An update on Section 21 proposals Legal advice for landlords - Direct Line for Business

Government proposal to end 'no fault' evictions: what landlords need to know

Not sure what the new governmental proposal for Section 21 means for you? Property Expert Kate Faulkner explains the proposed changes and debunks some of the myths.

Is the Government abolishing Section 21?

On 15 April 2019, following a consultation on overcoming the barriers to longer tenancies in the private rented sector, the Government announced that it intends to move forward with a proposal to end 'no-fault' evictions in England. Branded as 'the biggest change to the private rental sector for a generation', this was widely interpreted as an announcement that private landlords in England would no longer be able to use a Section 21 notice to end a tenancy at short notice and without a reason.

In reality, absolutely nothing has been decided yet. The 'news' was simply that the Government would be launching another consultation – this time on whether and how Section 21 should be changed.

Meanwhile, in the media, the Government was already congratulating itself, as though a firm decision had been made: "Today we're acting by preventing these unfair evictions….We are building a fairer housing market that truly works for everyone", and different tenant groups were claiming it as a victory for themselves, after years of campaigning for longer tenancies.

The current situation is comparable with the confusion that resulted when the tenant fee ban was announced, back in November 2016. Then, landlords and letting agents had no idea when it would begin to impact their finances, while many tenants believed they wouldn't have to pay for anything other than their rent. But there was no clarity, because the process had not yet begun. There had to be a consultation, followed by consideration and the drafting and passing of legal changes and, in the end, it has taken more than two and a half years for the ban to come into force.

Similarly, for now, this latest announcement about an end to 'unfair' evictions is simply a statement of intent by the Government.

Why does the Government think the law needs changing?

As it stands, a landlord can give a tenant two months' notice to leave their rented home after any initial fixed term has expired by issuing a Section 21 notice. They don't have to give any reason for asking the tenant to leave and the tenant has no recourse – they simply have to find somewhere else to live.

The Government's own research has found:

  • the average length of time tenants spend in the PRS is 3.9 years, but
  • more than four out of five tenancies granted are for an initial fixed term of just 6 or 12 months.

That means, from the government and tenant groups perspective, tenants have little security of tenure and they claim many live with the worry they might be asked to leave at any time, particularly if they make complaints. Evidence also shows that the ending of tenancies via the Section 21 process is currently one of the biggest causes of family homelessness.

Given the way the private rented sector has changed over the past 30 years (reflecting a shift in the wider housing market, economy and jobs market), there is a consensus that the rules governing the PRS need to evolve accordingly. Importantly, private tenants say what they want most is to have greater security and stability in their home.

What are the proposed changes to Section 21?

Although nothing has been officially agreed, if the current proposals came into force, it would result in the Assured Shorthold Tenancy essentially becoming an open-ended rental agreement. Landlords would no longer be able to issue a Section 21 notice without giving a valid reason. So, if you simply believe the headlines, you might think that as long as a tenant was abiding by the terms of their tenancy, they would be able to stay in their rented home for as long as they wanted to. However, that's not actually the case.

Some have misunderstood what is meant by 'no fault' evictions, believing it means they will only have to move if they decide to themselves. In fact, there are still numerous legally valid reasons why a landlord can bring a tenancy to an end which are likely to continue post the changes.

In speaking about the proposals, the Housing Minister, Heather Wheeler MP, has stated that a new deal "will also mean assuring landlords that they can get their property back when they need to, without recourse to Section 21, by making other parts of the system perform better." This is likely to include:

  • strengthening Section 8 to give landlords further grounds to repossess, such as if they need to sell the property or want to move into it themselves
  • exploring whether some of the existing grounds for repossession need to be updated so that landlords have the powers they need
  • introducing a Housing Court to make it quicker and easier for landlords to regain possession of their properties if a tenant refuses to leave.

The Scottish solution

A similar system was adopted in Scotland in December 2017, when a new 'private residential tenancy' was introduced. Under the terms of this tenancy:

  • Unless a tenant has breached their rental contract or agreed to leave, a landlord can only evict them if the property is required for another purpose (e.g. it's being sold or the landlord needs to move in themselves) or there is a legal issue (e.g. the landlord's registration has been revoked or the property is overcrowded).
  • If a tenant has been in a property for over 6 months, the landlord has to give them at least 84 days' notice to leave.

Among all the talk of change, it's important to keep the potential impact of any amendment to legislation in perspective. Research to date suggests that 90% of tenants actually choose to end a tenancy, meaning only 10% of landlords typically end a tenancy.

When tenants are evicted – which is in itself a relatively rare occurrence – it is generally because they have violated the terms of their tenancy through actions such as non-payment of rent or antisocial behaviour. In these cases, they can be evicted via the issuing of a Section 8 notice.

What happened to the minimum 3-year tenancy?

Some landlords and tenants may remember that in the summer of 2018, the Secretary of State for Communities, Rt Hon James Brokenshire MP, proposed introducing a minimum 3-year tenancy term with a 6-month break clause. It was suggested this would help tenants put down roots and give landlords longer-term financial security.

However, it turned out there was very little support for mandating tenancy length. This Section 21 amendment is essentially a substitute proposal to address the same issue of security of tenure.

What's the next stage?

A consultation on ending no-fault evictions is to be launched, giving tenants, landlords and others in the private rented sector the opportunity to comment and collaborate with the government in developing a new 'deal' for renting.

Heather Wheeler MP says: "Ultimately, both landlords and tenants stand to benefit from a more stable and secure legal framework – for investment, letting and renting alike."

However, given the current state of flux within the Government, there is very little certainty over exactly how and when this proposal will progress. You can keep up to date with the latest developments at GOV.UK.

If you are in a position where you need to take back your property, you can learn about the correct eviction process here.

Sources:

https://www.gov.uk/government/news/government-announces-end-to-unfair-evictions

https://scotland.shelter.org.uk/get_advice/advice_topics/eviction/eviction_of_private_tenants/grounds_for_eviction_for_private_residential_tenancy_tenants

https://www.mygov.scot/ending-a-tenancy-as-a-landlord/private-residential-tenancies/

https://news.rla.org.uk/section-21-wheeler-says-new-deal-vital-for-prs/

Landlord Insurance Kate Faulkner
Kate Faulkner

Kate Faulkner
Added: 17 Jul 2019