Described as what could be the biggest change to the private rental sector for a generation, the government has recently reached the end of a consultation period regarding its proposals to abolish section 21 notices.
Current position of section 21 notices
Section 21 of the Housing Act 1988 notices enable landlords to terminate Assured Shorthold Tenancies on or after the end of a fixed term, by giving the tenant a minimum of two months written notice. In accordance with this section, the landlord does not need to provide the tenant with a reason for requiring possession, and, critically, the tenant does not need to have done anything wrong.
Whilst no default on behalf of the tenant is required, we regularly see landlords serving section 21 notices in cases of rent arrears or other breaches as it is arguably quicker and easier than having to argue about default in court.
The current alternative available to landlords is to serve a notice under section 8 of the 1988 Act. This notice enables a landlord to require possession of their property following various breaches committed by the tenant (or where a landlord wishes to undertake significant works to the property and which cannot be done with a tenant in situ).
However, evictions under the section 8 procedure are often more costly and time-consuming for landlords, with possession often taking significantly longer to obtain. As such, it is no surprise that many landlords are deeply concerned about the current proposals.
Reasons for the proposed changes
The proposals are part of the government's pledge to tackle the housing crisis, increase tenant security and to balance the bargaining power between landlords and tenants.
What changes do the new proposals include?
The government proposes to completely repeal section 21 in the hopes of providing more security to tenants.
In addition to this, the government is proposing to expand the grounds for seeking possession under section 8 to allow a landlord to recover the property when it wants to sell it or to permit a family member to move in and to amend/strengthen the current grounds, particularly in relation to rent arrears and a persistent pattern of arrears and in respect of anti-social behaviour.
The proposals are intentionally favourable to tenants however, in reality, it is questionable whether their implementation would significantly affect a tenant's position.
Under the proposed changes, landlords would still be entitled to conduct annual rent reviews, ensuring that they are continuing to receive rental income at market value.
If the proposed section 8 amendment is implemented, this would effectively still allow a landlord to require possession of their property, under circumstances where they wish to occupy or sell the property. Consequently, fault on behalf of the tenant would not necessarily need to be attributed, when serving a section 8 notice.
The government has also promised that a quicker and more effective court process will be put in place when dealing with section 8 notices.
What does this mean for Landlords?
Whilst the government's proposals to abolish section 21 notices could result in a significant change to legislation, it may not be the 'disaster' for landlords, initially perceived. Landlords generally have no desire to evict long-term tenants who pay their rent on time and look after the property. Therefore, provided the government holds firm to its commitment to improve and speed up the section 8 eviction process, there may be little real day-to-day change for landlords.
Furthermore, as landlords will potentially be faced with tenancies for indefinite periods, this means that a prospective tenant would potentially be subject to more scrutiny during the due diligence process. A landlord is less likely to take on a tenant whom they consider to be risky and consequently, in this respect, the proposed changes may in fact be more detrimental to a tenant.
If you require any assistance regarding this or any other property matter that you might have, please contact Gail Morris.