by Today's Conveyancer
How You Can Reassure Your Clients Regarding The Abolishment Of Section 21 Notices
The Roof's Falling In: How you can reassure your clients regarding the abolition of Section 21 Notices
Speak to any landlord and one concern will regularly pop up in conversation – the fear of the law swinging in favour of tenants, making it harder for landlords to regain possession of their property. It is little wonder, therefore, that the announcement regarding the banning of Section 21 notices, hard on the heels of the Tenant Fees Act 2019 coming into force, has caused many to doubt the validity of remaining in the buy-to-let game.
For Solicitors with clients managing large buy-to-let portfolios, the challenge is to reassure them that the banning of Section 21 notices does not mean tenants cannot be evicted. They will, however, need to plan for a longer process as it is now easier for tenants to challenge any attempts to end their lease.
Why have the changes occurred?
Britain is returning to becoming a nation of renters. We say returning, because, contrary to what is often assumed, mass home ownership is a pre-World War Two phenomenon, which accelerated under Margaret Thatcher's premiership.
At the beginning of the 1900s, less than a quarter of Britain's homes were owner-occupied. Mortgages were rare, most people rented their homes privately. New homes were mainly built for sale to private landlords.
All across the developed world, the trend of fewer owner-occupiers and more renters is rising. In Britain, the number of privately rented households has doubled over the past 16 years, from 2 million in 2000 to 4.5 million in 2015/16. In London, the figures are even more pronounced – more than a quarter – 28.1% – of all households are now privately rented, up from 13.6% in 2003/4.
While no one wants to return to a Dickensian time when cruel landlords could turf families out in the street on a whim, it is understandable that buy-to-let owners are deeply concerned by the government's latest announcement.
Using Section 8 as an alternative
If the government's plans to remove the option of Section 21 notices goes ahead, landlords will have to revert to using Section 8 to regain possession of their property. Section 8 allows landlords to regain possession if certain covenants are breached, such as non-payment of rent for two months or more. However, it can also be used if the landlord wishes to undertake significant reconstruction of the premises and the work cannot be done with the tenant in situ. A full list of grounds for obtaining possession of a property let on an Assured Shorthold Tenancy are set out in Schedule 2 to the Housing Act 1988.
Landlords main complaints about the Section 8 process relate to time and expense. A survey of National Landlord Association (NLA) members found those who used Section 8 took on average 145 days to regain possession, at an average cost of £5,730. This compares with the average for Section 21 at 104 days, costing £3,525.
Richard Lambert, CEO of the NLA, says:
"Landlords currently have little choice but to use Section 21. They have no confidence in the ability or the capacity of the courts to deal with possession claims quickly and surely, regardless of the strength of the landlord's case.
"England's model of tenancy was always intended to operate in a sector where Section 21 exists. This change makes the fixed term meaningless, and so creates a new system of indefinite tenancies by the back door.
"The onus is on the Government to get this right. It's entirely dependent on the Government's ability to re-balance the system through Section 8 and court process so that it works for landlords and tenants alike. The Government should look to Scotland, where they reformed the court system before thinking about changing how tenancies work. If the Government introduces yet another piece of badly thought-out legislation, we guarantee there will be chaos."
Reassuring landlords
Few landlords have any desire to evict long-term tenants who pay their rent and respect the property. Therefore, if the government holds firm to its promise to strengthen Section 8 and maintain the right of a landlord to sell with vacant possession, life will carry on as normal.
Some landlords do not have the financial reserves available to to risk not being able to liquidate property assets quickly. In such a case, although they may be loath to do it, serving a Section 21 notice before the law changes may be advisable.
Both landlords and tenants must be assured that, if both parties respect each other and their legal obligations, the new regulation will have little effect on their day to day lives.
S21 along with BTL mortgages being based on rental income rather than LL personal income was what allowed the PRS to flourish from 1997.
Remove either of those facilities and a substantial portion of the PRS would collapse.
A speedy eviction process must be maintained.
Even with S21 it can take 10 months to achieve eviction if tenants refuse to vacate after the 2 month's S21 notice has been given.
"Britain is returning to becoming a nation of renters. We say returning, because, contrary to what is often assumed, mass home ownership is a pre-World War Two phenomenon, which accelerated under Margaret Thatcher's premiership"
The tragedy is that the conveyancing sector has never developed a system to address the phenomenon adequately
It brought homeownership to those who could not afford to buy a new home without selling their existing one. The dreaded chain arose and brought stressful uncertainty to home movers.
We still need to produce a solution for this as well as the move to renting.