An end to Section 21 (“No Fault”) evictions. Will it benefit tenants?
Last week the government announced plans to scrap “no-fault” evictions of tenants, a move welcomed by tenant bodies, with Shelter describing it as “an outstanding victory”. However, no indication has been given as to when the government intends to introduce the measure and, given the present uncertainty over Brexit, there must be some question-mark over whether the change will actually come into force, at least under the present government.
Unsurprisingly, the announcement has met with a much cooler reception from landlords and their representative bodies.
For 30 years now, landlords have been able to evict tenants with an assured shorthold tenancy (the standard form of letting for private rented accommodation), for example if they wish to sell. Many have, however, criticised the lack of security this provides for tenants, with the Prime Minister commenting: “Millions of responsible tenants can be uprooted by their landlord with little notice, and often little justification”.
However in my experience, which spans more than 25 years, landlords generally do not use Section 21 without good reason. Landlords are looking for a steady stream of rental income from a property, particularly if they have a mortgage to pay, and evicting a tenant is likely to lead to some loss of rent and costs, as well as having to find a replacement tenant.
In a measure designed to mitigate the effect on landlords, the government has indicated that they will introduce changes to the alternative eviction procedure, known as Section 8. In particular to allow owners to regain their home should they wish to sell it or move into it themselves.
It should be noted however, that an owner wishing to live in the property is already a recognised round for possession under Section 8, provided that they have served a notice upon the tenant (no later than the beginning of the tenancy) that they may subsequently wish to use this ground. It is one of eight mandatory grounds for possession. There are another nine discretionary grounds, which means that there can be no guarantee that the court will award the landlord possession of their property if no mandatory ground is available to them. At present, a landlord is able to use Section 21 if, for example, there is some breach of tenancy on the part of the tenant, such as damage, or bad behaviour.
Typically, Section 8 is used where there is a certain level of rent arrears, as this is a mandatory ground for possession, but if the arrears are below that, or the tenant persistently pays late, the applicable grounds are discretionary only and the right to use Section 21 instead will disappear if the measure comes into force.
Another cause of concern for landlords is that Section 8 is generally more expensive. This is due to how the application for possession is dealt with by the court, so if, for example, a landlord does not wish to sell, or move into the property, they will have to use this more expensive procedure after Section 21 is scrapped.
Allied to this are issues arising from the proposal to allow evictions (under Section 8) where the landlord wishes to sell. At present, this is not a recognised Section 8 round and a landlord will use Section 21. Realistically, the change will only be workable if wishing to sell is made a mandatory ground for possession. Undoubtedly, practical and evidential issues will arise, particularly in terms of proving a landlord’s intention to sell. In short, how will they do so? What will constitute sufficient evidence in the eyes of the court? Will the landlord have to place the property on the market for sale before being able to serve notice?
Often, even where there are arrears, landlords will follow the Section 21 route to remove tenants, rather than Section 8. If they now have to use Section 8 there will be adverse consequences for tenants who will find themselves with a CCJ against them and, being classed as intentionally homeless, will have greater difficulty finding somewhere to live than if they had been evicted under Section 21.
Looking at the wider picture, and the impact upon lenders, many commentators have expressed concern about the impact on the buy to let market, and investors’ ability to obtain finance for rented property purchases if the ability to evict under Section 21 is removed.
Concerns have also been expressed that the measure will drive some landlords from the market and deter others from investing in the private rented sector, leading to less stock being available for rent. It should be noted that the private rented sector now accounts for nearly 20% of all households in the country. This begs the question of who will meet the shortfall at a time when renting, especially among the younger generation, is on the increase as property prices put purchasing out of reach for many. As David Smith, policy director of the Residential Landlord’s Association, has commented, “For all the talk of greater security for tenants, that will be nothing if the homes to rent are not there in the first place”.
In the light of all this, could this measure actually turn out to be a hollow victory for tenants and be counter-productive for both them and landlords?
If you are a landlord or a tenant, and have any questions about the eviction process, contact landlord and tenant disputes specialist Philip Oke on 01752 203500 or by filling in our online contact form.