Landlords are to be prevented from evicting tenants without giving a reason under proposals that have been heralded as the biggest shake-up of the private rental sector in 30 years.
In June, the Government published its long-awaited ‘Fairer Private Rented Sector’ white paper, announcing a 12 point action plan that is set to give more power to tenants and reverses much of Thatcher’s deregulation seen in the 80s and 90s.
One of the key proposals contained in the white paper and set to be made law under the Renters Reform Bill is the abolishing of ‘no fault’ Section 21 evictions currently allowed under the 1988 Housing Act, allowing the termination of a tenancy without needing to give a reason.
Tenancy agreements are also set to be overhauled, ending the use of arbitrary rent review clauses and doubling the notice period required for rent increases.
Other reforms include a new housing ombudsman with the power to make landlords pay up to £25,000 in rent refunds if a property is deemed not up to scratch and suitable remedial action has not been taken by the landlord.
Under the proposals, landlords will also be required to accept tenants on benefits and those with pets.
Levelling Up and Housing Secretary Michael Gove said:
“For too long many private renters have been at the mercy of unscrupulous landlords who fail to repair homes and let families live in damp, unsafe and cold properties, with the threat of unfair ‘no fault’ eviction orders hanging over them.
“Our new deal for renters will help to end this injustice by improving the rights and conditions for millions of renters as we level up across the country and deliver on the people’s priorities.”
But many are worried that the reforms deal yet another hammer blow to already-struggling private landlords and could result in many quitting the market altogether. This would be bad news at a time when there is already a chronic shortage of rental properties.
The changes could also drive up rents when the country is facing a massive cost-of-living crisis, with inflation soaring to a 40-year high and property prices breaking new records.
For many investors, the changes set out in the white paper will come as a major concern and only add to the buy-to-let nightmare many are facing. As well as complex legislative changes, landlords are also having to deal with the soaring cost of buy-to-let mortgages thanks to recent interest rate rises.
Section 21 To Be Abolished
Introduced in the 1988 Housing Act, Section 21 allows landlords to terminate a tenancy agreement and evict tenants without giving any reason.
Under the new plans, these so-called ‘no-fault’ evictions will be outlawed, leaving landlords relying instead on serving a Section 8 notice for eviction.
Crucially, this means a valid reason will need to be given for evicting a tenant from a property. This would include when the tenant is in rent arrears, anti-social behaviour, and where damage has been caused to the property.
No-fault evictions have already been outlawed in Scotland in 2017, while the Welsh government proposes that notice periods will be extended to six months at the end of this year.
Greater restrictions in the last 10 years over the use of Section 21 means many feel their demise was already inevitable – but many experts are warning that the abolishing of Section 21 will further discourage landlords from entering into longer fixed term tenancies, with many likely quitting the market altogether.
In order to prevent this, it will be vital that Section 8 is reformed. It is likely that the bill will include amendments to Section 8 such as new grounds for possession if the landlord want to sell the property or live in it themselves.
What Can Landlords Do?
While it remains to be seen whether the reforms deliver the intended results, it’s worth noting that Section 21 is still currently an option for landlords.
As ever with legislative changes, planning ahead and preparing well in advance is always the best route of action. It’s worth seeking advice from qualified professionals and considering all the different options available to you.
Either way, there’s little doubt that private landlords are facing some tough times ahead, and a whole raft of new laws and regulations to get their heads around. This, combined with interest rate rises and buy-to-let tax crackdowns, means it’s becoming increasing difficult for traditional buy-to-let investors to make a profit.
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Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.