Are no fault evictions a 'disaster' for landlords? - expert opinion - Spear's Magazine

Are no fault evictions a ‘disaster’ for landlords? – expert opinion

Are no fault evictions a ‘disaster’ for landlords? – expert opinion

Whether the proposals to evictions provide the solution and lead to legislative reform remains to be seen writes Tom Beak

In what they have described as ‘the biggest change to the private rental sector for a generation’, the government has unveiled plans to hold a consultation on their proposal to abolish ‘no-fault evictions’.

The proposals are part of the government’s promise to tackle the housing crisis, increasing tenant security and balancing the bargaining power between tenants and landlords (indeed, reforms banning letting fees and capping rent deposits will take effect on 1 June 2019). The proposals have been widely reported as great news for tenants, but in practice, this is unlikely to be the case.

‘No-fault evictions’, or section 21 notices, allow landlords to terminate Assured Shorthold Tenancies (“ASTs”) on or after the end of a fixed term, giving at least two months’ written notice but importantly, not providing any ground for the termination.

Should the landlord wish to terminate the tenancy agreement during the fixed term, they must follow the Section 8 notice procedure; obtaining a court order and evidencing one of the statutory grounds – for example – where rent has not been paid.

The primary concern, as expressed by the National Landlords Association (NLA), is that the proposals effectively create indefinite tenancies. The proposals would require landlords to evidence a statutory ground in order to evict tenants and unsurprisingly, the desire to re-let a property for an increased sum is not a statutory ground. After all, landlords are running a business and businesses need to make money. But fear not.

Rent reviews will continue to be allowed annually, restricted only by the tenants’ right to challenge where they do not agree that the review reflects market value. In other words, landlords can continue to ensure that they receive the market rate for their properties.

This is the case in Scotland, where similar proposals were implemented in 2017. Scottish landlords have continued to exercise their right to review rent annually, thereby ensuring that they receive the market rate. The proposals will therefore either allow landlords to continue to receive increased rents or with the prospect of increased rent, will lead to the tenant ending their occupation (hardly the aim of the proposals).

When faced with the prospect of ‘indefinite tenancies’, landlords will understandably be far less likely to take on tenants who they perceive as “risky”. Landlords can protect their interest, increasing scrutiny during the vetting process and demanding lengthier or stricter guarantees.

In this way, the proposals are likely to leave landlords unable to accept the risk that accompanies the most vulnerable of tenants and in turn these tenants will struggle to find properties to rent.

The proposals include amendments to the Section 8 statutory grounds, enabling landlords to regain their property where they wish to sell or move into it. The NLA explains that the Section 8 procedure requires landlords to endure a slow and expensive court process simply to end the tenancy legitimately.

As such, landlords often rely on Section 21 notices, not because they are without good reason, but because the end result is delivered far more cost-effectively.

To combat this, the government pledge to expedite the court process, allowing repossession where rent is unpaid or the property has been damaged. This is, however, easier said than done and proposals to ‘digitise the court process’ and ‘provide better guidance’ are hardly ground-breaking. Indeed any reform that removes a tried-and-tested process in favour of increasing the court’s workload is unlikely to be well-received.

So, the proposals require court orders to be obtained before tenants can be evicted (unpopular with landlords) and will invite more stringent due diligence before tenants are able to rent properties (unpopular with tenants).

In short, the consultation is unlikely to receive a positive response and concrete legislative reform that can truly be described as ‘the biggest change for a generation’ remains a long way off.

In fact, these proposals result from the government’s previous consultation, where proposals for a minimum three year AST term failed to garner a mandate from either tenants or landlords.

A more cynical view could argue that the proposals are well-timed sound bites aimed at the ever-growing pool of tenant voters. The housing crisis is an undeniable reality, but whether the latest proposals provide the solution and lead to legislative reform remains to be seen.

Tom Beak is an Associate in Kingsley Napley’s Real Estate practice



 

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