OPINION: The consequences of abolishing Section 21

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Drummed up by popular media horror stories, egged on by the homelessness charities, the “ban Section 21” band waggon kept on rolling until eventually the politicians saw it would be politically advantageous to jump aboard.

What is Section 21

It’s a section of the 1988 Housing Act, an Act that introduced the concept of the Shorthold tenancy. This is where landlords can grant a tenancy for the short term, usually 6 or 12 months, and are guaranteed to get their property back if things go horribly wrong, an occurrence which does happen, but in a minority of cases.

The concept was revolutionary back in the 1980s, a period when all tenancies were started out under the old Rent Acts. This presumed, and it pretty well proved so in practice, that tenants had a tenancy for life, with controlled rents to boot.

The Rent Acts had decimated the UK’s rental market as landlords left in their droves, and those that remained refused to spend on their properties. This was because their investments had become economically unviable – it led to years of decay and dereliction in the UK rental market housing stock.

But enter the shorthold tenancy and the rental market was revived. Not immediately, but over the next 30 years the working and middle class landlord emerged. Armed with their buy-to-let mortgage and sparklingly refurbished properties, they created lucrative nest eggs for their pensions, while at the same time housing tenants in vastly improved conditions.

Section 21 was part of the package: it meant that by giving two months’ notice, landlords could at last require possession of a rental property without the need to give a reason for wanting it. Section 21 still applies in England, for now. But evidently not for much longer. It does not operate during the term of the tenancy, only when the fixed term comes to an end, or when the tenancy becomes periodic, usually month to month.

During fixed terms Section 8 applies, which means the tenant can only be removed for serious breaches of the contract. Landlords must appear before a judge and argue their case to regain possession. It usually needs the services of an eviction specialist or solicitor to get a successful eviction and even then the process can drag on for months, and in some cases even years.

There is one exception to this breach of contract rule: where a landlord has served the tenants with a Ground 1 notice before the tenancy started, a notice that warns the tenant/s they may need to move out to allow the owner to come back. The landlord is wanting to return to live in the property, providing they lived there before. Even this process can drag on into months.

The argument against Section 21

The popular media regularly highlights the injustice of tenants being thrown out on their ears, landlords using Section 21 to give summary notice and kicking their tenants out onto the street, with only the clothes they stand up in! It’s a myth, perpetuated by the homelessness charities, but it’s one that has gained considerable traction among politicians, who are running scared of public opinion.

Granted, some rogue landlords have been known to evict tenants using Section 21 because they complain regularly about one thing or another, perhaps poor housing conditions. But these retaliatory evictions are a tiny minority compared to the whole, and in any case no tenant under a Section 21 notice can be removed in less that 6 months, on average.

In my experience, when tenants who start to complain regularly, picking up on trivial and contrived issues, it’s usually a smoke screen to hide the fact that they are struggling to pay the rent, they resent paying the rent, or they made a mistake and wish they had lived somewhere else.

The advantages of Section 21

For landlords, Section 21 gives them a safety net, a guaranteed possession order, albeit with a few months wait. They are absolutely sure to get their property back eventually, with the minimum of trouble and expense, in the unlikely event, things go wrong.

Landlords need this assurance to get them to use their hard earned cash, perhaps with the help of a buy-to-let mortgage, to provide housing which not only benefits them, it benefits their tenants and society as a whole. Without that assurance landlords will think twice about investing, I certainly would.

Why do landlords want to evict?

By far the majority just don’t. If tenants pay their rent on time and look after the property few landlords would want them out. After all they are providing a reliable income stream, and re-letting a property is not only a real hassle, it costs money, not to mention the loss of rental income during void periods.

There are only for reasons why landlords want tenants out of their properties, in my experience:

(1) They want to return to live in their own home. This is covered above and would no doubt be a remaining feature of any Section 21 replacement.

(2) The tenant is failing to pay the rent or payments are so late and erratic that the landlord’s tolerance has reached its limit. Rear arrears is by far the biggest reason for evictions and represents around 98% of cases.

(3) Tenants failing to look after the property, causing damage which goes far beyond what the deposit would cover. Obviously this is of great concern for landlords and very often leads to thousands of pounds worth of damage and cleaning, when the landlord does eventually regain possession.

(4) Anti-social behaviour, constant neighbour complaints and police call outs mean that the landlord, along with the neighbours, has no peace of mind while the tenant/s remain in place.

More often than not it’s a combination of these things. Once saddled with a really bad tenant the landlord’s life can be made a real misery. We’ve all seen the TV programmes that graphically demonstrate this. Until you’ve experienced it yourself you’ll never fully understand the anguish and the hassle it can cause, and I’ll wager none of the lawmakers considering this change ever have.

There’s a class of tenant, the serial rogue tenant, who goes from one tenancy to the next never paying any rent. In theory it is possible to play the system in such as way that these brazen “criminals” can live rent-free for 12 months at a time, before moving on to their next landlord victim. Even Section 21 struggles to combat this type of abuse.

What’s a viable Section 21 replacement

The ideal perhaps would be a local housing tribunal in towns and cities throughout the country, one with experts on the panel, perhaps a legal professional, and a representative from the landlords’ association and a tenant representative such as Shelter, much like the employment tribunals as they operate today.

We look forward to it, but is it ever likely to come about? Well pigs might fly! It would cost £millions if not £billions, and in these straightened times the money is just not there.

So, we are left with a beefed up Section 8 process, a legal tweak, and one which still relies on the overcrowded County Court system. Here, landlords or their legal representative have to go and argue their case in front of a judge, who is often a sucker for a sob story from tenants.

If they are lucky the landlord gets a suspended eviction order pending improvement in the tenant’s behaviour! Even when they get a full possession order, there could be weeks’ or month’s waiting for a court bailiff to evict, and that’s if the tenant does not appeal.

What are the consequences arising from the abolition of Section 21?

Michael Gove’s decision to include rental reforms, including abolishing Section 21, in his “Levelling up” White Paper sets the course – it’s not a good prospect for either landlords or tenants.

It will undoubtedly result in more landlords leaving the private rented sector for fear of being trapped in the system, fighting to remove a bad tenant. It will make the landlord’s task more difficult and more expensive.

Landlords will be even more choosy about who they take on as tenants, and rents will increase to reflect that. Rigorous background checks already feature highly in the armoury of a successful landlord, and there are only so many tenants with an A1 background history to go round. Accommodation scarcity, with high demand for tenancies only goes one way – rents go up!

With more and more social tenants being housed in the private rented sector, many will lose out. They will find it increasingly difficult to find landlords willing to take them on, with a diminishing pool of available rentals. It will simply exacerbate an already severe housing crisis.

Local authorities will find themselves under even more pressure than they are already to provide temporary accommodation for homeless tenants. Meanwhile, the landlords who do provide housing for those at the bottom end of the scale will continue to provide the lowest quality accommodation. There is then no incentive or competition for them to invest to attract tenants.

In other words, banning section 21 helps nobody, not landlords, not tenants and certainly not local authorities.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – OPINION: The consequences of abolishing Section 21 | LandlordZONE.

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LOOMING Section 21 ban already changing how landlords choose tenants

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Landlords are becoming more risk-averse when choosing tenants ahead of a likely Section 21 evictions ban.

New research from Goodlord reveals that the share of those insisting tenants pay two or more months’ rent upfront has risen by 43% since the pandemic; so far this year, one in 40 landlords have made the demand.

Many have been scarred by the evictions ban and courts backlog and are now wary of taking tenants who aren’t financially secure – bolstered by increased tenant demand for fewer available rental properties.

Goodlord analysed 730,000 tenancies over the last four years and also found a 36% rise in the number of non-student tenants being asked to provide a guarantor, with the biggest jump seen in 2020.

Guarantor hotspots

The biggest increase was in the West Midlands, where 14.9% of non-student tenants were asked to provide a guarantor, up from 6%. During the same period, requests for guarantors for student tenants have remained relatively stable. 

Goodlord says as more tenants are spending a greater proportion of their salaries on rent and stretching their budgets in order to secure properties with spare rooms or gardens, landlords want additional assurances during the referencing process.  

“Not only have tenants faced financial difficulties, but it’s important to remember that many landlords will have as well – considering that 54% of landlords have buy-to-let mortgages and nearly half of all landlords have only one property,” says Nathan Emerson, CEO of trade body Propertymark (pictured).

“Even before the pandemic, changing legislation and the onset of tax changes have impacted landlords’ costs, so it’s not surprising that we are seeing a rise in landlords requesting rental guarantors to give a greater level of protection should a tenant fall into arrears or default on the tenancy agreement.”

Read more about evictions.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LOOMING Section 21 ban already changing how landlords choose tenants | LandlordZONE.

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LATEST: Summer BOOM ahead for short-lets landlords as staycation trend sticks

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UK holiday let landlords are bracing themselves for another bumper summer as bookings for staycations continue to surpass pre-pandemic levels.

According to leading lettings platform Sykes Holiday Cottages, bookings are already up 22% this year compared with the same time in 2020, while it has seen a 158% increase compared to last year.

Homes in Whitby, Ambleside and Bowness-on-Windermere have attracted the largest number of bookings for 2022.

Dorset, the Cotswolds, the Peak District, Devon and Somerset were the top earning locations for holiday homeowners last year, who earned an average of £28,000 per property, compared with almost £21,000 in 2019 – a figure that is set to rise again as bookings and occupancy soars.

Stuck on staycations

In another survey of 1,000 holidaymakers, Sykes found that 55% of Brits say they will opt for UK staycations even when all international travel restrictions have been lifted; almost half (46%) say limiting their environmental impact is a key consideration when choosing a UK break over foreign travel.

Graham Donoghue, CEO at Sykes Holiday Cottages, says bookings are already coming in for autumn and winter thick and fast.

He adds: “With the trend for staycations going nowhere, the attractiveness of holiday letting as an investment opportunity continues to go from strength to strength.

“We’ve witnessed a strong pipeline of enquiries in recent months from those new to holiday letting or wanting to rent out a second home as many look to reap the financial rewards on offer.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Summer BOOM ahead for short-lets landlords as staycation trend sticks | LandlordZONE.

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EVENT: New landlord group to host online ‘honest’ debate about proptech

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Landlords are invited to attend an industry-first proptech gathering on 23^rd February at 6pm being organised by the Portfolio Landlords Action Group (PLAN), the new industry grouping for landlords with 75 properties or more.

Founder Marcus Selmon (pictured) tells LandlordZONE that, now he has signed up the first members to the group, he wants to encourage a lively debate about the role of technology among both its members and the wider private rented sector.

The free ‘online exhibition’ and discussion will welcome both members and non-members. Details of the platform being used to host the event will be available on the organisation’s website soon. In the meantime, landlords wishing to attend should email Marcus direct.

“One of our core objectives is to share information about best practice and in particular best tech for operating a rental portfolio,” says Selmon.

“Most Landlords do not have the resource or often the interest in tech to realise even a fraction of its potential and I include myself in that.

“These are understanding the potential a tech has to offer; choosing between what is normally a wide selection of tech offering the same solution and being able to actually implement it into your business on a day to day basis.”

Selmon says he wants to make tech easier to digest with down-to-earth language and explanations for landlords, rather than the ‘techno babble’ some proptech firms employ.

An old-fashioned landlord network is also going to be set up to enable landlords to find advice and support locally on a range of subjects, including tech.

Single step

“It is not going to happen overnight. But as they say, the journey of a thousand miles begins with a single step,” says Selmon.

“Our tech exhibition is the first step and we will have to see how it develops.

“If it gains traction then we can build a foundation of information on which a great deal of useful knowledge can be constructed.

“And if the tech companies see the benefit then hopefully they will work with us to repackage their tech and make it much easier to access.”

Marcus is a leading landlord figure specialising in the formation of high-yield property portfolios in the north of England.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EVENT: New landlord group to host online ‘honest’ debate about proptech | LandlordZONE.

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Pie Shop Conversion Creates £1 Million Price Tag

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When you convert a commercial building to residential use under permitted development rights (PDR), how much will that residential property be worth?

£100,000? 500,000? perhaps a £1,000,000?

Yes, a pie shop to resi conversion is actually worth a million pounds.

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EXCLUSIVE: ‘Stop your vendetta against landlords’, portfolio player tells Ministers

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The government must stop its vendetta against landlords or face a housing crisis, warns the boss of one of the UK’s leading guaranteed property cash buying firms and landlords.

“If they continue with these increased costs and liabilities against us, there won’t be many left and that means a shortage of rental homes,” Open Property Group’s Jason Harris-Cohen tells LandlordZONE.

The company buys any type of property, whether vacant, owner-occupied or rented, and currently has 120 let/managed properties across England and Wales, focused on the northern powerhouse cities where it can achieve yields of around 7%.

He’s willing to invest in the portfolio, spending £150,000 when EICRs (electrical installation condition reports) were introduced, as most of the properties needed remedial works.

Massive impact

But imminent measures to raise all rented homes to EPC band C by 2028 will have a massive impact on the business, says Harris-Cohen.

“In our portfolio, the average rating is a D and some have an E rating. Those properties have already had energy efficient condensing boilers fitted and double glazing, but to raise them above an E we’d have to fit internal or external insulation which is financially prohibitive and disruptive for tenants.

“I’ve just been quoted £8,000 for external insulation on a two-bed Victorian property, which across our portfolio would translate to hundreds of thousands of pounds. Who has that kind of liquidity?”

Jason Harris-Cohen

Although small landlords have it tough, he believes there’ll be more pressure on larger landlords who have multiple properties to retrofit.

“It’s hard enough trying to get access to do a gas safety certificate when a tenant will often cancel or not answer the door,” he says.

Logistical nightmare

“Trying to get a tradesman to install internal insulation over a number of days will be a logistical nightmare as we’ll probably have to put tenants in a hotel.”

Harris-Cohen believes that as well as dealing with the usual costs, maintenance, void periods and electrical inspections, selective licensing is yet another burden on landlords, and particularly unfair because they don’t get the licensing fee back pro rata when they offload a property.

He’s hoping that there are no more surprises to come, and adds: “If Labour get in and they introduce a rent cap, I will definitely sell my portfolio as it will no longer be financially viable.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: ‘Stop your vendetta against landlords’, portfolio player tells Ministers | LandlordZONE.

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