A step in the right direction for residential landlords

A gradual return to normality looks hopeful for landlords and letting agents as the Section 21 notice period moves back from its temporary Covid extended period of 6 months to is normal 2 months on 1 October.

Desperate times called for desperate measures

When Parliament shut down for a month in March last year to combat the spread of coronavirus, one of its last acts in the final session, it passed through the Coronavirus Bill. The Coronavirus Act 2020 saw all notice periods for residential tenancies extended to six months for most grounds (including Section 21 notices), with exemptions only for certain serious cases.

So now, an important stage in the pandemic is being reached as we (hopefully) move towards post-Covid normality. This is happening for residential landlords, with the news that the notice periods they need to give to tenants to take back possession of their properties will revert to pre-pandemic lengths on October 1.

Rent arrears could soar

The good news is tinged with some anguish for landlords as furlough comes to an end, and those with benefit tenants, as their rent debts could soar when the soon to be removed £20 premium on Universal Credit payments hits. An in future , evictions could become much more difficult as on the horizon is the Government’s promise to remove the – much valued by residential landlords – Section 21* (no fault) eviction process.

Although the notice period was reduced to four months for most circumstances on the 1^st of June this year, and a further reduction to two months on August 1, where there was less than four months of unpaid rent, it will come as a relief to all residential landlords as the notices revert to normal after the end of September.

All Section 21 notices will then be for 2 months and also for Section 8 notices with periods of between two weeks and two months for reasons varying depending on such grounds such as serious rent arrears, persistent late payment of rent, breach of Right to Rent regulations, mortgage repossession and under Ground 1, the landlord wanting to move back in to was originally their main residence.

We are not out of the wood yet!

Should the Covid-19 pandemic worsen as we enter the Winter period the government has indicated that further restrictions could be imposed, this by recently tabling legislation giving it the powers to revert back to longer notice periods.

The extended periods have given tenants a welcome period of security if they were struggling financially, with landlords and letting agents often helping out where they could with rent reductions and rent holidays, but it does not alter the fact that arrears are arrears which legally are still due.

And for every tenant in genuine difficulty there will always be a small minority, as is the case with commercial tenancies, who take advantage of the legislation and refuse to pay rent even though they could. Although theoretically the courts are still available to resolve these issues, there are long delays and the expense involved is a “bit of a gamble” given that the outcomes would be uncertain.

Meanwhile the rent debt crisis looms

According to debt charity StepChange around half a million private tenants are now in serious levels of debt, with in total around £360 million outstanding in rent arrears across the UK. Their research shows that private tenants are on average around £800 in arrears with their rent payments.

The charity has argued, along with some landlords, that the planned removal of the temporary £20-per-week uplift to Universal Credit compounds tenants’ difficulties and arrears likely to soar..

A 61 years old tenant used as an example by the charity is £2,000-worth in arrears:

“I have recently managed to get some help from the council regarding my rent and am just about managing to pay it in full, but I’m still not really able to pay anything towards the arrears,” the tenant told StepChange.

“Luckily [says stepChange] the landlord seems fine with this at the moment, but obviously that could change at any time.”

One in ten could face eviction

The charity is predicting that around 10 per cent of all residential tenants in the UK – and these are in-work tenants, – are in fear of being evicted over the next 12 months.

Phil Andrew, chief executive of StepChange speaking to the PA News Agency, says:

“Covid support schemes, while a lifeline for many, haven’t been able to help renters address their arrears and with cuts to Universal Credit and the end of furlough imminent, there is a real danger of thousands losing their homes.”

A support lifeline is called for

StepChange is now calling for dedicated financial support to help ensure renters can safely wind down Covid rent debts and keep their homes.

“By establishing a dedicated rent debt fund, and by scrapping the planned Universal Credit cut, the Government can avert the threat of a rise in evictions, problem debt and homelessness that will compound financial and social problems and hamper economic recovery,” Phil Andrew suggests.

Chris Norris, policy director for the National Residential Landlords Association speaking to the PA News Agency, said:

“Many tenants and landlords have struggled throughout the pandemic.

“The end of furlough combined with cuts to benefits creates a perfect storm as those affected face the prospect of rent arrears getting worse.

“These are debts that landlords cannot afford to sustain indefinitely. The Chancellor needs urgently to follow the examples set in Scotland and Wales and come forward with transitional support to get Covid-related arrears paid off.”

A spokesperson from the Ministry of Housing, Communities and Local Government (MHCLG) had said:

“Our £352 billion support package has helped renters throughout the pandemic and prevented a build-up of rent arrears.

“We also took unprecedented action to help keep people in their homes by extending notice periods and pausing evictions at the height of the pandemic.

“As the economy reopens it is right that these measures are now being lifted. We will bring forward further proposals in due course to create a fairer and more effective private rental sector that works for both landlords and tenants, including the abolition of Section 21 ‘no fault’ evictions and further support for landlords where repossession is necessary.”

Keeping landlords onboard

If landlords are to be encouraged to stay in the sector and provide much needed rental accommodation, especially as house prices continue to soar, then the government must come up with a sensible and workable system of not only supporting tenants in need but enabling landlords to recover debt and quickly remove delinquent tenants.

*The Government has committed to abolish ‘no-fault’ section 21 evictions in the private rented sector. A Renters’ Reform Bill was promised in the 2019 Queen’s Speech to achieve this.

The Section 21 process introduced under the Thatcher Government by the 1988 Housing Act and credited with much of the impetus behind the growth of Buy to Let, enables private landlords to repossess their properties from assured shorthold tenants (ASTs) without having to establish fault on the part of the tenant. Hence it is sometimes referred to as the ‘no-fault’ ground for eviction.

However, private tenants, their representative bodies, and homelessness charities working in the sector have argued for some time that the ability of landlords to terminate an AST at short notice has a detrimental effect on tenants’ wellbeing. The current Conservative Government it seems has been swayed by their arguments.

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