Letting agents are being urged to do more to protect buy-to-let landlords by preparing now for the government’s plans to scrap Section 21 of the Housing Act, as part of a new Renters’ Reform Bill.
PayProp is advising agents to adapt to upcoming changes to the eviction system by updating key documentation and automating arrears management to cut the chances of having to evict tenants and leave landlords with an unnecessary rental void period.
The lettings payment automation provider wants to see letting agents take the following steps.
Neil Cobbold, chief operating officer of the lettings payment automation provider, said: “For some time, the political will - regardless of party - has been to remove Section 21 from the Housing Act 1988 and reform the eviction system.
“Following the Queen’s Speech, letting agents and landlords need to start preparing for change and updating their processes accordingly as it has been confirmed that the evictions process will be reformed through the same Bill.”
Cobbold points out that amendments to the eviction process will see agents needing to update their contract templates and eviction notices to fall in line with a new system - highly likely to revolve around a strengthened Section 8.
He explained: “One of the most important aspects of eviction reform for agents will be educating and informing landlords and tenants about how the new system will work.
“However, on top of this, they will also need to make sure their documents are up-to-date and watertight to evidence their adherence to current and proposed legislation. This will give landlords and tenants the best chance of a smooth eviction process."
“Agents who adopt thorough record-keeping and arrears management can prove their worth to landlords and increase their chances of new business and client retention.
“Having the right technology and systems in place can be a huge help in making these changes seamless and efficient.”
Letting agents can also prepare effectively for evictions reform by thinking about the ways they can reduce the chances of landlords needing to evict tenants, according to Cobbold.
He says that the removal of Section 21 has the potential to impact the methods landlords use to regain possession of their properties, although he feels that the government’s acknowledgment that it needs to improve the court process was a welcome addition to the Queen’s Speech.
But reforming the grounds for possession has the potential for teething problems and agents could mitigate this by improving their own internal procedures.
Cobbold continued: “With this in mind, agents need to think about the ways they can help to reduce the frequency of evictions. Encouraging good relationships between landlords and tenants is all-important, as is staying on top of repairs and facilitating good communication between both parties.
“Rent arrears are one of the most common reasons for evictions, so agents can help landlords to keep them to a minimum by sending automated emails and text messages - which are proven to be more effective when it comes to chasing rent payments.”
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The way to prepare for S21 abolishment is prepare to sell up.
If there is no fast track S8 process then it is game over for leveraged LL.
Few will be able to afford the inevitable longer eviction process.
The final insult for leveraged LL who are mortgaged sole traders will be they will have to pay TAX on fictitious income as no tenant facing eviction ever pays their rent.
So as well as still having to pay the mortgage without rental income they will have to pay tax on the mortgage interest courtesy of the ridiculous S24 of the Finance Act.
Then of course there are all the eviction costs.
I simply cannot see there being an equally as effective revised S8 eviction process as S21 as that would somewhat defeat the whole point of abolishing S21!!!
With no further significant investment in County Courts I simply cannot see how even an enhanced S8 process would be more speedy than the current S21 process.
The main issue for LL is getting rid of rent defaulting tenants.
That is why most LL used S21.
I would suggest that if a reason was asked voluntarily from the LL as to why S21 had been issued it would have been
Rent Default
Of course S21 was also used as a standard way to terminate a tenancy on the basis that if the tenant failed to vacate at least the LL could submit a PO application the next working day.
Most S21 notices were far from NO FAULT EVICTIONS.
I'm afraid the two fundamental underpinnings of the PRS since 1996 have been the ability to obtain mortgages based on rental income and to be able to offset mortgage interest against rental income and the S21 facility.
Both of these will have effectively been removed shortly.
Leaving behind a dysfunctional S8 process and a 20% tax credit.
The business proposition for AST lettings no longer stacks up.
I should perhaps qualify this by referring to mortgaged sole trader LL.
Also mortgaged corporate LL will be affected by S21 abolishment.
Time to leave Dodge!
Make deliberate withholding of rent or remaining in a rental property after accruing more than 2 months' rent arrears criminal offences. It's just plain theft after all. Put Shelter in the dock too as accomplices. Then the current legislation can be amended as rent arrears can be kept under control. Why would any decent tenants object to this? After all it would free up properties being hogged by Shelter-backed freeloaders for decent tenants to occupy.
Nice ideas but you and I know they will NEVER come to pass!
Every DSS tenant would be two days away from being a criminal!!
Most AST are paid rent monthly in advance.
HB is paid in arrears.
1 month and 1 day with rent not paid is 2 months of rent arrears.
Most DSS tenants would become criminals almost overnight!!!
I would much prefer the method of immediate eviction by Police 14 days after the 2nd month rent default.
No County Court required.
That would concentrate minds wonderfully!
But even this will NEVER be countenanced by Govt.
LL simply have to face up to the simple fact that rent defaulting tenants will be able to stay even longer in a rental property before being eventually evicted.
LL will simply have to consider their whole business proposition in light of these forthcoming changes.
For many the risks will be too much and selling up will be a very pragmatic business response to such circumstances.
If any tenant who may be a potential risk, why not insist on a Guarantor as a condition of renting? This would give another avenue for unpaid rent and if not option do not rent to the applicant.
Insisting on a Guarantor would bankrupt most LL.
Very few tenants are able to source a guarantor or qualify for RGI.
Being a LL is a very risky business.
Very few people understand this; especially most LL!!
Paul although you make some valid points I think ur glass is very half empty there’s always ways round it I have 70 plus tenants and my arrears are near zero most are honest people who want to keep a roof over their head the ones that play the system are in the minority in 15 years of being a landlord I have hardly ever used s21 most times if I have arrears I say they are going to get evicted and get off before any paperwork is issued. Stay in the game demand is high and only going to get better if you can dig in.
Unfortunately there are no ways round things if you can't obtain RGI on a tenant.
Doesn't matter how good your tenant sourcing is.
Eventually a LL will come a cropper.
Rich LL can afford long eviction processes and can take more risks.
As a very poor LL I can't afford not to have RGI.
Unfortunately rarely have I ever been able to source tenants who can qualify for RGI.
I have literally lost hundreds of thousands of pounds caused by rent defaulting tenants such that I shall never make a profit for the rest of my life!!
If I was starting out again I would only invest in a property where RGI qualifiable tenants were readily available.
It is simply a basic fact that very few tenants can qualify for RGI.
I cannot afford rent defaulting tenants which is another reason why I'm selling up.
If only all my tenants had qualified for RGI I would have done rather well!
It would have cost the RGI companies about £100000 in claims!!!
Rich LL can take risks.
One eviction process could bankrupt me.
Far too risky for me and a risk I am no longer prepared to tolerate especially with all the daft regulations coming and recently introduced.
So time for me to depart the AST lettings market.
I won't miss it at all!
My experience has been that at least 50% of my former tenants were fudamentally dishonest!
It was something that I confess I was a little naive about.
The best mitigation to the abolition of Section21 is have no debt on the property (so you are not bankrupted by the eviction process- should you need to use it) or sell up NOW!
If we all insist on guarantors then there will be a lot of tenants totally unable to rent. more homeless
Homeowning guarantors of course.
A L
Just a homeowning guarantor, as you put it, is not good enough. OK you put a charging order on the guarantor's property, should the tenant create arrears. Then what? You will have to wait for such a day that the guarantor's property goes for sale. A homeowning guarantor with a full time job. Then if need be, you can obtain an attachment order. Self employed guarantors no good. Do we really need all that? After nearly forty years as a landlord, for me its time to get out and enjoy remaining days, hassle free. I have had protected tenants before Mrs. Thatcher introduced HA 1988,Section 21. Take it from me, you don't want to go back.
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