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The Guild explains what impact proposed Section 21 changes will have

The government’s existing consultation on the abolition of Section 21 does not close until Saturday 12th October, but its proposal to remove Assured Shorthold Tenancies (ASTs) from the Housing Act 1988, essentially means that assured tenancies will become the only type of tenancy available to landlords.

The Guild of Property Professionals explains that in the proposal put forward by the government tenants will have the option of agreeing to a fixed-term assured tenancy, which means both parties are committed to a predetermined time or a periodic assured tenancy.

In the case where a fixed-term tenancy has not been terminated by the tenant, or the landlord using the Section 8 Notice process, it is possible for it to be renewed to a new fixed term. If this doesn’t happen, it will automatically revert to an assured periodic tenancy.

If the decision is made by the government to move forward with the proposed changes and they are passed into law, there will be a transitional period of six months before the law comes into full effect. So, if nothing else changes and this matter is prioritised, we could see it come into place either towards the end of next year or perhaps early in 2021.

Would the changes impact tenancies currently in place?

Iain McKenzie, CEO of The Guild of Property Professionals, explains that there has been confirmation from the Government that the changes would not be retrospective. “What this means is that should the law come into place, it will not impact tenancies that are already in place at the time it is passed. So, landlords in these agreements will still be able to use Section 21 until the tenancy comes to an end. Any new agreement thereafter will then become an assured tenancy,” he adds.

What if the landlord or tenant wants to end the agreement?

If the landlord wishes to terminate an assured tenancy, they will have to give the tenant a Section 8 eviction notice based on one of the grounds specified in Schedule 2 of the Housing Act 1988.

“In the instance where the tenant decides to end the tenancy, they would have to give one month’s notice, but only at the end of a fixed-term tenancy or during a periodic tenancy, unless their agreement includes a break clause,” explains McKenzie.

A reformed Section 8 Notice process

If Section 21 is abolished, other aspects will need to come into play to protect landlords such as the improvement of the Section 8 notice process. The Government is proposing that the process for possession be accelerated, removing the need for a court hearing if unchallenged by then tenant.

McKenzie says: “There are several other changes that the Government will be looking to make to Section 8 to mitigate the loss of Section 21, such as adding a new ground into Section 8 for when a landlord wishes to sell the property or widening the current grounds to cover a landlord, their spouse, partner, or family member, should they wish to move into the property.”

It is also proposed to strengthen the current mandatory ground 8, which pertains to rent arrears, as well as ground 13 to allow landlords to use this if tenants routinely refuse access to the property for safety checks and repairs.

For tenants, the Government wishes to include the prescribed information requirements that currently exist via the Deregulation Act for the valid use of Section 21 in the Section 8 process to ensure their existing protection is maintained.

Impact on rentals

Even with the proposed amendments to the Section 8 process, with Section 21 abolished, landlords will feel they have fewer options when dealing with defaulting tenants – which will have repercussions on the rental market.

“If landlords feel they have less protection the likelihood is that they will become far more risk-averse and less likely to want to rent out their property. This could mean the supply of rental properties would decrease, which in the long term could push up rental prices. Landlords will also be far more stringent in their tenant selection process, meaning some tenants may find it far more difficult to find a place to live,” says McKenzie.

What should landlords do to prepare?

The Guild’s inhouse Compliance Officer, Paul Offley, says: “It is important that landlords have a workable process for obtaining possession where there is a justified need for them to do so. Any process which helps execute this process, whilst being fair to the tenant, has got to be seen as a positive move. Any change brings concern but providing MHCLG is working with organisations like The Guild and that they listen to the feedback they receive, then hopefully this will benefit all parties concerned.”

  • Kelvin Francis

    Why not modify S21. instead of scrapping it. Introduce the requirement for good reason to serve it, such as persistent rent arrears, damage to the property or wilful neglect or anti social behaviour. This would relieve pressure on the Courts processing S8. actions and limit the damage to the property and surroundings. The only other good reasons for requiring possession, could then be for personal reoccupation by the Landlord, or the need to sell.

  • Andrew Hill

    I still think they should include a reason as to why S21 is served on Form 6A and make it mandatory that all S21 notices are served, for data collection purposes, before any decision is made as to it's abolition.

    There was a reason assured tenancies were ended with the introduction of the Housing Act 1988, it seems a bit nonsensical to go back to a system that's already been found to be broken.

  • icon

    No I don’t agree why not restore S.21 the way it was, before you cause the biggest recession ever know. Scrap the 2015 De-Regulation Act that was only brought in to under mine S.21. Scrap How to Rent as if people didn’t know how to Rent. Scrap the Deposit Schemes that are an extra cost & only protect the Deposit itself and lets a have the original Deposits restored. Scrap the unfair Licensing Schemes that only applies to one half of the Community & robs us & we fund all. Scrap Right to Rent it’s not our job. Scrap S.24. Scrap Article 4. Scrap 3% SDLT surcharge. Scrap the 8% Capital gains surcharge. Do you not even know why S.21 was introduced. Scrap Building thousands of Flats clearly not required. For goodness sake anyone can see it’s an all attack to destroy us, no business can survive this not a hope , how much evidence do you all need.

    Paul Barrett

    All very commonsense stuff.
    None of which will occur.
    Indeed it is going to get a lot worse!
    There is simply no way that Govt will make it easier to evict rent defaulting tenants who refuse to vacate at the expiry of 2 months notice to quit.
    With S21 which was already massively dysfunctional to now just have a supp ok supposedly enhanced S8 eviction process just won't happen.
    No way does Govt wish to give LL quicker eviction processes compared to S21.
    Even is enhanced to effectively duplicate S21 that somewhat defeats the object of the exercise.
    S21 might as we be retained.
    No the allegedly enhanced S8 eviction process will be far more awkward and will take far longer and cost a lot more.
    Just the eviction process will be so problematic that LL will stop letting apart from to tenants who qualify for RGI.
    This will millions of tenants will be booted out unless they qualify for RGI.
    Indeed every LL should try and obtain RGI on all their existing tenants..Any who don't qualify should be booted out.
    RGI is the only defence against what will be an even more arduous eviction process under a new S8 process.
    It makes no business sense to retain tenants who can't qualify for RGI or source a guarantor that can qualify for RGI.
    Inevitably LL will gravitate towards quality tenants as they will have little choice as RGI will be fundamental for business guarantee s.
    Hardly any of my tenants over the past 12 years were capable of qualifying for RGI and I took massive risks which didn't work out in my favour.
    It wi become impossible to evict rent defaulting tenants within a reasonable timeframe to survive as a business.
    Without RGI being a mortgaged LL is just too risky.

     
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