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Landlords left in limbo by government confusion on rental reform

Uncertainty over government plans for the Private Rented Sector - including the controversial Renters Reform Bill - has left the industry in a state of confusion.

That’s the view of Daniel Evans, Chair of the Association of Independent Inventory Clerks.

He says there aren’t enough available homes to satisfy demand, and believes landlords are holding fire on investment because of the lack of clarity.

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It is five months since the Bill – said to be the most radical shake-up of the PRS in a generation – was introduced in Parliament and it received a Second Reading just this week but only after the Government paused its long-promised scrapping of Section 21, ‘no-fault’ evictions until improvements are made to court processes.

There remains no indication of when the Government will be in a position to proceed with that specific reform.

Evans says: “While it is encouraging that the Government has recognised that the court system needs to be upgraded and the current waiting time for hearings massively reduced, there is no indication of how long this will take or exactly how it will be achieved.

“But there is still the firm intention that, in the end, Section 21 will be scrapped.

“We’ve been told that there are some measures that may or may not be added at a later stage. As the Bill stands currently it’s like a half-baked cake.

“Meanwhile, demand for rented properties has gone through the roof because many thousands of landlords have already sold up and left the sector – some of them because of the fear of the abolition of Section 21.

“Potential first-time buyers are staying in rented accommodation longer because higher interest rates and tougher mortgage rules have made it harder for them to get on the property ladder.

“As a result, rents are continuing to rise and those landlords that are left are wondering which way to turn. These are investors, businesspeople and they are desperate for clarity.”

Last month, the Government paused plans to introduce tougher Minimum Energy Efficiency Standards for rented homes – a measure that had been flagged up for introduction in 2025.

“Of course, this was welcome news for some landlords who have, in the short-term, been saved from forking out for expensive insulating and energy saving improvements,” says Evans.

“But many landlords, knowing that the MEES regulations were going to change, have already spent thousands on their properties making the upgrades.

“And some others, knowing that the necessary works would be too expensive for them, have already sold up and gone.

“Michael Gove, the Housing Secretary, described the PRS as having a ‘vital’ role to play in housing the nation. This kind of policy confusion creates chaos and helps no-one.”

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    I can solve this housing crisis easily (I think). Just make all tenancies common law tenancies, and with respect to everything else e.g. energy performance make rental properties subject to the same laws as owner occupied properties. Obviously abolish all forms of property licensing for rental properties. Additional licensing has already led to underoccupation of properties and all forms of licensing costs have been passed on to tenants.

    By doing that, supply will increase, rents will fall, and property standards will be greatly enhanced as landlords compete for tenants. Landlords will also rarely give notice to existing tenants as the potential income from a new let may be lower than that which they can currently get.

    Families, people with pets and people on benefits will all be able to find accommodation in the private rental sector.

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    Very good I agree, what you are Saying is Remove the Causes of the Sell off, the Housing Crisis and the Homeless. Let’s be honest this didn’t just happen it was caused.

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    Exactly, and landlords leaving their rental properties empty will bring them back into use - and people may let their second homes, too. By treating private landlords fairly (and recognising that they are people) the pressure would be taken off the local authorities; they wouldn't have to house so many homeless people.

     
  • Ian Deaugustine

    Governments need to learn what they are doing as they are corrupted people who, in most cases, have not worked for a single day of their (useless) lives. It goes without saying that whatever decision they take has nothing to do with common sense.

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    Being a landlord needs to be profitable. There are plenty of other assets people can invest in and most of them don't run the risk of hefty fines for minor mistakes, being trashed by someone with mental health or dependency issues or bizarre government ideas that suddenly make them unviable.

    Landlords tie up a huge amount of capital in their properties and provide a very varied range of rental options. Options that often wouldn't be available from big corporate or Social landlords. If we include all forms of private renting from lodgers, to Airbnb, to fully catered homestay to traditional ASTs this variety would be impossible to provide in a formulaic way. We provide roughly 20% of housing and virtually all of the niche housing solutions. We often listen to the human story and can be very accommodating in our tenant selection process.

    The PRS provides very cost effective, flexible housing solutions in locations people want to live in. Far easier to obtain than Social Housing and far quicker and cheaper entry than buying. Very cheap and simple to end a tenancy when the time has come to move elsewhere.

    PRS Landlords are not charities and certainly don't receive the favourable tax breaks or minimal regulation Social Housing providers enjoy. It's long overdue for a bit of levelling up and provide landlords with the same tax situation as all other self employed businesses.

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    Exactly I never have invested or worked for peanuts why would I ?

     
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    What the Conservatives do is meaningless, in a year they are likely to be out of government 🤔 I fear 😰 Labour will simply start off exactly where they stopped. We have a year or so then it’s all back on the table, incl of EPC C 🆘🆘

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    Student landlord here and definitely confused. So new idea to give right for possession on a specific date for students but also you cannot give right to possess within 6 months of tenancy beginning. So you rent to a group of students (either individual contracts or joint (not sure what is possible anymore)) and one moves out 5 months before the academic year - in that situation how can you rent the room to someone new and comply to both regs- give them 6 months before you ask for possession and ask for possession at the end of the academic year. So you then have a void you can't fill - NOW this is the real problem - what if your house is in a C4 planning area - you are meant to show 10 years of continuous rent - how can you when the government has legislated and pretty much forced you to have voids - the only hope is not to rent to students and rent to professionals. This poorly thought through, insular to other laws, knee jerk legislation by the slow of thinking isn't going to work for students at least. They accept that PBSA need fixed term rents so why do they not accept that private rental to students needs it too? If they continue down this route of just thinking up another rule to solve the problem they have created without fully thinking it through the student housing market will decline . PBSA have big money and that is the only reason the conservatives are listening to them and ignoring the individuals trying to provide private rentals to students. Its bad for student landlords like me but this will be atrocious for students in 5 to 10 years time who have nowhere but PBSA to live in (already 50% more expensive than the private sector)

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    You're right that it will be terrible for students in 5 to 10 years time if it isn't done absolutely right now. We need to be able to offer fixed term contracts for whatever the standard period is in each university city. Usually 10, 11 or 12 months or 48 or 51 weeks.
    It needs to be possible for an agreement to be assignable to a replacement student if someone drops out (especially on a joint tenancy agreement). There also needs to be provision for one semester tenancy agreements for students.

    About 10 years ago we had a dip in student numbers and I started letting my 6 bedroom student house as a 6 individual tenancy HMO. It is in absolute prime student territory but has never gone back to being a student house. Students would pay a bit more but the group of professionals I currently have are incredibly easy to deal with. They have a proper community vibe going on in the house and it's been a very stable group for well over 2 years. One of them will have been there 7 years next month. So it's nice for me, nice for the current tenants and rubbish for the current student population already searching for next September's housing.

     
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    Ellie , You should also include being taxed like any other Business . Remove section 24 .
    I am being approached by many tenants who have been living quite happily for 10 years or more with their current Landlord who as been forced to sell up . I received 96 enquiries for the last vacant property.
    I also agree with the Statement above This Crisis has not just happened , It has been Engineered by the Government . They new the consequences because it happened in Ireland.
    I wonder if anyone in the department of Levelling up or Government .has considered how People feel you are effected by this feel ,When others are housed in Hotels

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    Taxation could be made fairer for landlords, of course - and is very important in ensuring a large private rental sector.

    The only problem is that Michael Gove has said that they are not going to repeal Section 24. It was introduced to deter landlords from borrowing money to buy more and more property. They want to force, and perhaps help, first time buyers on to the property ladder so that they pay a mortgage rather than rent.

    The Rental Reform Legislation is having the same deterrent effect - very few landlords intend to buy more houses, even those who have the cash and those who intend to remain as landlords whatever the government does to them.

    However, politicians have to consider whether they want to prevent a housing crisis - and as the general election approaches, with Labour seemingly intending to impose yet more regulatory and tax burdens on Landlords, it looks like there is going to be a dreadful housing situation created.

    The suggestion I made above wouldn't cost anything and would save local authorities a great deal of money.

     
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    @ Ellie. Yes Gove gave the standard Treasury reasons for justifying S24 but there were too many 'coincidences' around L&G and Blackstone for my liking. I'm afraid that Mr Gove is not telling the truth.

     
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    They may do something to help landlords who are struggling in the autumn statement. Besides Section 24, there is the fact that the wear and tear allowance was abolished which hit landlords who carry out maintenance work themselves and with "making tax digital" a fixed rate allowance could simplify returns. Also retirement relief was abolished in respect of capital gains tax and that capital gains tax relief could be useful for older landlords who couldn't possibly cope with ombudsman claims once their legislation is in force.

     
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    @ Ellie. I don't think Landlord Today will give me enough room to go into all the detail I can on this but starting with our favourite charity, they supported the introduction of S24 claiming that it wouldn't affect many LLs but at the same time it would raise enough money to have a meaningful effect on HB. No reason was given to say why they thought Government would increase HB. They also admitted that S24 may well push up rents so they were backing something they knew would be detrimental to the people they are supposed to represent. Isn't it interesting that at that time L&G were one of Shelter's corporate sponsors? The 'charity's' annual accounts even stated that L&G collaborate with them on policy!

    When Osborne announced his 3 pronged tax attack the second most senior Treasury mandarin was a guy called John Kingman (later knighted in Cameron's exit honours list). Shortly after Osborne left office Kingman went off to become Group Chairman of L&G and it was reported that he more than doubled his salary.

    Also in Cameron's time a senior manager from L&G took a sabbatical and ran the policy unit at No 10 for around 10 months before returning to L&G. I forget his name but could look it up if you really want to know it. The same guy was involved in a joint project with the Fabian Society (about as left wing as you can get without being communist). The project was for Shelter and as I remember it was jointly funded by them and L&G.

    When Osborne left office, one of the many jobs he took was one day a week at Blackstone for £650k per annum. This company is the biggest commercial residential landlord in the world and there's some great articles out there about the way they work. If you google 'The Blackstone rebellion: how one country took on the world’s biggest commercial landlord' you will find a lengthy but very interesting article by The Guardian.

    So in my view what Gove has said is the same old smokescreen that the Treasury has been peddling all along and I personally don't believe a word of it.

     
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    You seem to know a great deal about the people involved, John. The majority don't.

    I think most people just accept the reasons that Michael Gove gives now and those that George Osborne gave at the time. George Osborne said in his budget speech in 2015 that:

    "Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income whereas homebuyers cannot, and the better off the landlord, the more tax relief they get. For the wealthiest, for every pound of mortgage interest costs they incur, they get 45p back from the taxpayer. All this has contributed to the rapid growth in buy-to-let properties, which now account for over 15% of new mortgages, something the Bank of England warned us last week could pose a risk to our financial stability. So we will act, but we will act in a proportionate and gradual way, because I know that many hard-working people who have saved and invested in property depend on the rental income they get. We will retain mortgage interest relief on residential property, but we will now restrict it to the basic rate of income tax. To help people to adjust, we will phase in the withdrawal of the higher rate reliefs over a four-year period, and only start withdrawal in April 2017."

    Not everyone agreed with George Osborne. Paul Johnson, director of the IFS, took issue with the Government’s rationale for reforming these rules – that, as the Chancellor suggested, the tax system gave buy to let landlords a large tax advantage.

    Mr Johnson said, “this line of argument is plain wrong. Rental property is taxed more heavily than owner occupied property. There is a big problem in the property market making it difficult for young people to buy, and pushing up rents. The problem is a lack of supply. This change will not solve that problem.”

    Stuart Adam, at the time, suggested that the Government’s argument was ‘nonsense’, given that,
    • Landlords are taxed on rental income and capital gains
    • Owner-occupiers are not taxed on their (implicit) rental income and capital gains
    • Deduction of costs is an appropriate counterpart to tax on returns.

    The argument then seems to have changed to deterring landlords from buying up more property and encouraging renters to get onto the property ladder - so section 24 coupled with the Renters Reform legislation became part of an ill thought out plan to reduce supply of rental properties. And now we have Michael Gove saying that they want a thriving private rental sector.

     
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    @Ellie. If you look on 118 for the report that Dr Ros Beck did after S24 was announced you'll find me as one of the contributors but we all worked together as a team and found the dirt as a team.

    Further evidence that the whole idea was to decimate the PRS to make way for the big boys was that Osborne didn't attack the Air BnB market thus encouraging LLs to shift from conventional lets to holiday lets.

    And Osborne only had to look at Ireland to see what the effects would be. I don't believe the man is stupid, far from it, so why would he think anything different would happen in the UK?? Yet those landlords that wrote to the Treasury got the standard response saying it's different here to Ireland. Really??? Well it's panning out exactly the same and has allowed the big BTR companies to move in, only many of them seem to be making a complete hash of it, especially the new players such as John Lewis.

    Yet with all the evidence screaming in their faces they will still not repeal S24. Why? Which of those big players are the main donors to the Tories?

    What will be interesting is what Labour will do when they get in. Their left-wing ideology will urge them to hit the PRS even more but then it hurts the very people that will have voted for them. Meanwhile more LLs flee and the situation worsens. Interesting times ahead.

     
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    I found the report John - and I can see that you were a contributor. I have reproduced the summary of your report below:

    1. Experts and commentators agree that Section 24 makes no sense, as it proposes ‘individual’ landlords pay tax on their profit but stops them from offsetting the
    costs of making that profit.

    2. The logical conclusion of Section 24 is that many landlords will pay huge amounts of tax. The two real case studies in this report show effective tax rates of 83% and
    93% for two portfolio landlords as soon as s24 is fully in place. Interest rate rises are likely to cause the tax rate to exceed 100% of their real profit. It will even be payable on a loss, making the rate infinite.

    3. The tax will be confiscatory. If the landlord is able to pay it out of another salary or savings, the salary/savings will be confiscated by the Government. If the landlord is
    not able to pay it, HMRC will bankrupt him or her, and the property will be confiscated by the lender. Tenants will be evicted and landlords’ livelihoods and lives
    will be ruined.

    4. Landlords have been made the scapegoats of the housing crisis which is due to a decades-long under-supply of new dwellings. This blaming is ironic as landlords have made a huge contribution to the supply of new dwellings. The crisis would be much worse now if they had not done this and both rents and house prices would be higher than they are today.

    5. Organisations like Shelter and many sections of the media have vilified private landlords for years, although surveys show that more than 80% of tenants are
    satisfied with their homes.

    6. There was no consultation whatsoever before this policy was announced, there was no valid analysis of how many landlords would be affected, and the impact report on the measure did not mention tenants as an impacted group, although one estimate is that 4.6 million tenants will be affected, with the most in need being the most hard hit.

    7. The way the policy was introduced throws up serious questions about the ‘independence’ of the Office of Budget Responsibility (OBR) and the Bank of England
    from the Treasury.

    8. Even before Section 24 was announced, UK landlords received worse tax treatment than all their counterparts in the advanced world, with the exception of Ireland.

    9. Similar, yet far milder, policies were introduced in Ireland twice in the last 20 years and both times there were adverse consequences, including sharp rises in
    homelessness. The UK Government has made no reference to this. In fact, Section 24 is far more extreme as it applies to properties already owned; in Ireland it only initially applied to new purchases. It is the fact that Section 24 is retroactive legislation that is so damaging and that will lead to the bankrupting of currently
    successful businesses. The Irish Government has now made the dramatic announcement that their measure against private landlords is to be repealed, because of how it has exacerbated Ireland’s housing crisis. The UK Government needs to learn from the lessons of others which are clear to behold.

    10. If, instead of draconian tax punishment, the Government offered the same incentives that landlords in other advanced countries enjoy, private landlords
    would increase the supply of new dwellings even faster than they did up to 2015 without such incentives. They financed new-builds, rehabilitated run-down properties and converted large residential or commercial buildings into flats or houses of multiple occupation (HMOs).

    11. To avoid bankruptcy, landlords have already started to pass on the Government’s levy to their tenants by increasing rents. Those on housing benefit cannot afford
    the increased rents and are being evicted, increasing the homelessness problem for councils who have to find ‘temporary’ accommodation for them. These costs are
    significantly higher than housing benefit; the cost in human misery is incalculable.

    12. In tandem with the attack on ‘individual’ landlords, the Government has supported ‘Build to Rent’ by institutions, some of whom are Conservative Party donors. These institutions will charge higher rents than private landlords, so will not alleviate homelessness. No justification has been advanced for this preferential treatment.

    13. Landlords were so furious at the sustained attack on them by the Government since the Summer Budget of 2015 that they even attempted to obtain a Judicial Review of the policy (this was however refused). Such anger towards the Government from landlords is unprecedented and indicative of the sense of betrayal felt over this hardleft measure; this is in the context of the Conservatives having presented themselves as the party of business in their general election campaign.

     
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    You can see the Government's response to that report by googling "Treasury response to Section 24 report by Dr Rosalind Beck"

     
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    Yes Ellie, though it seems like a lifetime ago now.

    BTW I was in the court room for the judicial review, along with most of the people that contributed to that report. As it happens I was just behind Cherie Blair who represented us. The Government had 2 barristers and have to say I thought they were pretty useless but what the Judge said (twice) was interesting.

    Whilst I won't have the exact wording right he said that whilst Government doesn't always make morally correct decisions it was his job to ascertain whether any laws were broken by their actions, on this occasion it was his opinion that they hadn't.

    So he thought S24 was wrong but was legal.

    On a different note, after S24 was announced, a friend and I put a website together called Say No To George. We predicted landlords quitting, scarcity of available rental property, rising rents and increased homelessness. None of it was rocket science and more like 'stating the bleeding obvious', yet the landlord haters denied any of it would come to pass. Well here we are. I'd love to engage with all those people again!! :)

     
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    I agree that Section 24 is a very big problem now for some landlords, as is the Renters Reform Legislation which is bringing the private rental sector back to the 1970s when it was very small indeed. The majority of landlords were not prepared to let if it meant losing control of their properties. I can't understand either why anybody would want to create a situation where tenants can't find anywhere to live - or is that the people involved simply don't understand what they are doing?

     
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    John you did so well to ensure that all the arguments were put across. You couldn't have done more.

     
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    Student housing is certainly a problem if fixed term contracts are abolished. I have a 5 bed student house and on several occasions a student has dropped out of Uni, stopped paying rent and gone home. Fortunately a letter to their parents, and the threat of a CCJ, quickly restores payments. Best, however, to make all contracts “joint and several”, meaning that the remaining student tenants are responsible for any shortfall. If they don’t cover the rent then it becomes deductible from the deposit at the end of the period.
    On a broader renting note, what business is it of Government anyway? A contract should be between consenting adults. If the contract is unacceptable then don’t agree to it….simple.

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    I agree, Colin. That is why I said above about making all tenancies common law tenancies - in those tenancies the terms of the contract count, not the Housing Acts.

     
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    In Scotland where no fixed term tenancies are allowed even for students since 2017, it's not really been a major issue for students in a joint tenancy where peer pressure and guarantor responsibility tends to bring common sense currently.

    However that despicable green dwarf acting as he little helper of Humsalot Useless threatens to allow one joint tenant to leave at any time and it's totally unclear whether the remaining tenants will need to cover that share of the rent.

    Families wanting to rent long term are no longer preferred over a bunch of students but further lunacy from the SNP and their little Green helpers now threatens to screw things up even further in Scotland.

     
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    Hi Robert,

    It would be great if you would be kind enough to tell us more about the situation in Scotland for example are there any fixed term tenancies allowed for short lets or serviced accommodation lets? Do fixed term company tenancies still exist?

     
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    Ellie

    I only know how the Scottish PRS legislation has affected me and my family and not much about the overall legislation in detail.

    As far as I am aware, fixed term tenancies were totally outlawed in December 2017 and some have taken advantage in pretending that they wanted a longer term rental but gave notice shortly after moving in as they just wanted a short term rental but at long term rates which are obviously much lower.

    More recently, there have been eviction and rent freezes which morphed into rent controls at 3% or a maximum of 6% if costs have risen by more than 3%.

    Older short assured tenancies were initially left alone but there was a consultation paper recently which threatens to retrospectively outlaw these and outlaw rents reverting to market rents for new tenants.

    It had been proposed that HMO licenced properties would be allowed fixed term tenancies but the SNP rightly realised this would place normal families at a disadvantage and lead to more student rentals at the expense of normal families. This has still happened as in practice students still operate as if they have a fixed term tenancy as it fits in with fixed term university courses and peer pressure from joint tenants by and large keep it working as it always has done.
    However another part of the new consultation document proposes to allow a joint tenant to leave but is unclear how this rent shortfall will be dealt with but almost certainly it will be the landlord who picks up the tab, either leading to higher rents if still allowed or more landlords selling up if the alternative is running a loss making business.

    Incidentally I tried to respond to the consultation document but it only allowed me to rank alternatives in order of preference. It didn't allow any free text or have an option to disagree totally with proposals.

    Incidentally another consultation document discussing doubling Council Tax on second homes had less than 1000 responses with over 900 in favour. The SNP interpreted this as overwhelming support and now plan to press ahead with a scheme supported by less than 1000 Scottish residents.

    Paul will always support measures to rob Peter even more!

     
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    It is amazing, Robert, that you have managed to carry on so well in that difficult situation.

    I can see that allowing a joint periodic tenant to leave without the tenancy terminating for everyone could create a very big problem.

    I did a google search yesterday evening and it seems that there are still fixed term common law tenancies permitted in Scotland for example company lets.

    Isn't it possible in Scotland to offer a head lease to a University which would be of a fixed duration so that your rental income was guaranteed and you knew you were going to get your property back? That is what happened in England in the past when the Rent Acts were in force.

    The situation for property owners seems to be impossible in Scotland - and the consultation about second homes appears to have been extremely unfair.

    Do you know what the council tax situation will be in Scotland if a second home owner lets part of it to a tenant, and keeps part of the property for their own use?

     
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    Colin, all students should be on joint and several. Every year we get the same argument from a guarantor that they are happy to guarantee their darling child but not everyone else's. We patiently explain that they are guaranteeing only their offspring, but their offspring's liability guarantees the others and vice versa.

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    I show no patience but simply tell such smart Alec parents that I am not prepared to risk a property worth hundreds of thousands if they don't feel they can trust their offspring's judgement in choosing suitably trustworthy flat mates. I tell them I am therefore not prepared to continue with the proposed tenancy and move on to the next group in the long queue.

    I have found that such smart Alecs invariably cause further hassle further down the line and should be avoided at the earliest opportunity.

     
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    @ Robert,
    I found that, once explained, they accept and sign. On one rare occasion I did have to do as you ask and told one princess that we could not proceed because daddy would not sign. Daddy signed within the hour!

     
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    OK I see so many wanting different rules for different groups to suit their agenda.
    As for Section 24 to stop people buying more & more, no need for that if there ever was, a dozen interest rate hikes has taken care of that, so scrap it now.
    So many comments on going on a daily basis about alternative’s to Section 21, it maybe be specific rules for various groups but we can’t have people treated differently, and whether it be messing about with a modified Section 8 or new rules one thing is clear you are talking about an alternative to Section 21, Therefore you are admitting Section 21 is needed or you wouldn’t be looking for an Alternative.
    Scrap the Stupid Bill now, we know the proposer the House Secretary is pretty useless having previously been sacked, didn’t we even have Liz becoming Prime Minister and nearly Bankruptcy UK, don’t tell me they know what they are doing. They have cost the Country Billions, made hundreds of thousands Homeless and Caused a Housing Crisis.

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    Can you have section 21 and give a reason?

     
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    Micheal
    Liz Truss was fetched down by the Americans in order to put their stooge Sunak in power. Sunak who squandered billions as chancellor and financed the COVID hoax.

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    • A JR
    • 05 November 2023 08:53 AM

    John: I recently evicted a tenant using Sec 21 and yes I detailed all the reasons inc the political ones to the Court.

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