Abolishing Section 21: Is this the final nail in the coffin for Buy-To-Let ? Your questions answered.

Posted on March 6th, 2020.

Several Landlords, some clients of mine and others that are with other Agents have contacted me to get my thoughts about the Government’s plan to abolish Section 21. Since it was first announced back in April 2019, it has caused jitters amongst Landlords and divided opinion across the Buy to Let sector.

There’s been much speculation in the property press about the effects of banning no -fault evictions. Landlord groups and Industry regulator, Propetymark, have indicated that it will deplete the supply of rental homes, putting upward pressure on rents. Tenant pressure groups on the other hand, claim it will make renting more attractive, improve social cohesion and attract better quality long-term tenants. Below are the 5 main questions that Landlords have been calling up and writing in about.

1.Will banning section 21 raise costs for Landlords?

We can expect to see a considerable increase in the number of cases being brought to the Courts. As a knock-on effect, this will impact both Landlords and Tenants financially. The suggestion that Section 8 be used instead has divided opinion. Under Section 8, Landlords can only seek to regain possession after having 2 clear calendar months of rent arrears. The current system in place, is slow and expensive. The average timescale from Court application to repossession is 6 months. The average rent in the London area currently stands at £985 per month. That makes a loss of £5910 on top of 2 months’ rent arrears at the time of the application.

2.Will there be an under-supply of rental property and more thorough vetting of tenants?

Recent reports and Government surveys have shown that on the back of the punitive tax rules, a large proportion of Landlords will halt further investment and others will sell up altogether. Whilst tenant pressure groups are championing security of tenure, this pales into insignificance as the homes to rent won’t be available in the first place. Its less choice for tenants, rising rents and landlords feeling risk averse.

3.Does Section 21 benefit tenants?

With a growing number of shared households, Section 21 enables Landlords to evict problem or nuisance tenants with 2 months’ notice. If its abolished (Section 21), it will be much harder to remove problem tenants who are disruptive to their co-habitants and neighbours. Local councils already have powers to stop Landlords using Section 21 notices for no-fault evictions, though ironically, it’s not being appropriately enforced.

4.What If there are issues with Anti-Social Behaviour in a Tenancy ?

If Section 8 is to be relied on instead, it will need to be radically overhauled if it’s to replace Section 21. Currently, it’s not an effective remedy to problems such as anti-social behaviour. Section 21 gives landlords the power to remove nuisance tenants within a set time frame.

5.Will abolishing Section 21 mean it will take even longer for Landlords to get possession ?

As part of the Governments proposal, they have advised that they will establish a Housing Court. It will be specifically set up to handle possession cases and other matters in relation to compliance and minimum standards. Due to funding cuts, the Court Service has a substantial back log of cases, hence the current timescales they have on cases. The ambition is that the introduction of a Housing Court will accelerate the process surrounding disputes and make it more accessible to landlords and tenants.

We are in consultation with other industry professionals and will be rolling out a further update on Section 21 in the coming weeks.

As ever, if you would like to discuss any aspect of the upcoming legal changes for Landlords in 2020 or would like to know more about Buy-To-Let, don’t hesitate to get in touch. You can write to me [email protected] , for more articles like this visit my blog https://www.ashmoreresidential.com/blog/