The answer to this question is yes, however, the Government are considering making it harder!
In 2018 the Government consulted on making tenancies last for a minimum of 3 years. Their response to the feedback from this has now resulted in a further consultation on whether we should abolish the Section 21 ‘no fault’ notice. Some say this would effectively create indefinite tenancies, as these notices are the main method landlords use to end a tenancy when tenants are troublesome. If this happens, it could be a major change in the industry.
The consultation on 3-year tenancies was driven by the poor practice of some landlords and agents who ended tenancies to get major rent increases. They felt the market was so buoyant that they preferred the risk of getting rid of their current tenant, suffering a potential void period whilst re-marketing and then taking an unknown tenant than to risk a successful challenge from their current tenant on a large rent increase.
Such evictions were obviously hugely disruptive for the evicted tenants, and these tenants’ concerns reached the ears of the politicians, as there are more tenants than landlords (so more votes) and numbers of tenants are growing, and the ball started to roll. Add to this mix the minority Government needing to show progress on an issue the other parties like, the inevitable conclusion is making changes to provide more protection for tenants.
The fact is 89% of tenancies are ended by tenants, not landlords.
Landlords only end a tenancy when they need the property, e.g. to sell or have a family member move in; or where the tenant is not honouring their obligations under the tenancy.
The 3-year tenancy consultation resulted in a great deal of feedback and, this caused the Government to announce in April 2019 that it would be consulting to end Section 21 ‘no fault’ notices. They perceive Section 21 notices are being used to evict people carelessly or without reason and this is a big issue for Landlords & letting agents because Section 21 notices are the main method used to evict any tenants.
In our extensive experience, the Section 21 notice is always used with justification. However the advantage is that the landlord does not need to give any reason as to why they want to end the tenancy, they simply need to prove the correct processes were followed and all paperwork is in order. Given this requirement, Section 21 notices usually result in the tenant leaving the property relatively easily and the overwhelming majority have no court involvement.
The alternative to the Section 21 notice is to take the tenant to court to prove a breach of the tenancy using a Section 8 otice. This is far less likely to be as successful, as the landlord needs to prove to a court that the tenants’ behaviour is unreasonable or a breach of the tenancy is severe. This process also requires court involvement, increasing landlord costs. Of course, in turn this will have the effect of making a troublesome tenant aware that the landlord is reluctant to take formal action if they misbehave.
So what is likely to happen?
The good news is this is just a consultation, so hopefully, the final decision will be practical. We have decided to take a risk and offer a prediction of the outcome of the consultation!
- Section 21 notices will probably be largely stopped. Landlords will probably be allowed to use them just when they want to reutilise the property, but not to change tenants.
- There is likely to be some undertaking from Government to improve and automate the court processes for common tenancy breaches, such as not paying the rent.
- Such changes will make landlords even more sensitive about accepting tenants who have any credit or reference concerns, thereby driving these tenants to ‘black market’ renting or social housing – a challenge as there is not sufficient social housing capacity
- Landlords will use legal expense and rent protection policies to cover the cost of any legal claim and ensure the rent gets paid. This will generate a new industry of legal teams funded by these policies.
Despite all this, our evaluation suggests having an investment property will still generate a reasonable return; maybe not as good as it once did, but still a viable part of any investment portfolio.
Helpfully the recent ‘Tenant Fee Act’ has caused us to make a change which will be helpful if Section 21 Notices are ended. The Tenant Fee Act means we can no longer charge tenants fees such as late rent fees (other than a tiny amount of interest). These fees have been a major lever in encouraging tenants to pay their rent on time. We anticipate this change may mean an increase in the number of tenants who default on their rent payments, and, as result, we have sourced a competitive legal expenses and rent protection policy for our landlords.
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