What’s happening with Section 21?

If you follow this blog regularly, you’ll know that we frequently add updates about the progress of the Renters Reform Bill, legislation that will – among other things – phase out Section 21 (‘no fault’) evictions.

The government wants to scrap Section 21 evictions to help give tenants greater security of tenure. Ironically, you could argue that this ambition is causing problems for a large number of tenants. Many landlords, fed up with the uncertainty of the long-drawn-out rental reforms, are selling up. Currently, some 2,000 households in England face homelessness each month because their landlord is selling their property. In addition, about a third of landlords are planning to reduce the size of their rental portfolios.

The delay in Section 21 abolition

Originally, the Renters Reform Bill would have abolished Section 21 after it gained royal assent. However, the legislation will not scrap Section 21 immediately. First, the government wants to reform the courts so they can handle the likely increase of Section 8 evictions.

Recently the House of Lords gave the bill its second reading. According to Housing Minister Baroness Swinburne, work is being done on a system for the courts to process new Section 8 repossessions. She also said that she would “attempt to supply a visual chart for setting out indicative timelines for the Section 21 phases and the total abolition as we discuss this over the coming weeks.”

That said, Baroness Swinburne refused to be drawn on a date when Section 21 will be abolished. She said: “There is a raft of secondary legislation that will be required to achieve that; therefore, it cannot be done at Royal Assent.”

Section 21 loophole?

Recent reports also suggest the Renters Reform Bill will create a system where some landlords will be able to issue Section 21 notices while others aren’t. This is because there will be three broad types of tenancy. These will be as follows:

• New tenancies created after the bill becomes law. You will not be able to issue a Section 21 notice in these cases.
• Fixed-term tenancies that become periodic after the bill becomes law. You would be able to issue a Section 21 notice before the tenancy type switches, but not afterwards.
• Tenancies that are periodic when the bill becomes law. You’ll be able to serve Section 21 up until the time government completes its review of the courts system and announces a date for Section 21 to be scrapped.

Should I sell up now?

If you’re a landlord, you may be considering selling up before Section 21 is abolished. However, it’s worth remembering that when the bill becomes law, you’ll be able to serve a Section 8 notice if you want to sell the property. The only restriction is that you’re not allowed to do this during the first six months of a tenancy. You’ll also still be able to evict for reasons that include repeated, serious rent arrears and antisocial behaviour.

While uncertainty isn’t helpful for landlords or tenants, rental property can still be a good investment. You not only have an asset that normally increases in value, but you also have income from your tenants. Yes, margins have got lower over recent years, but with the right approach there’s still money to be made. If you’d like to talk to one of our accountants with expertise in buy-to-let, get in touch today or learn more about our Landlords’ Platinum Accounting Service.