Landlords are set for a major overhaul in the way they manage their property portfolio under the government’s rental market reforms.
The Renters’ Rights Bill, released this week, sets out plans to abolish section 21 notices in England, known as no-fault evictions, meaning a landlord will instead need to justify why they want the property back or need to remove the tenant.
It is part of plans to clamp down on rogue landlords and to support tenants who may fear being evicted if they challenge poor practice and unfair rent increases.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But there may be legitimate reasons why a landlord has to evict a tenant, such as if they are routinely damaging the property or stop paying rent.
Under the proposed changes, landlords will need to issue a section 8 notice that sets out their reasons for the eviction. This has prompted warnings that courts could be overrun with cases if tenants challenge the demands.
The reforms will give tenants more protection but the National Residential Landlords Association (NRLA) describes the legislation as the biggest change to the sector for more than 30 years.
It comes as landlords are already exiting the sector amid buy-to-let restrictions and tax fears in the impending October Budget.
Ben Beadle, chief executive of the NRLA, says: “Ending section 21 will leave the courts needing to hear possession claims where landlords have a legitimate reason.
“The cross-party Housing Select Committee has warned that without reforms to ensure the courts process cases much more swiftly, they risk becoming overwhelmed. This will not serve the interests of tenants or landlords seeking justice.”
The rules around eviction notices
Currently, landlords must serve a legal notice to end a tenancy. If the tenant does not leave, the landlord must go to court, which can instruct bailiffs to enforce an eviction.
Under the existing system, a landlord can evict a tenant without providing any reason using a section 21 notice.
They will need to give the tenant two months’ notice to leave the property.
Landlords may also seek possession using section 8 grounds such as rent arrears or a breach of tenancy but this can be challenged in court.
How can landlords evict tenants under Labour's reforms?
The Renters’ Rights Bill makes a few changes when it comes to evictions.
The biggest is the end of section 21 ‘no-fault’ evictions, so landlords need a valid reason to remove a tenant.
The main route to evict a tenant will be through section 8 notices, where landlords need to explain their grounds for removal and the notice period will depend on the reason.
Landlords have been given more justifiable reasons for eviction and the type of section 8 notice is split into mandatory and discretionary grounds.
Mandatory grounds for eviction
The Renters’ Rights Bill sets out more than 20 different grounds for a mandatory possession.
This includes a landlord wanting to move a family member in or sell the property. These grounds can’t be done for the first 12 months of a new tenancy and four months’ notice is required for tenants.
One of the main reasons for eviction is often rent arrears. Currently, a tenant can be evicted if they are two months behind on rent but the new legislation will increase this to three months of arrears.
Additionally, the notice period for rent arrears will increase from two weeks to four.
Landlords renting full-time to students will be able to use a section 8 notice if the property is required for a new group of students in line with the academic year after a four-month notice period.
If a tenant dies, a landlord can issue a section 8 notice no later than 12 months after death or, if the court directs, after the date on which the landlord became aware of the death. Two months’ notice is required in this situation.
No notice is required if a tenant has been convicted of criminal behaviour or has breached an anti-social behaviour order.
Discretionary grounds for eviction
There are also 11 discretionary grounds.
These include tenancy breaches or if the tenant has made false statements or caused the property's condition to deteriorate, all of which require two weeks’ notice.
Landlords can also raise issues about persistent arrears, where four weeks’ notice is needed
Tenants who are convicted for rioting in the UK can also be evicted using this route after two weeks’ notice.
Landlords must, as in the current system, go to court if a tenant does not leave. In court, they will need to provide evidence that the ground is met.
For mandatory grounds, the court must award possession if the ground is proven.
For discretionary grounds, the court can consider if eviction is reasonable, even when the ground is met.
Paul Shamplina, founder of campaign group Landlord Action, says good landlords will benefit from clearer regulations, but promises of robust eviction grounds mean little if the courts remain overwhelmed.
“We already have cases where landlords are owed two years of rent but can’t reclaim their properties, with one of our cases dragging on for 19 months without a hearing date yet,” he says.
“Landlords aren’t banks, and many rely on rent to cover mortgages or fund retirement. Nearly a fifth of properties for sale are from landlords leaving the market, forcing tenants to find homes in an already tight market.
-
Higher rates hamper Reits – are they still worth buying?Shares in Reits have been under pressure and, as a result, discounts to net asset value are likely to persist for some time – focus on income over value
-
Will Topshop return to the UK high street?Despite Asos selling a £135 million stake in Topshop, is there a chance for the retailer to make a comeback on the high street?
