The End of Section 21… What Happens Next?

I just wanted to record this video today to share my thoughts on a story that’s been in the news for a few months now and that’s the potential abolishment of Section 21.

Section 21 is the process that is used by landlords to regain possession of their property without having to state a reason.

In the future, according to the government’s consultation which I’ll come onto in a minute, landlords will have to give a valid reason for taking back possession of the property, and would need to be able to satisfy a judge of the validity of their claim. Now, the government will effectively end Section 21 by getting rid of Assured Shorthold Tenancies and basically having open-ended tenancies. To replace Section 21, the government is proposing to review the Section 8 process, which, in a nutshell, is the process used if the tenants actually breach the tenancy agreement.

The consultation on whether the abolishment of Section 21 will go ahead actually ended on the 12th of October. Although, by all accounts, the government had pretty much already made up its mind back in July when the consultation was announced that this was going to happen. The consultation process, it seems, was just to tick a few boxes to say that we’ve actually followed the process.

There is no doubt that Section 21 can be used for the wrong reasons, and a story emerged where Norwich City Council referred to Section 21 as the “Rogue landlord’s trump card”.

The ability to serve notice on a tenant for no reason has also been cited in many retaliatory evictions. Just a couple of days ago, Labour politician and London Assembly member Tom Copley has urged the government to press on with the plans to abolish Section 21, stating that, in his words, “There were thousands of no-fault evictions in London last year” and that “the end of a private tenancy is now the leading cause of homelessness in the capital”.

Well, I’ve got news to you Mr. Copley, it’s Daren here from up in the Midlands, you know, above Watford, you know, one of the many places in the U.K. that account for 87% of the U.K. population who don’t live in London… it’s not all about what happens in the Capital!

A recent survey by the Residential Landlord Association found that 84% of landlords used Section 21 due to tenant arrears, 56% used it because of intentional damage to the property by the tenant, and 51% used it for anti-social behaviour. So, it’s not all retaliatory evictions and other things.

As I’ve said, a small minority of landlords do abuse their position and should be ousted for good. But, you know, is this really a big as issue as Mr. Copley would have us believe? Also, you know, as a model, the idea of a landlord is going to spend time and money finding a tenant only to get rid of them for no reason. It’s not a great business model and I don’t think it should be used to potentially scare tenants.

On the face of it, abolishing Section 21 is bad news for landlords and good news for tenants. Or is it? You know, I want to look at the unintended consequences, the possible unintended consequences for tenants when this goes ahead. So the bottom line is that abolishing Section 21 increases the landlord’s risk of letting a property. Landlords will be far more cautious as to who they let their property to, to avoid potential losses. You know, it’s all down to risk.

This thought process may well affect more vulnerable tenants, those at a higher risk of arrears and the landlords may hold out for tenants with better credit scores and higher affordability ratios. Whilst Mr. Copley stated that abolishing Section 21 would prevent homelessness, founder of Landlord Action, which is one of the biggest tenant eviction businesses in the U.K., Paul Shamplina, said that Section 21 is often used as an alternative to Section 8 to evict tenants for rent arrears as the process is faster and doesn’t require a county court judgment.

Now, if there’s no Section 21 available, tenants will be at a much greater risk of receiving a CCJ through the Section 8 process, and then you’ve got homelessness anyway, as local councils will not be obliged to re-home those with judgments on rent arrears. A CCJ would also impact a tenant’s credit rating, making it harder to pass tenant referencing, and if those tenants can’t get accommodation in the private rental sector and can not be re-homed by the council, what’s going to happen to them? So, rather than Mr. Copley saying it’s going to, it’s a reason for homelessness, this could actually increase homelessness.

Another major impact of getting rid of Section 21 is the impact on rental stock levels. Now, some landlords will inevitably leave the private rental sector as their risk increases, and supply and demand, lowering supply, this is going to increase the rent. It’s as basic as that. So, as I’ve said, I believe that this is a foregone conclusion and that Section 21 will be replaced by an updated Section 8 process with current average court process times at 22 weeks instead of a targeted 9 weeks. You know, the government really need to have a properly funded plan of court reform before any of this goes ahead.

I actually believe, and many of us do as well, that we should have a completely separate property court process in which we have specialist property judges. You know currently, judges, they can’t keep up with the 150-plus pieces of ever changing legislation which govern the private rental sector. You know, as letting agents, we have to. Judges have so many other things that they’ve got to look at on a daily basis, so they can’t possibly do it. So, I think a specialist court system for property is a must, or should be in the pipeline if this abolishment goes ahead.

Anyway, that’s my thoughts and that’s it for another video.

Thank you for watching, and we’ll see you next time.