The End of No Fault Evictions: Good or Bad?

The end of no-fault evictions is on the way. But will that be good or bad?

  • The government intends to end section 21 no-fault evictions in England
  • Landlord’s will need a “concrete, evidenced reason already specified in law” to gain possession

Disclosure: Some of the links in this post or on this website may be affiliate links and if you go through them to make a purchase I will earn a commission. I only link to products or companies I consider to be of quality.

Are you a landlord and worried about the plans of the government (announced 15th April 2019) to end the right of landlords to evict a tenant at the end of their tenancy without having to give a reason?

Are you a tenant thinking the end of no-fault evictions is unqualified good news for you?

As ever, the picture is not black and white

This blog considers what the end of no-fault evictions is likely to mean for the main parties involved.  It deals with:

1. The changes signalled by the government

2. The prospect of additional changes going forward

3. What the end of no-fault evictions may mean for landlords

4. What the end of no-fault evictions may mean for tenants

5. The future for private sector landlords and tenants in the light of the planned changes and possible additional changes.

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1. The changes signalled by the government

Current section 21 procedure

Under existing legislation, a landlord has the right to get their property back at the end of a tenancy. They simply need to give 2 months’ notice to the tenant. This is commonly known as “the section 21 procedure”.

The notice is known as a “section 21 notice”.  In most cases the tenant will leave by the date specified in the notice.

If the tenant fails to leave, the tenant is protected from forcible eviction. The landlord must obtain a possession order from the court to be able to lawfully evict the tenant.

If the tenant still does not leave after a possession order, the landlord cannot forcibly evict the tenant. The landlord must apply for a bailiff’s warrant. A bailiff will then lawfully evict the tenant. 

This procedure is known as “no fault” possession since, to gain possession, the landlord can simply rely on the fact that the term of the tenancy agreed with the tenant has come to an end.

There is no need to show “fault” on the part of the tenant – such as rent arrears, damage to the property or anti-social behaviour.

A landlord will typically rely on the section 21 procedure where the only thing they are seeking at the end of the tenancy is possession.

The availability of the procedure gives flexibility to landlords. At the end of a tenancy, they can choose to allow the tenant to remain or ask them to leave. 

The procedure for gaining possession is relatively quick, simple and inexpensive.

Section 8 procedure

The other procedure currently available to landlords is “the section 8 procedure”, involving the service of a “section 8 notice”.

This is the “fault” procedure and is typically used where there is “fault” by the tenant such as rent arrears, anti-social behaviour or damage to the property.

In the section 8 notice, the landlord must give a reason or statutory ground for wanting possession. There are currently 17 statutory grounds that can be relied upon.

If ground 1 to 8 is established, the court must give the landlord possession. If ground 9-17 is established, the court has a discretion whether or not to give possession.

Changes signalled

The changes signalled by the government will mean landlords will no longer be able to automatically gain possession under the section 21 no-fault route. 

Landlords will have to show a “concrete, evidenced reason already specified in law” to gain possession of their property.

In other words, they will probably have to show one of the 17 grounds currently required to gain possession under the section 8 procedure

Broadly, they will need to establish some form of fault by the tenant or a good reason on their part for wanting possession.

It is likely that obtaining possession will therefore be more difficult, slower and more expensive for landlords.

On the other hand, tenants will have greater security of tenure. They might therefore have the chance to stay on at a property once the contractual term of their tenancy has ended. 

It will all depend on the exact legislation which is enacted. 

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2. The prospect of additional changes going forward

It is important to note that changes to no-fault evictions are not the only changes on the horizon for the private rental sector. 

On the 9th April 2019 the government released two guidance documents on its website gov.uk:

– One for local authorities relating to “rogue landlord enforcement”

– One for landlords and tenants relating to “landlord and tenant rights and responsibilities in the private rented sector”.

It also seems the government is interested in the idea of minimum length tenancies – with three years being mooted.

Further, there has been talk of rent control. However, that does not seem to be on the agenda of the current government.  

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3. What the end of no-fault evictions may mean for landlords

The end of no-fault evictions is likely to make it much harder for landlords to get their property back at the end of a tenancy. 

Tenancies could continue indefinitely unless the landlord has a legal ground for gaining possession. 

That would restrict the options of landlords, making buy-to-let a less flexible investment. As a result, there could be a reduction in BTL mortgages from some lenders. 

Details not yet known

The details of the government’s proposals are not yet fully known. However, it is expected landlords will be able to get possession if they need to sell their property. 

If a landlord wanting or needing to sell has to do so with the tenant still in occupation, that could depress the sale price. 

Buy-to-let landlords seem likely to desert the sector in large numbers if the new rules reduce their rental profits or lead to a reduction in property values.  

Longer to evict tenants

It will probably take longer to evict bad tenants under the new rules. Also, it may be more costly to do so if lawyers have to be retained and court proceedings taken.

Some landlords will look to reduce their risks.  Many tenants will not be able to pass the stringent “quality checks” some landlords and agents may be minded to impose. 

The main drawback for landlords is that, generally speaking, it will be  more difficult for landlords as a whole to gain possession.

As a result, BTL could become a less attractive investment. 

Some landlords may sell-up and the number of properties in the private rental sector could be impacted downwards. 

Unintended consequences

A possible unintended consequence is that the changes may cause landlords to take on the best tenants only, excluding tenants with poor or borderline credit scores, references or histories.

Some tenant categories could find themselves being discriminated against – for instance, those on benefits.

Supporters of the government’s proposals see it as a way to reduce homelessness. In fact it could increase it.

If a large number of landlords exit the market, the number of rental units could fall, and rents could rise. 

The actual impact of the planned changes will  of course depend on the precise wording of the legislation that comes into force.

The proposed changes will be subject to the usual consultation with interested parties and groups before draft legislation is put before Parliament.

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4. What the end of no-fault evictions may mean for tenants

The changes seem likely to give tenants the opportunity to remain in their rented home for as long as they like – subject to good conduct and not falling into rent arrears, and the landlord not having a legal ground to gain possession.

The changes will be good news for tenants, giving them greater certainty and security in their accommodation – enabling them to plan their lives and raise their families with greater stability.

Less frequent moves by tenants

Many tenants will not be obliged to move as frequently as before – saving money in terms of removal costs and other costs of moving.

Tenants with children will be able to provide them with more settled, and probably more successful, schooling.

Tenants who choose their accommodation with their job in mind will face less worries about losing their accommodation and having to travel further and more expensively to work.

In the words of former PM Theresa May, the changes should enable tenants “to feel secure in their home, settled in their community and able to plan for the future with confidence”.

The downside

On the downside, the government’s changes could reduce the number of private rented units if landlords were to withdraw from the BTL sector in significant numbers.

That in turn could push up rents.

Another possible problem for tenants is that landlords may become less likely to accept tenants who look like they could present challenges or issues going forward.

That could be bad news for tenants on a low income, welfare benefits or housing benefits.

Further, landlords could be disinclined to take on any tenant who looks like they could be a long-term renter. Tenants with children could find themselves being adversely affected – the very same tenants the government is keen to help.

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5. The future for private sector landlords and tenants in the light of the planned changes and possible additional changes.

When considering the likely impact of the planned changes it is important to stress that they are just that – planned changes.

The eventual changes will be subject to the outcome of the usual consultations with interested groups and the legislation which is placed before and passed by Parliament.

However, with the government clearly keen on reforms, the landlord and tenant landscape is set to see fundamental changes in the near future.

There seems to be a clear intention on the part of the government to:

  • Make it harder for landlords to evict “blameless tenants”
  • Strengthen tenant’s rights
  • Give tenant’s longer tenancies.

Buy-to-let less attractive to landlords

While these changes will probably be accepted as fair and reasonable by most landlords, the clear risk is that the changes will make buy-to-let less attractive overall.

The changes could cause a significant percentage of landlords to exit the market, exacerbating, not helping, the housing shortage –  and possibly worsening “the housing crisis”. 

The various changes are likely to increase the running costs or overheads of landlords – impacting on profits or rental returns.

Wise landlords will want to target rental units with the highest yields. They will shun low yields since they may not be profitable in the long-term.

If the government brings in 3-year tenancies, that could be both a positive and a negative for landlords.

Positives include:

  • Less voids
  • Reduced maintenance costs
  • Lower letting costs.

Negatives include:

  • Less flexibility in terms of disposals
  • Longer problem periods when faced with a difficult or troublesome tenant. 

Longer tenancies will be a win-win for tenants. It seems likely that the government will enable tenants to leave early for a good reason, without being obliged to pay rent to the end of the contractual term.

Overall, 3-year tenancies should not be a problem. Data from Hometrack, reported in the Financial Times in May 2018, suggests that the average private tenancy lasts over four years. 

 

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Conclusion

The plan to end no-fault evictions is likely to have a major impact on the private rental sector.  

The plan presents a danger to BTL landlords at several levels – including the operational and the financial.

The changes seem very likely to drive out more amateur landlords, “weak players” and “cowboys”.  That is likely to be good for tenants and good for good landlords.

Landlords exiting the market will present buying opportunities for landlords remaining in the market.

If you are a landlord, when developing or reviewing your property plans or strategies, it is vital to factor in the likelihood of a buy-to-let landscape where:

  • No-fault eviction is no longer allowed
  • Tenancies need to be at least three years in length
  • Regulation of landlords and the private rental sector in general is greater and more expensive than at present.

If government imposition on private landlords becomes excessive, they will simply exit the market – with no certainty that the public sector will be able to fill the gap.

The government’s changes  need to strike the right balance between the interests of landlords and the interests of tenants. If not, the changes will have an adverse impact on both.

Comments

How do you feel about the possible changes in the law?  Do the changes seem good or bad to you? Can you foresee any unintended consequences?

Disclosure: Some of the links in this post or on this website may be affiliate links and if you go through them to make a purchase I will earn a commission. I only link to products or companies I consider to be of quality.

Dalton Barrett
Rebel Property Coach

About the author

London-based blogger Dalton Barrett has over 30 years experience as a property solicitor, conveyancer, investor and coach. Read about his unconventional worldview of property here

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4 comments

  1. The private rented sector certainly needs a shake up as to reflect modern living. Although as you skilfully point out policies which sound enticing on the surface e.g rent control, can in actuality work to the detriment of the people they are trying to help.

    1. I think a revolution is coming in the private rental sector. The current government initiatives are simply the start of things to come. If there is a change of government I’m sure there will be plenty of work for the lawyers.

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