What the abolition of Section 21 means for landlords [2023 update]
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If you’re a landlord in England or Wales, chances are that something called Section 21 will have been on your mind lately – and with good reason. Changes to the 1988 Housing Act, first proposed in April 2019, will involve the abolition of Section 21 of the act and the end of “no-fault” evictions, as well as creating a new framework for the repossession of property.
The UK government has finally started to move forward with the proposal more than three years after it was first suggested, with the introduction to Parliament in May 2023 of the Renters (Reform) Bill. Amongst the provisions laid out in the bill are measures to bolster and protect the rights of private tenants. But how will this affect landlords? Here we look at what this upcoming overhaul of the rental sector could mean for you.
What is Section 21 and what is it used for?
In Assured Shorthold Tenancies (ASTs) – which make up the majority of private sector rentals in England and Wales – Section 21 allows landlords to reclaim their property with two months’ notice without claiming fault on the part of the tenant. A tenant can be evicted through a Section 21 notice even if they have not broken any aspect of the tenancy agreement, hence the term “no-fault” eviction. Currently, Section 21 can only be served once a tenancy’s fixed term has ended, or if a tenancy has no set end date.
Why is Section 21 a problem?
One of the main cases against Section 21 is that the relative ease with which landlords can repossess their properties could have a negative effect on the wellbeing of tenants. In a 2014 survey commissioned by Shelter, one in twelve private renters said they were too scared to report problems, or request maintenance, out of fear of losing their home. Indeed, evictions using Section 21 proceedings jumped by 143% between 2021 and 2022.
These days, with private tenancies making up 20% of English households, and 36% of those belonging to families with children, there is a fear that such instability and uncertainty affects more people than ever before. It is also thought that Section 21 could be a contributing factor in rising homelessness statistics. Indeed, the National Audit Office has identified the forced ending of private tenancies as the “biggest single driver of statutory homelessness in England”.
How will Section 21 be abolished?
The Renters’ (Reform) Bill has finally reached the House of Commons for consideration. This bill is the government’s response to a housing consultation that took place between July and October 2019, and a consolidation of the recommendations of a private rented sector white paper published in June 2022. The abolition of Section 21 is just one of several changes to the private rental sector included in the bill
When will Section 21 be abolished?
While the Renters (Reform) Bill was introduced to parliament on 17 May 2023, after a three year wait, it is likely that the bill will still take several months at least to become the law of the land.
At the time of writing, the bill has only had its first reading in the House of Commons, and more readings, debates and committee stages in both the House of Commons and the House of Lords are still to come before the bill could receive Royal Assent. This also leaves open the possibility that the substance of the bill could change during the parliamentary process.
What is replacing Section 21?
Section 21 of the Housing Act is not the only mechanism for eviction of a tenant and the proposals for the Renters’ Reform Bill include provisions that would strengthen Section 8 of the Act. So, while there will be an end to “no-fault” evictions, this means landlords will be given further grounds for repossession, including in order to sell their property, or to move in themselves or to have a close family member move in.
Striking a balance between the rights of tenants and the rights of landlords is key to the success of the proposed bill, and it is hoped that by codifying a more streamlined process for landlords to repossess their home for sale or to move in, everyone’s interests will be served and their rights protected.
As well as the abolition of Section 21, the new bill will limit landlords to one rent increase per year with a minimum rent increase notice period of two months, double the current required period.
Finally, a new government-approved ombudsman for private landlords will be appointed to oversee independent investigations of landlords when tenants make complaints, with the power to demand up to £25,000 in compensation from landlords deemed to have acted improperly.
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What does this mean for landlords?
Without Section 21, landlords will need to state legitimate grounds for repossessing their properties. The assumption being that unless the landlord is intending to sell the property or move in themselves, tenants who don't break their contracts should enjoy a right to stay indefinitely.
While this will almost certainly provide assurance to tenants that they will not be unreasonably evicted from their home, some argue that this could lead to stunted growth of the private rental sector, and in turn, an eventual lack of housing for the most vulnerable. The government argues it will create a “housing market fit for the 21st century”, providing more security for both tenants and their landlords.
With such significant potential legislative changes, landlords – and prospective landlords – might be left worrying about their properties and the potential damage difficult tenants could cause. Flexible, tailored landlord insurance from Superscript can help.
We understand your worries, so our highly adaptable cover is there to give you greater security in the evolving private rental space. It includes protection against damage to the building and its fixtures and fittings, as well as property owners’ liability. In some circumstances, cover can be included for landlords' contents, acts of terrorism and cover for loss of rental income when a building becomes uninhabitable.
While the proposed changes in the government's 2022 white paper would mean some significant changes to legislation surrounding private property rentals, this shouldn't be a cause for overwhelming concern for landlords. With the proposed strengthening of the powers of repossession in Section 8 and the establishment of a Housing Court, landlords will continue to be able to evict tenants that break their contracts. Meanwhile, the rights of tenants to continue to peacefully enjoy residing in their homes will be strengthened as well.
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