Concerns over Section 21 reform among landlords greater than those of stamp duty surcharges or the loss of tax relief

As the introduction of the Renters' Reform Bill draws closer, apprehension surrounding the abolishment of 'no fault' evictions continues to grow among UK landlords, with a third now saying that the scrapping of Section 21 is of major concern to them, according to Mortgages for Business.

Related topics:  Landlords,  BTL,  Section 21,  Renters Reform Bill
Property | Reporter
20th March 2023
"Fears surrounding the scrapping of Section 21 are a driving force behind landlords not remortgaging and selling-up instead"

According to a new poll conducted by the specialist buy-to-let broker, 33 per cent of landlords were worried by the reform of Section 21 as part of the Renters Reform Bill. Under government plans, landlords are set to lose the right to evict tenants at short notice without giving a good reason for doing so.

Until now landlords have been able to use Section 21 of the 1988 Housing Act to evict renters after the end of a fixed-term tenancy, with two months’ notice.

Government plans will effectively create open-ended tenancies whereby landlords will have to give a reason for eviction — such as rent arrears or antisocial behaviour — as well as include evidence of the tenant’s shortcomings.

“Fears surrounding the scrapping of Section 21 are a driving force behind landlords not remortgaging and selling up instead,” said Gavin Richardson, the managing director of Mortgages for Business.

In future, all tenancies will be assured tenancies that will continue indefinitely unless ended by one of the new Section 8 grounds for possession. These include: if the landlord wants to sell the property (or move into it) or if there has been a breach of the tenancy by the tenant.

Richardson said landlords had less to fear from reform of Section 21 than they realised.

He added: “Section 21 notices have been abused for years. They have been used as a vehicle for ‘revenge evictions’, for instance, where renters who have complained about their property are evicted in retaliation.

“I don’t think the reforms will prove to be that bad. First, tenants didn’t have to do anything wrong to justify a Section 21 notice — they could have been paying the rent on time and taking good care of the property. Sensible landlords rarely turf out good tenants who pay their rent as they want them to stick around. So this reform will disproportionately hit bad landlords abusing Section 21, rather than the reputable end of the market.

“Second, tenancies can still be ended if there has been a breach of the tenancy by the tenant. Furthermore, the government has said it will introduce a new ombudsman to settle disputes between tenants and landlords without the need to go to court — and speed up court processes where possession cases require them. The government has also promised to digitise the courts’ agenda ahead of these reforms to ensure a swift resolution to these cases.

“Third, owners will be able to end a tenancy if they plan to move back in or sell it — that was the real danger of this reform, anything that inadvertently risked landlords’ ability to realise the value of their housing assets through disposal.”

“The loss of full tax relief on mortgage interest payments for individual landlords, the stamp duty surcharge on additional property purchases, and the need to ensure properties meet energy efficiency rules expected to apply from 2025 are all far more significant for landlords.

“You’d never guess that from the government rhetoric though. For instance, I don’t think for a moment that Section 21 exacerbated homelessness as one Tory communities secretary claimed.

"The politicians are irresponsibly trying to curry favour with tenants: the country will suffer as the private rented sector — with its efficient use of property stock — dries up. The government needs to stop trying to gain cheap brownie points by taking a pop at the private rented sector and needlessly spooking landlords. It is the reason the government has lost the confidence of responsible landlords.”

Mortgages for Business’ research found that the chief concern of landlords was higher mortgage rates (a concern of 63 per cent of landlords) followed by Section 21 reform and EPC regulations and tax (both a concern of 32 per cent of landlords).

Richardson concluded: “Of the big concerns raised by the business people working in this entrepreneurial sector, government is responsible for all of them — from Kwasi Kwarteng’s catastrophic mini-budget smashing up rates to new EPC legislation and the changes to the way the Private Rented sector is taxed.

"It’s hard to see how this is the work of the party of business. The government is making it harder to start and grow a business in the private rented sector. The UK is not a place where property entrepreneurs know they can build on their ideas and find success. Landlords’ potential is being restrained.”

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