What Does the Abolishment of ‘No Fault’ Evictions Mean for Landlords?

No-fault evictions are set to become a thing of the past after Theresa May announced their abolishment this month.

For tenants, this is being held up as a great victory. The fact its come so soon after the announcement of the implementation of the lettings fess ban on June 1st also demonstrates the government’s determination to protect renters.

With mounting pressure in the media about unethical landlords, it’s not a total surprise that landlords have had even more powers taken away from them. Stories about tenants being evicted after something as innocuous as reporting a leak has led to landlords’ reputations being damaged in the eyes of the public.

Still, while the end of the Section 21 process will protect tenants from unethical landlords, will its removal leave good landlords vulnerable to unethical tenants?

How Has the End of Section 21 Come About?

In her announcement, the PM said:

“Everyone in the private sector has the right to feel secure in their home, settled in their community and able to plan for the future with confidence.

“But millions of responsible tenants could still be uprooted by their landlord with little notice, and often little justification.

“This is wrong – and today we’re acting by preventing these unfair evictions. Landlords will still be able to end tenancies when they have legitimate reasons to do so, but they will no longer be able to unexpectedly evict families with only eight weeks’ notice.”

A clear message is being sent that tenants shouldn’t have to live with the worry of an unexpected eviction. More powerful than this, though, are the recent statistics about the impact of no-fault evictions.

According to Citizens Advice, tenants who made a formal complaint to their landlord had a 46% chance of being evicted. Alongside this, the Ministry of Housing, Communities and Local Government (MHCLG) has attributed these evictions to one of the main causes of family homelessness.

And, with Section 21 notices increasing (though seemingly now dropping) over the last 10 years, more and more people are feeling the effects of them. The data below from the Ministry of Housing goes some way to explain this, though it does include evictions from social housing also.

number-of-no-fault-evictions-graph

It’s easy to see the upside of this abolishment. Of course, responsible tenants shouldn’t feel at risk of eviction for no reason, but in a system that already seems weighted to tenants, what defences do landlords have left to deal with irresponsible tenants?

What is the Impact on Landlords?

As part of her announcement, Theresa May stated that landlords will still be able to evict tenants if they have a legitimate reason, but so far we still don’t fully know what that process will look like.

In fact, it’s likely that no new powers will be implemented to allow landlords to evict tenants and instead they will be expected to fall back on the Section 8 eviction process.

If this is the case, landlords will be worried. Section 8 allows evictions, but if a tenant refuses to vacate, landlords often have to embark on lengthy and costly court cases.

This can mean that landlords are left footing the bill if, for example, a tenant is not paying their rent. Furthermore, the existing system allows tenants to halt proceedings by paying the rent owed. This can cause a stop-start payment cycle where a tenant only pays the rent when threatened with court proceedings.

It goes without saying that situations like this can put landlords under extreme and undeserved levels of financial pressure and stress.

It’s worth pointing out that the Ministry of Housing is looking at ways to improve the court process, so it remains to be seen how that unfolds.

Will Landlords Continue to Invest?

With another piece of armour stripped away from landlords, the question crossing many smaller investors minds may well be whether they continue?

Housing prices are rising and a lack of social housing forces families to turn to the private rental market. However, it now feels like private landlords are expected to run their properties closer and closer to a social housing model, all without the financial backing of the government.

This puts landlords at greater risk financially, so will we see smaller property investors walk away?

It would be an exaggeration to pretend there are no longer profits to be made in being a property landlord. Of course, there is, but it may be that investors have to build larger portfolios to absorb the extra risk of not being able to evict a poor tenant with Section 21.

Conclusion

Without clear definitions on what constitutes an eviction, it’s not unreasonable for smaller landlords to look upon the end of Section 21 with a sense of trepidation.

However, this announcement is still young and it remains to be seen what steps will be taken to improve the Section 8 process. The abolishment of the unfair eviction of tenants is not a bad step, so long as the other existing processes are improved to protect landlords.

However, is there a risk that this abolishment will hurt the people it is designed to protect in the long run? The added security provided could result in longer tenancies and result in less ambition to enter the housing market.

This could lead to less availability in the private rental sector, something local authorities rely on heavily to place those on accommodation waiting lists and housing benefit in a home.

Even without this consideration, the government still needs to fix the issues of rising house prices and rents if it truly wants to protect tenants. Many Section 21 notices take place because tenants can’t pay there rent, so what steps are going to be taken to ensure renters can keep up with the climbing costs?