No fault Section 21: A red herring?
‘No-fault evictions’, which allow private landlords to evict tenants, seemingly without any reason, have come under the spotlight recently as their use is reported to have trebled in the last eight years. According to Shelter, the increase in the number of households evicted from privately rented homes has accounted for 78% of the rise in homelessness since 2011. Indeed, adds Shelter, the loss of a private tenancy remains the single biggest cause of homelessness.
New tenancy rules introduced in December 2017 ended the contentious practice of so-called ‘no-fault evictions’ in Scotland by scrapping fixed term tenancies for private renters and giving tenants indefinite tenure. Housing campaigners at the time hailed the move as a “new dawn for renters”.
Following this, Labour leader Jeremy Corbyn said his party’s next manifesto will include a pledge to scrap no-fault evictions in England to ‘tip housing rules back in favour of renters’.
Last month’s BBC Panorama documentary about the Section 21 notice no-fault eviction procedure investigated whether tenants deserve more protection, highlighting the difficulties faced by many private tenants in the UK, who have no long-term right to stay in their homes and can be ordered to leave with very little notice or explanation. The programme, which appeared to suggest that the system needs to change, raised some very important issues.
There is no doubt that it is very distressing to witness a family being evicted from their home and plunged into chaos. The current system of no-fault evictions has been blamed for forcing people into homelessness, breaking up communities and causing children to move schools or even miss school altogether.
Sadly, there are occasions where landlords have misused their Section 21 rights, for example evicting one tenant so that they can get another in to pay more rent. Fortunately, rogue landlords who exploit tenants in this way are a very small minority. But while this is not likely to be much consolation to a tenant who falls foul to one, scrapping Section 21 no-fault eviction rights is perhaps not the solution to ridding the market of these rogue landlords.
The homelessness statistics – 300,000 people in the UK according to Shelter (equivalent to one in every 200 nationwide, rising to one in 59 in London), are undoubtedly shocking. But so long as the media focus on no-fault evictions as a driver and landlords are portrayed as the villains, they could be missing the point. What are the factors that lie behind the increase in Section 21 eviction? Is the very focus on no-fault eviction a red herring, diverting attention away from the key issues underlying the social housing shortage in the UK?
Paul Shamplina, Total Landlord Insurance ambassador and Founder of leading tenant eviction company Landlord Action, was interviewed on Panorama. He argues that it is misleading to suggest that tenants are being evicted for no reason; that there is always a valid reason why a landlord ends a tenancy using their Section 21 rights.
He says: “The term ‘no-fault’ is really a bit of a red herring. There is always a reason why a landlord ends a tenancy, but it’s a far cry from the headlines showing that landlords use it just to throw tenants out. If a landlord has a good tenant, the last thing they want to do is get rid of them.”
Mr Shamplina highlights a number of alternative reasons that account for the rise in no-fault evictions:
- That the Private rental sector has almost doubled in size since the early 2000s so inevitably there will be an associated increase in evictions.
- That councils are still encouraging tenants to stay put in a property, until they are evicted, so that they do not make themselves voluntarily homeless.
- That the majority of landlords are using Section 21 because their tenants are in arrears and, most of the time, they write off the arrears and legal costs owing. They just want their property back, to try and recoup losses.
- That many landlords are selling their properties and exiting the private rental sector, often because of Section 24 and impending tax liabilities. Section 24 of the Finance (no. 2) Act 2015 might mean that over half of UK landlords will be pushed into a higher rate of tax despite their income not having increased, and some might end up renting at a loss.
Shamplina sums up: “in our experience, the main reasons for serving Section 21 notices are for rent arrears, tenants requesting to be evicted so they can be re-housed or, most recently, because landlords wish to sell their property owing to impending tax liabilities. Normally at Landlord Action we are instructed by landlords that are owed arrears by their tenant and most of the time do not pursue the tenant for arrears but go down the Section 21 route as it is easier.”
So, stagnant wages, rising housing prices and a chronic shortage in social housing, are all factors that are exacerbating the situation and contributing in one way or another to the rise in no-fault evictions. Meanwhile, the homelessness crisis is “likely to have been driven” by the government’s welfare reforms, the public spending watchdog has said. And let’s not forget that landlords are also subject to the same economic constraints as renters.
Mr Shamplina echoes the views of many other commentators on the private rental sector who believe that scrapping Section 21 rights could actually exacerbate the social housing crisis.
Section 21 was initially aimed at attracting private landlords to the sector in a bid to tackle the housing shortage. While it is upsetting to see tenants who have done nothing wrong being evicted, if a landlord is experiencing financial difficulties and needs their tenants to vacate a property, scrapping their Section 21 rights could worsen their situation and leave them trapped.
At a time when landlords are leaving the sector due to changes in buy-to-let tax relief, it is clear that scrapping Section 21 would be another nail in the coffin for landlords, meaning that more landlords might exit the market and more properties would consequently be lost from the private rental sector, which could actually compound the housing shortage problem.
Shamplina believes that the government should incentivise landlords to give tenants longer tenancies, arguing that a more regulated private rented system with particular emphasis on longer tenancies would bring greater stability to tenants’ lives, particularly as more private renters are bringing up children or growing old in a rented home.
The government announced a consultation on the issue of longer tenancies in November last year, which is welcomed, but it is debatable whether this goes far enough. There are currently over 15 consultations underway in relation to the private rental sector when clearly what is needed is action on the ground.
Shamplina concurs with Shelter that longer tenancies actually make business sense, in addition to meeting the changing needs of the rental market. It is clear that when tenants have a stake in the property, they are more likely to take care of it and this benefits landlords and reduces costs in a number of ways:
- Tenants invest in the property
- Tenants take steps to minimise wear and tear
- Tenants are more likely to report problems as soon as they occur
- Void periods are reduced
“Remember, landlords want tenants, and good tenants at that, to stay in a property as long as possible. The vast majority of landlords would have no interest in evicting a tenant who respects their property and pays their rent on time,” concludes Shamplina, who is strongly in favour of working together with government and organisations like Shelter to raise standards.
At Total Landlord Insurance we are committed to raising standards in the private rental sector and offering as much help and advice to our landlords as we can. Whether you are a residential or a commercial landlord or any other property professional, visit the resources section on our website for useful information and guidance on property issues.
To contact Landlord Action visit www.landlordaction.co.uk or call them on their free advice line at 0333 321 9415.
Learn more about our different landlord insurance types today.