Section 21 Changes will Increase Need for Professional Letting Agents

Automated rental payment provider PayProp has spoken out about Government plans to abolish Section 21 of the Housing Act 1988.

It believes that scrapping this act will further increase the need for professional letting agencies to guide landlords through the lettings process.

Guidance from agents would, in such a case, be crucial to help landlords to legally regain possession of their properties, says PayProp.

It was in April that the Ministry of Housing, Communities and Local Government (MHCLG) announced its intention to abolish Section 21 evictions. It stated that such a move would be ‘the biggest change to the private rental sector in a generation’.

In replace of Section 21, the Ministry has proposed a new system under which landlords would be required to serve a Section 8 notice, providing a ‘concrete, evidenced reason already specified in law’ in order to regain possession of their property.

As it stands, Section 21 allows landlords to regain possession of their property without providing a reason. However, Section 8 can only be used when a tenant has fallen into rent arrears, been involved in criminal or anti-social behaviour or broken the terms of their tenancy agreement.

The Government has made a pledge to amend Section 8, so that it allows landlords to use it if they wish to sell their property or move back in themselves, and ‘expedite’ the court process to make the system more effective.

However, many in the lettings industry worry that the new system might make it more difficult for landlords to regain possession and discourage future investment in the PRS.

A huge overhaul for landlords?

PayProp has pointed out that the scrapping of Section 21 would be the latest in a long line of changes to the evictions process. The last significant updates were made to the legislation in 2015 and 2018. This increased workload for landlords could have an impact on the buy-to-let market.

In a recent study by Landlord Action, 33% of landlords said they would leave the market if the Government removed Section 21 without providing a clear alternative, while 38% said that they would consider selling properties.

Neil Cobbold, Chief Operating Officer of PayProp UK, says: “It’s no surprise that many landlords would consider their options if Section 21 was scrapped, as it would mean yet another change in lettings legislation after so many others in recent years.

“If introduced, the changes would represent a huge overhaul in processes for landlords. Therefore, it’s important for letting agents to raise awareness of the situation among landlords now, so they have time to prepare.”

Complexities of the evictions process

Cobbold has also explained why the expertise of professional letting agents would be crucial if the evictions process is to be reformed.

“Requiring the use of Section 8 to regain possession of their properties will mean landlords need to understand a new set of rules, steps and documents,” he says.

“Evicting tenants can be a legally complex and long-winded process, and if a new system is introduced, letting agencies will need to help landlords to follow the right steps and issue updated documentation,” Cobbold explains.

“If the evictions process is not followed properly it can cause complications for landlords. It’s also important to remember that landlords’ investments and tenants’ homes are at stake,” he says. 

Need for professional agents continues to grow

Cobbold believes that further changes to legislation and a more complex and time-consuming lettings process could mean fewer landlords will self-manage their properties in the future.

Meanwhile, figures supplied by the Government show the number of small-scale and accidental landlords has fallen, with the proportion of landlords letting one property falling from 78% to 45% between 2010 and 2018.

“This market shift means demand for professional letting agencies will rise – agents should see the potential for increased business and ensure they are prepared to meet landlords’ expectations,” adds Cobbold. 

“They can do this by offering an unrivalled landlord proposition which is fully compliant, transparent and efficient.”

The MHCLG is currently consulting on the proposed removal of Section 21 from the Housing Act 1988 and improving Section 8 eviction grounds.

The consultation was launched on July 21 and closes on October 12 2019. It can be viewed on the GOV.UK website: https://www.gov.uk/government/consultations/a-new-deal-for-renting-resetting-the-balance-of-rights-and-responsibilities-between-landlords-and-tenants