20 December 2019

Balance of power shifts towards residential tenants

Although not specifically referred to in the Queen's speech the Renters' Reform Bill can be found amongst the small print in the Government's briefing document. The main elements of the bill include abolishing the use of "no-fault" evictions by removing Section 21 of the Housing Act 1988 and reforming the grounds for possession.

Whilst greater security for tenants is welcomed, there are fears that the abolition of Section 21 will have a significant impact on the private rented sector as buy-to-let investors see a reduction in the control of their asset and decide to move their money elsewhere.

Under the current regime, a landlord can terminate an Assured Shorthold Tenancy (AST) when the fixed term comes to an end using a Section 21 Notice. It is called "no-fault" eviction because the landlord does not need to rely on any default by the tenant to regain possession. This means a landlord retains control of the term date which in turn gives it the ability to set a new rent.

The proposal to remove ASTs from the Housing Act 1988 mean that all landlords – private and social – will only be able to offer assured tenancies which will either be fixed term or periodic. Fixed term tenancies will continue as statutory periodic tenancies unless they are ended by the tenant or the tenant defaults. In an effort to ameliorate the effective removal of ASTs the Government is proposing to enhance the grounds upon which a landlord can recover possession of assured tenancies.

The proposals also include the introduction of a lifetime deposit so tenants don't need to save for a deposit every time they move house.

Although the proposals are at an early stage the intention is to introduce the legislation in 2020. Many landlords are warning that in a rental market where demand is outstripping supply it is essential that the proposed enhancements to the grounds and the court process allow them to retain the control they need to repossess properties swiftly for legitimate reasons.

Natasha is a partner and the Head of Property Litigation here at Forsters.

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