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Section 21 notice changes: an update for landlords

The government has announced its plans to abolish the use of Section 21 notices, with landlords now expected to use Section 8 if they wish to evict their tenants. This change coincides with the Tenant Fees Act 2019 coming into place last month, which has capped the amount allowed for a tenancy deposit and banned most tenancy fees. Together, these new changes contribute towards the increasingly difficult rental climate for landlords. Nottingham chartered accountants Clayton and Brewill explains all you need to know about the new changes.

Previously, if a landlord wanted to start the eviction process, a Section 21 notice was typically the first step they would take if the property was being rented out on an assured shorthold tenancy.

Landlords had to give a minimum of 2 months’ notice to tenants. They were not required to provide a reason as to why they wanted to begin the eviction process.

Section 21 changes

Now, in what has been described as the biggest change in the private rental sector for a generation, landlords will have to provide a legitimate, evidenced reason for ending a tenancy. Such reasons can include:

• Non-payment of rent
• Lease violation (for instance, unapproved subletting or unauthorised pets)
• Illegal or drug related activity
• Property damage
• Evidence that the tenant is no longer living at the property

The 2 months’ notice period is also expected to be extended, and the proposal of a new three-year tenancy will be consulted on in August as a replacement for the current six to 12-month leases – which around 81% of renters are signed up to. If approved,  this could cause a huge shake-up of the private rental sector.

The Tenant Fees Act 2019

As of 1 June 2019, the Tenant Fees Act bans the majority of letting fees and puts a cap on tenancy deposits paid by tenants in the private rented sector in England.

The aim of the Act is to reduce the fees that tenants face during the period of their tenancy. Instead, landlords will be responsible for paying these costs. Tenants will now be able to see, at a glance, what a given property will cost them in the advertised rent with no hidden costs.

Now, the only payments that landlords or letting agents can charge to tenants in relation to new contracts are:

• rent
• a refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000. Or, 6 weeks’ rent where the total annual rent is £50,000 or above
• a refundable holding deposit (to reserve a property) capped at no more than 1 week’s rent
• costs associated with early termination of the tenancy, when requested by the tenant
• payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment or novation of a tenancy
• payments in respect of utilities, communication services, TV licence, and Council Tax
• a default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement

A difficult climate for landlords

The accumulation of these changes comes as yet another blow to landlords. Many have felt the brunt of a number of changes in recent years that have impacted them negatively. Some argue landlords have had little choice but to use Section 21 as a backstop to overcome the ineffectiveness of the Section 8 process.

The NLA has stated it will now look to pressuring the government to re-balance the system so that Section 8 and the court process works for landlords and tenants alike. They believe that, to keep good landlords in the market, the government needs to look at the housing sector as a whole, rather than making impulsive changes to singular items of legislation.

Seek professional advice

If you’re a landlord in the private rental sector, you might be feeling the impact of the recent changes. Getting professional advice could help you to decide your next steps.

Clayton & Brewill offers specialist tax advice and accountancy support for landlords across Nottinghamshire, Leicestershire and Derbyshire. If you’d like to discuss your options, please get in touch.