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  • Property-a-holics

    End of Section 21 - "butterfly" effect



    Whilst tenant groups are hailing a victory and the Government may have won some voter brownie points, I think we now start to need looking in detail at the reality of ending Section 21.

    Section 21 is closely connected and interwoven with other aspects of landlord and tenant law and legislation, and, if it is removed, the Government will need to consider the "Butterfly effect".

    In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state.

    Here are some of the initial consequences that I can see the abolition of Section 21 creating:

    1.  Other areas of legislation:

    Solicitor Giles Peaker identified two of these on twitter:



    It is worth noting that tenancy deposit protection has been in the PRS for over 10 years and some landlords are still not aware of it, or are compliant with it!  I thought the S21 clause in TDP went some way to "encouraging" landlords to properly protect cash deposits.  This aspect will need a re-think otherwise rogues may see an opportunity.

    2.  Insurance

    I can see landlord insurance premiums rising as it becomes harder to evict a tenant.  Therefore landlord margins will be slimmed further.

    3.  Mortgage lending

    Section 21 played no small part in the growth and competitive of BTL lending, as lenders could see a clear and easy way to regain the property if the mortgagee defaulted.  The removal of Section 21 may see BTL lending reduce or rates rise to reflect greater risk, and this in turn will have a knock on to supply of rental accommodation.

    4.  Increased risk of tenants in receipt of housing benefit/UC

    Landlords will feel less inclined to take this demographic of tenant now imho, putting greater pressure on council housing stocks.

    5.  Return of "Rachman" landlord

    If some landlords cannot remove a tenant easily through the courts, they might take matters into their own hands and revert to aggressive behaviour.  I have already seen a unscrupulous landlord on facebook saying they will "send the boys round" to remove a delinquent tenant if S21 is abolished.

    6.  Worse for tenants on many levels

    Section 21 allowed tenants in rent arrears to move on with little consequences of their actions, as the landlord took it on the chin and just wanted to get their property back.  Now, going down the S8 route, tenants will get CCJs for rent arrears.

    Furthermore, the margins that landlords make in BTL are for the risk of taking on a tenant who does not pay the rent, so, if landlords see higher risk, it is not unreasonable for them to seek higher margins, which means rent increases.

    That in turn will likely lead to rent controls - the final nail in the coffin of the private rented sector.

    _________________________________

    Ending S21 is using a sledgehammer to crack a nut.  Landlords do not get rid of "good" tenants for no reason.  Where there lacks clarity is which process landlords will use to evict tenants who are not in rent arrears or who are not damaging the property (which is covered by Section 8).

    Issues such as anti-social behaviour or a tenant refusing to admit a tradesperson for maintenance or a gas safety check will need to be addressed. 

    Very often, it is not one single issue that results in a landlord serving an S21 notice.  It can be a number of things that build up over time and results in the break-down of the landlord/tenant relationship and the landlord thinking that they can no longer work with that tenant.

    These situations - which are far from black and white - will need careful consideration by Government if S21 is to be ended.

    Housing Consultant Joe Halewood summed up the butterfly effect in his recent blog:

    The Housing First model has been dealt a mortal blow as there is no way in the world now that properties will ever become available for this deluded theoretical nonsense that cannot work in the UK with this announcement so there is at least some good news. 

    Rough sleepers are perceived as the riskiest of all ‘client groups’ to rehouse direct from the streets and by private and by social landlords … and today’s NFE announcement also means social landlords are going to have massive increased demand for social housing properties as consequence of PRS eviction and de facto unwillingness to house any risky client group at all … which in turn means that even those social landlords who wanted to get in on the Housing First financial gravy train will now have to go back to the drawing board and revise all such business plans.

    Why would social landlords house such risky clients when they can have far less risky full-time and in-work prospective tenants banging on their door? 

    Increased risk equals increased cost in the social landlord mentality just as it does in the private landlord one and with social landlords constrained from increasing rents then bye bye Housing First clients will happen!

    I could go on and on but the case is proven that the NFE announcement means that ALL things are going to get much worse for ALL renters and the policy proposal is THE most dangerous of the lot from this idiotic Conservative government who any sane rational person would not allow to determine housing policy for a Wendy House!

    ________________________________

    A friend of mine with 80 properties emailed me this morning as follows:

     "I will leave the BTL market if they don't find an alternative to S21 by way of a new S8 ground or similar."

    Please can PT members share any other thoughts about the butterfly effect of Section 21 as I am sure that I have only scratched the surface.

    SEE ALSO  -         Government announce dilution of Section 21

    UP NEXT -             Section 21 and 6 month tenancies

    DON'T MISS -        ..... And now for Rent Controls!

    NOW WATCH:

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    A superb post that sums up the situation perfectly.

    i have been saying on twitter that landlords, including myself quite often, have used S21 for rent arrears or damages where we have no intention of pursuing the tenant for the money. Thus they can get away ‘cleanly’ with no impairment on their record.

    Now we are forced to go through S8 the problem tenant will most likely HAVE to get a CCJ which will impair their life chances for many years to come.

    I have used S21 a couple of times where the tenant has requested it, or where the council needs to see one to assist the tenant. What happens in these cases if we have to use S8.

    Will the tenant be helped by the council? Will the tenant get the outcome a friendly landlord can help with? Will their lives be improved more by a court hearing or would they have preferred just a notice in the post?

    Tenant groups may be crowing about their victory, but for many tenants I am quite sure it will turn out to be a hollow one.

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    I am sure a CCJ on record for 6 yrs will impair chances of a delinquent tenant getting best deals on insurance (car) - mobile phone contract rather than more expensive Pay as You Go deal - or of getting a Credit Meter for Gas/Elec at new rental rather than more costly and massively inconvenient PrePay meters - as well as credit generally.

    The real biggie is it will flag up immediately with any prospective new landlord.

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    One problem with the current system is that the judgement doesn't get registered for some time after it's made

    - so whilst the next-but-one LL may have some indication of a bad tenant

    - the next LL has already let them into their property and would then need to attempt eviction on the basis the T had lied in their application - difficult.


    Need an alteration to the process so that both active CCJs and PENDING possession proceedings can be searched for and flagged up in a routine 'credit' check.

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    DISCLAIMER just my personal opinion - for legal advice consult a qualified professional grown-up.

    Luckily I have never had to use section 21 or 8. 

    I see quite a few good things coming.

    1. Amateur well think twice of entering BTL and that means less competition. Just even the talk of removal section 21 will means people will leave and that is good for me. (Sorry for being selfish)

    2. As some has already stated now it is more likely a tenant will get a CCJ. They might be able the get a new place right away as it takes time to be marked, but then they know if they get kicked out again they will really struggle.

    When I read the email from RLA about it I saw it to some regards as a victory for LL and a loss to tenant.

    On one hand the government need new voters but I also believe they cannot push to much more on BTL as there is a housing crisis and they need us.

    In many ways a review is good. Now it is just up to us to come with our input so any new changes is beneficial for us, so please please everyone provide feedback.

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    I'm working on a letter to everyone I can think of about this, helped hugely by many of the thoughtful and insightful comments of PT members.

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    Good shout Heather.  I have sent the link to this thread to my MP this morning.

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    @Vanessa  Hi Vanessa i would be really interested if you could shed any light on how you think this may work with student lettings, many of which we let out 9 months in advance.  [if  current tenants advise us they will not be staying on].

    However under new legislation proposed they could readily change their mind a day before contract expires [and many months after we have alternate tenants signed up], then we would be really stuck as would be unable to remove current tenants?

    Do you know how this is currently being handled in scotland??

    Many Thanks

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    Ok Thanks very informative video,  I Was just hoping the scottish system had thrown up some early lessons!

    I Guess time will tell ;-)

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    Graa,  I wish you were right, However-

    1. Amateur Landlords -  60 % of Landlords own Only 1 property. Usually acquired by inheritance and kept for Pension supplement due to the successive Govt screwing up our finances = Austerity ( part from M.P's salaries )  Its hard to convince these landlord to learn the vastly multiplying laws affecting PRS, so they will be oblivious to the problems.  look at how many don't know about Sec 24, Deposit protection etc   I don't disagree there will be some slimming down.

    2. Tenant Referencing - Debt tracking is a joke, Serial Bad tenants know more effective ways of flying below the very ineffective 'radar' that  they just hop from fleecing one Private Landlord to another.

    If you wanted to think of a way to multiply Homelessness, you'd struggle to do better than scrap Sec 21.  Far less Benefit Tenants will be 'risked' in the PRS and the queues outside  Local Authority Housing will be backing round the corner.

    If Govt wanted to find out facts about Sec 21,  they could have set up a monitoring of 'reasons' for its use, even if during a trial, they were voluntarily supplied and not impactive on the Possession decision.

    An example of the political posturing was evident last Friday when embargoed Press release about it in England was  beaten to the Post by the Labour Welsh Assembly leader who had to just get in before the Tory govt's announcement by saying it was being  adopted in Wales. ( never mind the effect it will have on tenants hey ! )

    Tenant campaign groups will have to take some responsibility was well, - as Housing supply decreases, rent ( due to risk ) Increases they can open up their offices as Night shelters. - no pun intended !

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