Renters Rights Bill - the End of "No Fault Evictions" - Bad news for landlords and tenants?

There has been a lot in the news recently that “No Fault Evictions” are coming to an end, but what is this likely to mean in practice for both landlords and tenants? It is such a highly political subject because a person’s home is so important to everyone. 

Background

Historically, unscrupulous landlords could evict a tenant very easily and there was little a tenant could do about it. The government intervened and introduced the Rent Act 1977, which swung the favour so far to the tenant with low rents and significant security of tenure that the rental market shrank dramatically.  

So, the government intervened again and introduced the Housing Act 1988 (“the Act”) which, amongst other things, created a new species of residential tenancy agreement, known as an Assured Shorthold Tenancy (AST). An AST would, more often than not, be entered into between the landlord and tenant for a fixed term. 

At the end of the fixed term the landlord and tenant could either enter into a further agreement, or the original tenancy would continue under the same terms as the original tenancy, save that it would be on a rolling periodic basis.  In the latter case, the landlord could, at any time, seek possession of the premises under Section 21 of the Act, which is what is often referred to in the press as a “no-fault eviction”.  

According to the charity Shelter, there have been more than 26,000 “no-fault” evictions, since 2019 and that does not include tenants that left upon receipt of notice. Many of those who are evicted seek to be re-housed by their local housing authority.  

In order to reduce the strain on the local housing authorities and give tenants more security, one key proposals under the Renters Rights Bill is the abolition of Assured Shorthold Tenancies and with it, the “no-fault” claims for possession under S21 of the Act.  If passed, this will be a major change for private rental sector.

What will this mean for landlords?

As things stand, without S21, a landlord would need to rely on one of the other 15 grounds for possession under S8 of the Act and unless the tenant was actually in breach of the tenancy, there are very limited ways in which the landlord could seek possession of the property.  The landlord might be able to rely on Ground 1, being that they want to take back possession of the property to live in, but only if they occupied the property as their principal home before the tenancy started.  So, a landlord that bought an investment property and never lived there, could not rely on this ground. The proposed changes are therefore likely to be a significant worry for such landlords.

However, it is not all doom and gloom for private landlords as the RRB does propose the following important changes to Ground 1 as follows:

• Removing the requirement that the landlord, family member or spouse lived at the property prior to the tenancy agreement; and
• Introducing a new ground 1A, being that the landlord intends to sell the property   

Anecdotally, in my experience, the main reasons private landlords tend to seek possession based on S21 are that:

1. the tenant cannot afford the rent and actually wants to be re-housed by the local housing authority and have been advised by them that they will not be re-housed unless they are evicted
2. they want to sell the property
3. there is a personality clash with their tenant and they just want the tenant to leave
4. occasionally, the landlord wants to move back into the property

So, the proposed changes to ground 1 will help with reasons (b) and (d) but not at all with reason (a) and (c). 

The other thing to say is that, obtaining possession based on S21 of the Act is not always straight forward and all things considered, these changes could potentially make it easier for landlords to obtain possession. 

However, for the reasons below, I think landlords are going to face a situation where tenants are going to struggle to pay their rent.

And for tenants?

For tenants, on the face of it, the end of “no-fault” evictions sounds like good news. Perhaps it is, but as I mention above, I do not think the proposed changes give tenants the security they might want and think they are getting.

However, that is not the narrative we see in the news, which seems to be suggest that the proposed bill is what tenants have needed since the late 80’s and an absolute disaster for landlords.  I could be wrong, but I speak with private landlords on a regular basis and based on the narrative in the news, I sense a lot of those landlords intend to leave the market. 

What the RRB does not do is seek to keep rents artificially low.  I am not an economist, but fewer private landlords, to my mind, means that market rents will be driven up even further. That is likely to lead to a significant increase in tenants falling into rent arrears and the landlord will seek possession based on those rent arrears.

Conclusion

The upshot is that, in my view, the proposed bill is going to be bad news for landlords and even worse news for tenants. 

Is all of this actually going to reduce the overall number of evictions and ease the strain on local housing authorities?  Regrettably, I do not believe it will.

Is the answer to restrain rents?  Probably not, as it will put us in a similar position we were in under the Rent Act 1977. 

The answer is not straight forward and that is likely why successive governments have struggled over the past 40 years or so to find the right balance.

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