A serious shake-up of assured shorthold tenancy (AST) contracts is on the cards when the Renters Reform Bill is published this autumn, the government has confirmed.

In answer to a Parliamentary question about how the PRS benefits the economy, Housing Minister Lord Greenhalgh (main pic) said the government was committed to delivering a package of reforms.

“A key part of our future PRS reforms is to ensure the flexibility of private rental tenancies is retained, whilst balancing increased security for those tenants who need and want it, alongside driving an improvement in the quality and standards of PRS accommodation,” he said.

In the consultation document – A New Deal for Renting – the government said landlords who evict tenants for rent arrears or anti-social behaviour using ‘no fault’ grounds masked valid reasons for eviction, which fuelled a culture of mistrust and uncertainty.

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No practical purpose

“The ability to use section 21 rests in the assured shorthold tenancies regime. The government is of the view that, with section 21 removed, the assured shorthold regime no longer serves a practical purpose as the ability to create fixed-term tenancies already exists in the Housing Act 1988.”

With section 21 removed, all future tenancies would be assured, either as fixed-term assured tenancies or contractual periodic assured tenancies.

It would mean the default position will be that a tenancy is a periodic assured tenancy unless the landlord and tenant have agreed a fixed term in writing.

A tenant under an assured tenancy won’t be evicted unless the landlord can provide grounds under Schedule 2 of the Housing Act 1988 or at a break point in the tenancy contract where a break clause has been agreed between them.

Read more about the Renters Reform Bill.

5 COMMENTS

  1. Since when is using S21 to evict for rent arrears masking the reason for eviction!?

    There isn’t anywhere to indicate why S21 is being used.

    99% of the time S21 is being used for rent arrears.

    Hardly non-fault!!!

    Why not just retain S21 for rent defaulting?

    I’m sure most LL would accept that.
    Use S8 for all other reasons.

    Of course as soon as rent defaulting occurs S21 may ve used.

  2. Buried in the small print is this….
    “You could also be asked to leave if your landlord needs to sell the property, move in themselves or if they need the property for a family member. The consultation is proposing that these new grounds could only be used after you had lived in the property for two years”

    That suggests to me that an investor would have to wait two years before being able to evict on grounds of wanting to sell the property for example…

    The wording needs clarification but I know civil servants love vague wording because it enables loopholes which will advantage tenant over landlord.

    Seems to me that unless there is real clarity about exactly how investors can gain possession of their properties and the timeframes involved then many will sell once their current tenants move on.

    There is NO WAY I would entertain the sort of tenancy that we had in the past “Assured and regulated tenancies that were agreed before January 1989” where “Sitting tenants” are effectively there for life. There are still a few of those tenancies in existence and the properties are impossible to sell at their true value and most actually sell for half their current value. Mostly bought by corporations like insurance companies who can sit on the asset until the sitting tenant dies then they can sell at full market value and earn big money.

    “It would mean the default position will be that a tenancy is a periodic assured tenancy unless the landlord and tenant have agreed a fixed term in writing”

    That is the govt aim but I for one will only agree to fixed term contracts under the new system either 6 months (For new tenancies) or 12 months for those that have been good tenants within the first 6 months and have proven themselves trustworthy and want to remain.

    The PRS is increasingly becoming a high-risk place to invest and that can only mean one thing for rents… they will increase rapidly and when they do the govt will contemplate rent capping legislation and then we will be back to the 1970’s when the whole PRS collapsed under the burden of legislation that is why the whole sector was reformed in 1989 with the introduction of AST’s etc and they system we currently have in place.

    Anyone that thinks that these changes will be the last are sadly deluding themselves because that is exactly what was promised in 1989.
    Anyone that believes the govt will reform the courts are also deluded. Courts are reliant on govt funding and therefore at the mercy of each and every chancellor at the budget.

    • Yep it amazes me the number of idiots piling into the PRS.

      The savvy LL are getting out.

      DD doesn’t even seem to be considered anymore.

      It seems these newbie idiot LL believe that CGT will remain as it is.
      That they will be able to remove rent defaulting tenants easily etc etc!!

      Still at least savvy LL will be able to sell to the mug newbies!!

      • Still at least savvy LL will be able to sell to the mug newbies!!

        Ha ha ha… That made me laugh but you are right of course especially when it comes to getting rid of EPC D-E etc…

        But I believe that window may well close…

        Eventually I think govt will have no option but to make EPC’s mandatory for all domestic properties. Personally, I can see them introducing EPC’s for everyone and then a couple of years after its bedded in then turning round and fixing any possible boiler scrappage grants linked to the EPC that everyone will have to have in order to claim any grant available.

        Once everyone has to have an EPC then that closes the door for LL’s to off-load dud properties because then everyone will be in the same boat.

        Personally, I read up on all of this 5-6 years ago. Hidden in “Policy” statements it was clear what the direction of travel was. I got rid of everything below D, kept my best tenants and shuffled them around into my best properties and at the same time reduced the overall portfolio.

        So, I’m left with less properties but they are future proofed for a decade, have good tenants who pay above market rents. Less properties means less risk of exposure to dodgy tenants.
        For me the only direction of travel will be a continued reduction of the portfolio, probably as each tenant looks to move on.

        CGT changes…
        Definitely on the horizon, at 18% its below the basic rate of 20% for income tax so “Normalisation” as it is referred to will seem “Fair” to Joe Average. But the biggie is that they could easily remove the personal allowance and make it payable on the whole gain… 2021-22 its £12,300

        If that allowance was scrapped, just 100 transactions would net govt £1.23 million. With around 20,000 “Second homes” purchased annually you can see the potential for a massive tax take and Joe Public will just see it as “Taxing the rich”

        That would be painful, wiping out a lot of profit for some. But how many people will be shedding tears for LL’s who are seen as multimillionaires in the eyes of the general public.

        Personally, for me I’m running a business not a homeless shelter and I don’t want to end up homeless myself by allowing feckless tenants to drag me down and end up bankrupt.

        Then of course there is Inheritance Tax… currently 40% That could go up and the allowances could be reduced. Nothing to stop the govt introducing a “Windfall tax” on owners of “Multiple homes” and increasing CGT and or Inheritance Tax on those properties.
        HMRC are past masters at tax raising wheezes.

        Making tax digital for LL’s is just around the corner… sold as streamlining things for small LL’s when in reality is just making it easier to be taxed….
        I see it as PAYE via the backdoor for the self-employed.

        • Interesting to see you being a savvy LL.

          Your mindset is something I concur with.
          Your business logic makes absolute sense.

          All LL should copy you.

          But they won’t because they naively and arrogantly believe they know better.

          We haven’t even mentioned the difficulty in getting rid of feckless rent defaulting tenants.

          The Renters Reform Bill is the next nearest nightmare coming to hit LL.

          The EPC nightmare is here now.

          I can see many LL selling off the dud properties.

          There are reckoned to be about 648000 dud EPC rental properties.

          For many LL it would be worth those LL to get rid of these dud properties.

          I reckon many LL will be a lot more interested in new build properties as they will be EPC C status.

          This will mean many Northern terrace properties being sold off.

          That will mean about 1 million evicted tenants.

          These Northern dud properties are mostly so low yielding worth getting rid of them

          But all the idiot Southern LL are rushing up North to buy these dud properties

          Fool and their money and all that.

          But certainly to as quick as possible reduce to only letting properties that are EPC C status makes excellent pragmatic business sense.

          There is also no doubt th Govt ill ve coming for 2nd homeowners of all types.

          Electorally Govt knows they can literally tax 2nd homeowners til the pips squeak.

          As you suggest Govt knows they won’t lose significant votes hitting 2nd homeowners.

          They will do this as that is where the money is.

          Taxing property wealth is an easy win.

          Shrewd LL will start to take profits by selling up and then hiding cash away from prying eyes.

          Many LL could survive for years on sale proceeds in addition to their other income.

          It will pay to scale back business as Govt will only come and take a bigger junk of that wealth.

          Fewer properties that are EPC C status with less leverage is the way to go.

          Perhaps investing in FHL in light of the Staycation boom might make more sense than letting on single household tenancies.

          But there is no doubt that the Tories are after 2nd home wealth.

          Shrewd LL will realise this and start taking profits before Govt can get their hands on it.

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