In what has been dubbed a “perfect storm” by legal experts, landlords in the private rented sector (PRS) are navigating a challenging landscape, with the Renters’ (Reform) Bill playing a significant role in exacerbating their difficulties. Gina Peters, head of landlord and tenant at law firm Dutton Gregory, sheds light on the various factors contributing to a growing exodus of landlords, including the impending abolition of Section 21.
Peters notes that a gradual departure of landlords, spanning various age groups, has been occurring over recent years, and the Renters’ (Reform) Bill is adding to the challenges they face. The pending removal of Section 21, a vital tool for landlords seeking possession of their properties, has sparked nervousness within the market.
Many landlords, according to Peters, find the rental market less profitable due to increased buy-to-let mortgage rates, escalating expenses related to selective licensing schemes, and the financial impact of Section 24 of the Finance Act 2015. The inability to deduct mortgage interest and arrangement fees from rental income, coupled with changes to annual exemptions, has left some landlords grappling with higher tax liabilities.
Peters emphasizes that the proposed removal of Section 21 is causing concern, as it is the only notice guaranteeing the return of a landlord’s property. With the Renters’ (Reform) Bill, landlords may be compelled to use Section 8 notices, leading to potential court hearings, further burdening an already strained judicial system.
The legal expert highlights the need for the government to address court service issues, including delays and backlogs, to ensure a smooth transition in the absence of Section 21. Court fees are expected to rise in 2024, adding to landlords’ frustrations.
Peters acknowledges an influx of landlords looking to use Section 21 in response to the Renters’ (Reform) Bill. Simultaneously, tenants are pushing back, seeking more time to vacate due to the challenging rental market characterized by high rents and a shortage of housing stock.
While some relief came with the government’s decision to scrap the requirement for landlords to achieve a minimum energy efficiency EPC rating of Level C, Peters warns that uncertainties remain regarding future plans to reduce carbon emissions.
As the Renters’ (Reform) Bill looms, the million-dollar question remains whether it will pass before the next general election. Peters suggests that the abolition of Section 21, coupled with Section 24 provisions and court backlogs, is creating a “perfect storm,” pressuring landlords to make decisions in an increasingly challenging environment. The bill’s fate and its potential impact on the PRS will be closely watched in the coming months.