Letting professionals and tenants divided on benefit of repeal of Section 21 eviction notices
According to the State of the Lettings Industry report by Goodlord and Vouch, now in its fourth iteration, 38 per cent of tenants surveyed thought that the repeal would have a major and positive change to the private rented sector, as opposed to just eight per cent of agents.
This compared to 30 per cent of agents who think the change would be major and negative, compared to just five per cent of tenants.
The government said it would repeal Section 21 evictions in 2019 but is still yet to do so.
Earlier this year, it said it would be releasing a white paper on the private rented sector in the autumn, and it is also working on a Renters Reform Bill, which could lead to serious changes in the private rented sector.
The report also found that around 64 per cent of letting professionals said they expected landlords to leave the sector in the coming year.
Around 83 per cent of letting professionals surveyed said they have seen landlords leave the sector in the past year, with the majority seeing between one and 19 per cent exit over the past year.
Some buy-to-let brokers have said that smaller landlords had decided to sell their properties during the pandemic as property prices rose, but suggested these could be picked up by portfolio landlords looking to expand.
The most common reason for exits was legislation, followed by costs, tax changes, yields and return on investment.
Arrears stabilising but still high
Lettings professionals reporting an increase in rent arrears in September fell from 64 per cent last year to 32 per cent this year. Under half reported rent arrears had stayed the same, which the report said indicated that they were still high.
Just under a third of respondents said they had seen an increase in arrears over the past year, and of those 37 per cent said that it had increased by 10 per cent.
Around 22 per cent said arrears had risen by between 11 and 20 per cent, whereas 16 per cent said that arrears had increased by 30 per cent or more.
Home purchase activity highest since 2007 – UK Finance
According to UK Finance’s latest Household Finance Review, purchase activity during the period, which combined new loans issued to first-time buyers and movers, came to 244,860 compared to 46,520 in the same period last year.
The report said that first-time buyer new loans amounted to 112,340, whilst mover new loans were pegged at 132,520. Buy-to-let (BTL) new loans for the second quarter were 32,400.
It said the strong activity was fueled by the BTL market and first-time buyers, with BTL landlords completing 15,200 new loans in June, the largest monthly volume of purchases since 2016. First-time buyers were buoyed by the renewed Help to Buy equity scheme.
It continued that a large part of the activity was due to the stamp duty holiday, as well as delayed purchases from previous lockdowns going ahead.
Homeowner purchase levels in the first two quarters of this year have either returned to or are higher than levels prior to the pandemic, UK Finance said.
Purchase activity in London tripled compared to the same period last year, along with Northern Ireland and the South East. Wales, South West and East Anglia all more than doubled.
However, the report said this high level of lending is unlikely to be sustained in the medium to long-term, adding that it expected a decline in activity as the stamp duty holiday and other forms of government support were wound up.
It pointed to job losses from the furlough scheme ending as a potential concern.
Overall, brokers said the figures showed that market was strong and recovering well, but they warned that the withdrawal of government support could pose a threat.
Primis’ proposition director Vikki Jefferies said the figures were “reassuring” as the property market was vital to the UK economy.
She added: “However, as government support comes to an end, it is important to note that the long-term impact of the pandemic may not yet be visible, and it will be vital to provide proactive and sustained support for brokers.”
John Phillips, national operations director at Just Mortgages added that the second quarter had been “the most extraordinary few months we’ve seen in a long time”.
He added: “The massive rush is not the result of borrowers over-extending themselves however. Although loan-to-income ratios for purchases increased over the second quarter, borrowers are still in a strong position. Thanks to extended mortgage terms, and low interest rates from lenders, borrowers are paying record low monthly payments.
“Brokers should take some credit for this. By providing expert advice, they are ensuring their clients are not overstretching themselves, even with rapidly increasing house prices.”
Legal & General Mortgage Club’s director Kevin Roberts said the strong activity levels were a good sign after such an uncertain period during the pandemic, and there was “little evidence” that this was going to fall away to a great extent.
He said: “However, though it is brilliant to see that those in a position to move home have done so successfully, many others have seen their financial circumstances complicated significantly by the crisis. People across the UK have needed to access financial support – everything from mortgage payment deferrals to income support and other benefits – and they now likely need extra help when it comes to managing their mortgage.
“This is where seeking financial advice is key, as independent mortgage brokers can help these people to keep their monthly repayments to a minimum by accessing a new deal, even if that means looking beyond the high street.”
Later deferrals grow but early arrears dampened by payment deferrals
The report said that the payment deferral scheme, which allowed borrowers up to six months respite from mortgage payments and came to an end in July, had been successful as it had limited those in early arrears.
First charge mortgages outstanding came to 11,034,000, up from 10,956,000 in the same period last year.
Those borrowers with arrears less than five per cent of the total outstanding balance, continued to decline in the second quarter as they were suppressed by payment deferrals and Coronavirus Job Retention Scheme.
However, UK Finance said the number of those in later arrears, which is 10 per cent or more of the outstanding balance, was increasing as these were mainly borrowers who were struggling before the pandemic, meaning payment deferrals and lender support had limited impact.
Early arrears are expected to increase as lender and government support schemes are rolled back, but further tailored help should be available for borrowers from lenders going forward.
Possessions up slightly quarter-on-quarter
In Q2, there were only 80 more possessions than in the previous quarter, coming to 440 in total, as government restrictions came to an end in May this year.
Ministry of Justice figures said mortgage possession claims increased from 161 in the second quarter last year to 2,498 this year.
The figures also showed that possession orders nearly tripled to 402 annually during the period, and warrants grew from 10 to 513. Repossessions by county court bailiffs rose from three to 44 in the second quarter.
However, the Ministry of Justice report explained that compared to pre-pandemic figures in 2019 claims, orders, warrants and repossessions by county court bailiffs have decreased by 60 per cent, 90 per cent, 89 per cent and 96 per cent respectively.
UK Finance said this demonstrated a “slow and considered approach” from lenders. It also said it expected numbers to rise moderately throughout the rest of this year and next year as lenders resubmit possession claims and the court backlog lessens.
Possession claims by private rental landlords surge in Q2 as moratorium lifts
This represented 3,023 possessions by private landlords in Q2.
The MoJ said this was a higher share compared to before the pandemic. For the same period in 2019, action from this part of the rental market made up 23 per cent of claims.
Possession claims are down on pre-pandemic levels however, with a 74 per cent drop in actions since Q2 2019. Orders have also fallen by 75 per cent, warrants by 73 per cent and repossessions by county court bailiffs by 80 per cent.
Due to the suspension of involuntary evictions and possessions until March this year, on an annual basis possession claims, orders, warrants and repossessions by country court bailiffs were up by over 100 per cent on all measures.
Possession claims rose from 3,023 to 7,000, orders from 656 to 5431, warrants from 274 to 3,709 and repossessions from zero to 1516.
The median average time from claim to landlord repossession has increased to 59.7 weeks, up from 19.6 weeks in the same period in 2019. There were no landlord repossessions in the same quarter 2020 due to policy interventions.
Landlord possession claims continue to increase but remain below the baseline following the lifting of the bailiff restrictions, the MoJ said.
Mortgage actions also increased by over 100 per cent since Q2 2020 but compared to 2019, mortgage possession claims, orders, warrants and repossessions by county court bailiffs fell by 60 per cent, 90 per cent, 89 per cent and 96 per cent respectively.
Because of policy restricting possessions except in certain circumstances, there were only 10 mortgage repossessions over the whole of last year from April 2020 to March 2021 and 44 repossessions in April to June 2021. Compared to the same quarter in 2019, this was down 90 per cent.
The median average time from claim to mortgage repossession has increased to 104.6 weeks, up from 36.1 weeks in the same period in 2019. However, this is based on significantly fewer cases.
The MoJ said mortgage possession actions were already on a downward trend since 2008, due to lower interest rates, action from lenders in managing borrower financial difficulties and a decline in the proportion of owner-occupiers overall.
However, the department said it expected an increase in the volume of all actions as courts cleared the backlog of cases and handled new ones.
“We expect to return to the usual practice from next year, when the Covid-19 impact is likely to have washed out of the data,” the MoJ added.
This aligns with figures released by UK Finance today reporting a slight rise in possessions during Q2.
End of eviction ban sparks calls for more tenant support
The ban, which stayed in place until Monday 31 May, was introduced in March last year to safeguard individuals who were financially struggling due to the pandemic. Minimum notice periods for renters were also extended from four months to six months.
But from today evictions can be enforced by bailiffs and landlords can give four months’ notice to renters. This will then go down to two months from 1 October.
There are growing concerns that the lifting of the ban could led to a spike in evictions as tenants may have garnered significant arrears during the pandemic.
Last week Citizens Advice reported that there had been 6,556 enquiries about evictions from private rental tenants in the first four months of the year, up 17 per cent compared to last year.
The charity also said that the average amount of arrears had increased by nearly a quarter over the past few months to £907 in April.
Former RICS residential chairman and north London estate agent Jeremy Leaf explained that currently landlords can use Section 21, or no-fault evictions, or Section 8 notice for possession where renters have damaged the property or not paid to evict tenants.
Both usually require at least two months’ notice and confirmation that correct procedures have been followed.
Bailiffs are the only people who can evict tenants, but they cannot evict tenants or anyone else living at the property if they have Covid-19 symptoms, tested positive or been told to self-isolate.
Tenants can also apply to local council for help if they are homeless or set to become homeless within eight weeks.
Leaf said: “Although mediation, which is currently subject to government consultation, is one way of reducing the present backlog by improving the chances of agreement without a full court hearing, speedy and effective repossession will always be necessary.
“Landlord and tenant representatives want the government to provide financial support to tenants in serious arrears due to Covid and more clarity on scrapping section 21 evictions after saying they would end but without setting a date,” he added.
Credit score damage could leave renters out in the cold
The National Residential Landlords Association (NRLA) says about 210,000 tenants may face severe difficulties in getting landlords to let to them in future, with the government refusing to support tenants and landlords in tackling Covid-related arrears.
The eviction ban ends on 31 May, meaning that from Tuesday landlords can pursue evictions against tenants in rent arrears. A NRLA survey found that seven per cent of private renters in England and Wales have built arrears since lockdown began in March 2020.
A quarter of those with arrears said their landlord had attempted to reclaim these by seeking a court order. Such orders, where successful, damage a tenant’s credit score – an outcome which makes it for harder for them to access new housing in the future.
The data, compiled by research consultancy Dynata, shows that the average amount of rent owed by those in arrears during the pandemic is now almost £900.
The figures also show that more than 80 per cent of renters now in arrears were not behind on their rent payments when the pandemic began. A third of those who are currently in arrears now owe £1,000 or more.
The majority of tenants in arrears do not qualify for emergency housing support provided by councils to help those in receipt of benefits. The government has also frozen housing benefit rates in cash terms, a policy the Institute for Fiscal Studies has branded as ‘arbitrary and unfair.’
Ben Beadle, chief executive of the NRLA, said: “As the private rented sector moves out of lockdown measures, the chancellor has failed to provide tenants with the support they need. This is especially the case for the majority of those in rent arrears who do not qualify for benefit support.
“Without urgent assistance, many tenants face the prospect of losing their home needlessly as landlords struggle to shoulder the cost of arrears. Affected tenants also potentially face the negative impact of damage to their credit scores.
“The government needs to develop a financial package which ensures that benefits cover the rents of those in receipt of them. For those who do not qualify for benefit support, an interest free, government guaranteed tenant hardship loan should be established, similar to those in Wales and Scotland.”
The imminent end of the eviction ban means increasing numbers of private tenants are turning to Citizens Advice for help. Citizens Advice data shows that in January to April 2021 there has been a 17 per cent increase in people with eviction issues approaching the charity compared to the same period in 2020.
Citizens Advice reports 17 per cent spike in PRS tenants seeking eviction advice
The charity said 6,556 people came to it for help with issues about eviction in the first four months of the year. This is an increase of 17 per cent compared to the same period last year.
A poll of 6,000 people conducted by Citizens Advice and ICM Limited found that nearly one in 10 private renters were behind in making rental payments, equivalent to 350,000 tenants.
Citizens Advice also revealed that the average amount of arrears had increased by nearly a quarter over the past few months to £907 in April.
Dame Clare Moriarty, cheif executive at Citizens Advice, said that with the ban on most bailiff-enforced evictions coming to an end on Monday, thousands of renters were at risk of losing their homes as they are still struggling financially due to the pandemic.
Moriarty reiterated calls for government to introduce a system of ring-fenced grants for renters in receipt of government benefits or those otherwise eligible for benefits.
She also repeated a request for government-backed interest free loans for renters who can afford to repay them, including those who have been furloughed and are struggling to pay their rent currently, but will be able to in future.
In August 2020, Citizens Advice formed a coalition with Shelter, the National Residential Landlords Association, ARLA Propertymark, Crisis and Generation Rent to call for a short-term package of emergency grants and loans worth £270m.
Moriarty also urged that Section 21 notices – so-called no-fault evictions – be ended as part of reforms to the private rented sector.
“The lack of security renters in England will face from Monday is a symptom of a longer-term problem where tenants can be evicted without cause. The government has committed to ending no-fault evictions and it’s vital this is urgently enshrined in law in their forthcoming reforms to the private rented sector,” she said.
Along with lifting the ban on evictions, the notice period landlords must give tenants will reduce from six to four months.
Eviction ban extended – but still no financial support for tenants
Renters will only have their homes possessed in the ‘most serious circumstances’ such as incidents of fraud or domestic abuse.
The requirement for landlords to provide six-month notice periods to tenants before they evict will also be extended until at least 31 May. It was previously due to end on 31 March.
Housing secretary Robert Jenrick said the measures will be kept under review in line with the latest public health advice.
Richard Lane, StepChange director of external affairs, said: “The government’s continued suspension of rental evictions until the end of May is a welcome step which will gives renters affected by the pandemic vital time to get back on their feet.
“However, renters are among the groups hit hardest by the pandemic, and many of those struggling have fallen well behind on their rent or resorted to borrowing to get by. With wider restrictions due to continue until at least the end of June and the economic effect of the pandemic expected to go on well beyond that, renters have little hope of a return to anything like normal by May.
“Without targeted financial support, many renters are at risk of losing their homes. We need urgent action to prevent homelessness, housing insecurity and long-term problem debt from taking hold when the newly extended suspension is lifted.”
Ben Beadle, chief executive of the National Residential Landlords Association, said: “That said, the further extension to the repossessions ban will do nothing to help those landlords and tenants financially hit due to the pandemic. Given the cross-sector consensus for the need to address the rent debt crisis, it suggests the government are unwilling to listen to the voices of those most affected.
“If the chancellor wants to avoid causing a homelessness crisis, he must develop an urgent financial package including interest free, government guaranteed loans to help tenants in arrears to pay off rent debts built since March 2020. This is vital for those who do not qualify for benefit support. Without this, more tenants face losing their homes, and many will carry damaged credit scores, making it more difficult to rent in the future and causing huge pressure on local authorities when they can least manage it.”
Both the NRLA and StepChange are calling for a financial package from the government that helps tenants deal with their rent arrears through a system of grants and no-interest loans.
The Scottish government announced this week that it was extending its support for landlords and tenants, a package which includes interest-free loans.
Half a million renters in arrears as evictions set to resume
The charity says that in December it helped someone with an issue with their privately rented housing every two minutes; and that half a million private renters in the UK are behind on their rent.
Protection against eviction is due to expire this weekend, coinciding with the third national lockdown and associated economic hardship.
Renters have already been badly affected by the economic consequences of the pandemic with one in three private renters losing income.
According to Citizens Advice, rent arrears is a new scenario for many tenants with 58 per cent of those currently behind on their rent having no rent arrears in February 2020 before the pandemic began. For people already struggling with rent before the pandemic hit, their arrears have got worse for 40 per cent of them.
On average, people who have fallen behind on rent now owe £730, which would mean about £360m is owed across the country, the charity added.
Negotiating with landlords
Citizens Advice points out that mortgage payers have been able to benefit from payment holidays, but renters have been forced to fall back on negotiating month-by-month with their landlords.
The temporary ban on bailiffs enforcing evictions in Tiers 2, 3 and 4 ends on 11 January and Citizens Advice is warning that, without further help for renters, an avalanche of evictions could take place in the spring.
A quarter of those the charity surveyed who have rent arrears have already been threatened with eviction, termination of their rental contract, or handed an eviction notice despite the current rules.
Alistair Cromwell, acting chief executive of Citizens Advice, said: “As coronavirus restrictions once again tighten for everyone, the government must not forget the struggles of private renters.
“They currently face the prospect of losing their home once the eviction ban ends next week and the debt they have built up is likely to cast a long shadow over their future.
He noted that half a million private renters remain behind on their rent, with the majority falling behind during the pandemic restrictions and highlighted they had no structured way to defer payments.
“Even though many landlords are trying their best to support their tenants, thousands of renters could face eviction in the coming months without further help,” he said.
“The government must act decisively to prevent evictions in areas subject to the highest coronavirus restrictions. And they should provide targeted support to help people escape the trap of rent arrears in the New Year.”
Extend ban on repossession action
Citizens Advice is calling for a legal ban on bailiff action and a pause on all possession proceedings during the national lockdown in England and in tiers 2 and above beyond 11 January.
It’s also demanding targeted financial support for people in England who have built up rent arrears.
It says the government should consider a system of grants and government-backed loans – comparable to schemes in Scotland and Wales – to help people pay back their rent arrears sustainably and stay in their homes.
The National Residential Landlords Association (NRLA) has also called for a financial package to help struggling renters to pay off arrears built since lockdown measures began.
Pause on bailiff action to protect renters slammed as ‘weak’
Housing secretary Robert Jenrick announced that renters will be protected during national restrictions as bailiff enforcement action will not be able to take place.
Similarly, evictions will also not be enforced by bailiffs until 11 January 2021 at the earliest, except in certain scenarios such as for anti-social behaviour.
Six-month notice periods are still in place which means renters served a notice can stay in their homes until May 2021.
Jenrick said: “We have already taken unprecedented action to support renters during the pandemic including introducing a six-month notice period and financial support to help those struggling to pay their rent.
“We are now going further by protecting renters from eviction during the new national restrictions and throughout the Christmas period – with a pause on bailiff activity other than in the most serious circumstances, such as anti-social behaviour or fraud.
“Striking the right balance between helping tenants in need while ensuring landlords have access to justice in the most serious cases.”
Courts will remain open through the new national restrictions. The only circumstances where these protections do not apply are illegal occupation, fraud, anti-social behaviour, eviction of domestic abuse perpetrators in social housing and where a property is unoccupied following the death of a tenant.
The government added it intends to introduce an exemption for extreme pre-Covid rent arrears.
Alicia Kennedy, director of campaign group Generation Rent, said the government had an opportunity to protect renters from losing their homes, and have instead “chosen not to act”.
Kennedy said: “A non-binding pause on bailiff action is completely inadequate. Eviction notices will be dropping through renters’ doors throughout lockdown, and the courts will be open the entire time, putting pressure on renters to move out while the pandemic rages on.
“Although the government has asked bailiffs not to enforce possession orders, it’s not clear if tenants are legally protected. In the event that a bailiff goes against the guidance, renters will have few options.
“The furlough scheme has been extended, mortgage holidays have been extended. Why then, has the government failed to extend protections against eviction? To keep renters safely in their homes, the government must end section 21 ‘no fault’ evictions and evictions for Covid rent arrears, lift the benefit cap and increase Universal Credit to ensure it covers average rents.
She added: “This weak guidance to bailiffs will not protect the most vulnerable, and simply delays the looming homelessness crisis.”
‘Abuse of protections’
Ben Beadle, chief executive of the National Residential Landlords Association, said: “The vast majority of landlords who have had tenants affected due to the pandemic have been working constructively to support them. We continue to encourage and support such action.
“However, in a minority of cases renters have abused the protections afforded by the recent ban on repossessions, causing significant hardship.
“It is therefore important that the government recognises that in the most serious cases enforcement action must continue.”
Campaign launched to extend landlord eviction ban
The eviction ban in England and Wales will be suspended on Sunday 23 August after an initial ban was introduced in March amid the growing coronavirus pandemic.
But with just days left until the protection runs out, homelessnes charity Shelter has launched a campaign calling on the housing minister to step in and protect people from losing their homes.
It is looking to send 10,000 emails to Robert Jenrick, urging the government not to end the temporary eviction ban.
The Shelter eviction ban campaign page stated that the coronavirus outbreak has lifted the lid on the “failing, unaccountable, and expensive renting system”.
Renters are among the hardest hit by the pandemic gripping the country with around 1.7 million people worried they’ll lose their jobs and face the prospect of not being able to pay their rent. Under current laws, they could also lose their home.
Shelter said that while the government has brought in some protections for renters, Universal Credit won’t cover most people’s rent.
“Right now, tenants are falling into debt because of coronavirus – and if the government doesn’t act now, these renters could be evicted once the ban ends.
“Together, we can make sure this doesn’t happen. Call on Housing Secretary Robert Jenrick to step in and protect renters before they lose their homes,” it stated.
Last month minister Lord Greenhalgh, at the Ministry for Housing, Communities and Local Government, confirmed there would be no further ban on evictions in response to a series of parliamentary questions.
After a five-month suspension, the minister said this would be “an important step towards ending the lockdown and will protect landlords’ important right to regain their property.”
When the extension was announced, the National Residential Landlords Association (NRLA) warned it could result in a “further impetus” to landlords exiting the market.
A Ministry for Housing, Communities and Local Government spokesperson, said: “The government has taken unprecedented action to support renters, preventing people getting into financial hardship and helping businesses to pay salaries – meaning no tenants have been forced from their home.
“We will give appropriate support to those particularly affected when proceedings start again and we have changed court rules so landlords need to provide more information about their tenants’ situation when seeking an eviction – with judges able to adjourn a case if they don’t.
“Legislation introduced in March requiring landlords to give all tenants three months’ notice will remain for possession cases, including section 21 evictions, until September 30.’’
Change in law needed
Under the current rules judges have to grant a possession order – leading to the eviction of the tenant – if landlords use what is known as ground 8 when a tenant falls two months behind with their rent, no matter what the reason.
Alex McMahon, a housing litigation lawyer at London law firm for Osbornes Law is calling for an amendment to Section 8 (Ground 8) notices to allow judges to hear the reasons why the tenant fell behind.
The judge can then have the discretion as to whether it is reasonable to make a possession order.
He said: “Thousands of people who are under threat of losing their homes are in this position because they have lost their jobs because of coronavirus.
“Under the current law, if a landlord relies on Ground 8 judges have no discretion over whether they grant possession orders if the tenant is 2 months or more in arrears, and that is clearly wrong in the middle of a global pandemic. I don’t think the government has thought about this and I would urge them to do so immediately.
“Of course, what would be even better is for there to be an extension to the current stay as more people are expected to lose their jobs and fall into financial hardship in the coming months. There will be more and more evictions as a result.”
However, Chris Norris, policy director for the National Residential Landlords Association, said: “Extending the ban on repossessions is not necessary. Our research clearly shows that the vast majority of landlords and tenants are working together constructively to sustain tenancies wherever possible.
“We need the courts to deal with cases where tenants are committing anti-social behaviour or where there are long-standing rent arrears that have nothing to do with the pandemic.
“Over the last five months landlords have been powerless to take any action against those who cause misery for fellow tenants and neighbours.”