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We respond to Welsh Section 21 consultation

Thursday 29 August 2019

The Welsh Government is currently consulting on extending the notice period for the equivalent of a Section 21 eviction under the Renting Homes (Wales) Act 2016, which is yet to come into force.

Whilst the Housing Act 1988 still applies to tenancies in Wales, the Welsh Government is consulting on amending the Renting Homes (Wales) Act 2016 before it comes into force. The equivalent of a Section 21 notice for Periodic tenancies (or occupation contracts, as they are described in the legislation) is a Section 173 notice. For Fixed Term tenancies, the equivalent in a Section 186 notice.

The Welsh Government is looking into limiting the use of eviction notices without providing tenants with a reason and has proposed significant changes.

Mark Drakeford, the First Minister of Wales, initially stated that “no fault” evictions would be abolished in Wales. However, the proposals contained within the consultation take a slightly different angle.

What are the proposed changes?

  • Extending the minimum notice period of a Section 173 notice for periodic tenancies from two months to six
  • Extending the period from when a Section 173 notice can be issued from four months to six
  • Limiting a Section 173 from being issued again following expiry for six months
  • Abolishing no fault evictions for Fixed Term tenancies by removing Section 186
  • Removing the landlord’s use of a break clause during a Fixed Term
  • Measures to limit a landlord from issuing another Section 173 notice for six months when the previous was issued in retaliation
  • Limiting the issuing of notices where landlords haven’t complied with relevant legislation

Our response

ARLA Propertymark has responded to the consultation, and strongly urges agents and landlords operating in Wales to respond individually as well. The consultation will close for comments on 5 September 2019.

Current procedures

We made it clear that landlords do not use Section 21 notices without reason. Due to possession being guaranteed, and quicker timescales than when a Section 8 with grounds for eviction has been used, on the rare occasion that a landlord does use a Section 21 it is usually for tenant rent arrears or antisocial behaviour.

Extending the notice period

A longer notice period, as proposed by the consultation, will extend the eviction process. This ignores times of emergency and means that problem tenants could be causing nuisance or not paying their rent for up to 12 months. This is because, by extending the notice period to six months from two and increasing the time from when the tenancy began until they can issue a notice from four months to six, tenants are being given a minimum of 12 months security in their tenancy by default.

For landlords, an extended eviction process will mean higher associated costs, including lost rent. A consequence of this is increased risk, which could result in less favourable mortgage terms and deter landlords from the sector as they would want greater protection in protecting their asset.

We think that taking into consideration the current legislative change affecting landlords, a market exit would mean increased pressure on the Welsh Government and local authorities to provide housing for displaced private rented sector tenants. This would mean more spending on social housing and temporary accommodation. The private rented sector provides vital housing for those without access to the social rented sector, and it is these tenants that will most likely be impacted due to the proposals.

Fixed Term tenancies

Removing a landlord’s ability to issue a tenant with an eviction notice without giving reason at the end of a Fixed Term will unfairly balance power towards tenants. This will mean that at the end of a Fixed Term, if it rolls onto a Periodic, landlords will still have to give tenants at least six months’ notice. We think that because of this proposal, longer Fixed Term contracts (i.e. anything over six months) will become obsolete. This will not improve a tenant’s security of tenure and will make short Fixed Terms or Periodic tenancies the favoured option.

Removing break clauses

We highlighted that break clauses do not unfairly impact good tenants. This is because, break clauses are often for the benefit of both landlord and tenant or just for the tenant. Break clauses solely for the use of landlords are extremely rare as they are often deemed unfair by the Unfair Contract Terms Act 1977. Break clauses provide flexibility for both parties, which in a sector that largely houses students and working professionals, is vital. They also provide extra protection for landlords that may be dealing with problem tenants, the break clause allows the landlord to end a Fixed Term early if the tenant isn’t suitable. We think that instead of removing the use of break clauses, the Welsh Government needs to define clear wording for a break clause that doesn’t disproportionately impact either the landlord or tenant.

Additional reform

If the Welsh Government is to move forward with its proposals to amend the Renting Homes (Wales) Act 2016, we believe that there needs to be additional reform to make the future eviction process workable.

Firstly, the Act has less grounds for eviction than is provided by the Housing Act 1988, this means that landlords will have no means for evicting a tenant if they want to sell the property or move themselves or their family into the property or where a mortgage lender needs to regain possession. We believe that these instances must be included in the legislation as mandatory grounds for eviction. We also think that existing grounds for rent arrears need to be strengthened to ensure that tenants who regularly flout their responsibilities cannot “play the system” by continually paying off arrears at the last minute.

Secondly, ARLA Propertymark has long called for the introduction of a specialist Housing Court for England and Wales. With the powers of the County Court and the Property Chamber of the First-tier Tribunal, specialist Judges would make housing claims simpler; there is potential for a cheaper process due to quicker and; when combined with other additional reform and other added protections, would allow landlords to take on longer tenancies with confidence.

Propertymark continues to respond to consultations across the UK on behalf of its members. If you would like to comment on any of the points raised here, please contact the Policy Team.