As Samir pointed out in his post on rent control, this month is the 25th anniversary of the passing of the Housing Act 1988.
I want to take a look at the effect of section 21 and the assured shorthold tenancy.
The bad old days
Prior to 15 January 1989 when the Housing Act 1988 came into force – you had to be very careful about letting tenants into your property as you might never get them out again.
Here are two examples from my experience.
Example 1: I can vividly remember advising a young man in about 1990. He had bought a house a few years previously and, not being able to live in it at that time, had rented it out.
Come a few years later he wanted it back to live in himself. The tenant refused to move out, so he came to me for advice .
However after doing some careful research (and also taking Council’s opinion) I had to advise him that his chances of getting the property back were minimal. Short of providing ‘suitable alternative accommodation’, which he could not afford. My client was a single young man – the tenant had a young family.
He was horrified but there was nothing we could do.
Example 2: My last piece of ‘proper litigation’ involved evicting a protected tenant from a farm workers house. The landlord had let a friend fleeing from an abusive husband into occupation for six months in the 1970′s. Needless to say the abusive husband then joined her and they were there for the next 30 years.
I managed to get the property back so the landlords could use it for their farm manager, but they had to buy another property to move the tenants into first. Even so they were delighted as they had been told they would never get it back during the lifetime of the tenants.
Bad for society
The strong security of tenure for tenants under the Housing Act was great for tenants but actually bad for society.
Very few property owners were willing to rent out property in circumstances where they were unlikely to get it back again and the pool of rented property dropped dramatically.
This was hurting society as there was hardly any short term accommodation available for people who needed it. This affected the ability of people to move for their jobs or indeed for any reason, Which was not good.
The new broom – and the assured shorthold tenancy
Mrs Thatcher was elected in 1979 and one of the things she wanted to do was ‘fix’ the rented property market. This she did eventually, with the passing of the Housing Act 1n 1988 – which created a new tenancy type. The assured shorthold tenancy.
The main driver of the current buoyant buy to let market, is the right for landlords of an assured shorthold tenancy, under section 21 of the Housing Act 1988, to recover their property provided they follow the proper procedure.
This means that landlords no longer have the prospect of losing all control over their property for the foreseeable future. Recovering a property under s21 is not quick, but it is certain.
This massive change, coupled with the new buy to let mortgages that were developed in the 1990′s, meant that it was once again economically viable for people to invest in property to rent.
The new problem for society
So we now have lots of short term rented property available so people are no longer prevented from moving simply because there is no rented accommodation available for them to live in there.
However we now have a new problem. This is the difficulty people have now in finding any long term security. This is also due to section 21.
The section 21 problem
Contrary to what many people think, the majority of landlords are not rich people. Most private sector landlords are individuals who own between 1 and 5 properties, often instead of a normal pension. They are usually comfortably off, yes, but not really wealthy.
So they cannot afford, for example, to have people living in their properties who are not paying rent or who are causing problems in some other way.
Section 21 is their friend here, as section 21 allows them to remove bad tenants fairly easily. However section 21 can ONLY be used after the fixed term of a tenancy has come to an end.
This means that very few landlords are prepared to grant fixed terms of more than six months or a year (even if their mortgage company were prepared to allow this, which normally they don’t). Otherwise they would be in difficulties if their tenant started paying rent irregularly (which would cause them financial problems).
There is a ground for eviction based on serious rent arrears, but this is more problematic than the section 21 procedure and usually takes longer. It it is in landlords’ interests therefore to grant short fixed terms, so the right to use s21 is never more than about a year away at most.
The problems of short term housing
Many tenants are perfectly happy with a short term commitment. However others are not.
It is particularly bad for families, where it is important that children are able to remain at their schools without being moved every year. Older people are also unhappy at being at risk of eviction within a few months.
If you have a short fixed term your right to stay in the property will never be more than two months or (if your fixed term has more than two months to run) the end of your fixed term.
This discourages people from putting down roots into the community. You do not feel the same about somewhere if you are at risk of having to move on within a couple of months. Which is not good, long term, for society.
A more serious problem for some
Then there is the more serious problem of ‘retaliatory eviction’ where landlords deliberately evict tenants under s21 when they ask for repair work to be done on their property (or in ‘bad landlord’ parlance, when they are ‘troublemakers’).
There is no point in investing money in bringing a claim for an injunction ordering the landlord to carry out repair work, if the tenants are shortly going to be evicted under s21. Until the next tenant moves in – and has the same problem.
Lots of people have made suggestions about solutions for this problem. Some people suggest mandatory longer tenancies – but some tenants don’t want this. I made a few suggestions in my ‘Bigger picture’ ebook (which you can >> download from here).
But it is a problem. What do you think?