London law firm Bishop & Sewell LLP has seen a significant rise in enquiries from landlords seeking to sell their buy-to-let properties ahead of the eventual introduction of the Renters Reform Bill, which outlines the government’s plans to outlaw Section 21 eviction and bring an end to fixed term tenancies.
Under Section 21 of the Housing Act 1988 landlords are currently allowed to evict tenants on periodic tenancies without providing a reason. However, the Renters Reform Bill will fulfil the government’s manifesto commitment to eliminate these so-called ‘no fault’ evictions, while a host of other proposed reforms seek to provide added protection to tenants.
Charlie Davidson, senior associate with Bishop & Sewell’s Residential Property team, said: “The proposed Bill promises to be the biggest shake up to the private rental sector for a generation, bringing in new laws to protect renters from no fault evictions to ensure a better deal for renters.
“However, the changes to Section 21 are causing landlords particular concern, as they will face additional obstacles to removing tenants when they come to selling the property.”
Originally proposed in April 2019, the Bill has only just begun a lengthy progress through parliament where it will likely be subject to much challenge and revision before it becomes law, but the changes proposed are already having an impact on the buy-to-let mortgage market.
Davidson continued: “Many landlords oppose the Bill and, when coupled with the impact of higher mortgage costs and soaring energy bills, buy-to-let landlords in particular are considering exiting the market in their droves. This could inadvertently reduce the supply of rental properties and increase costs for renters, which is far from the Government’s intention.
“Meanwhile, mortgage lenders prefer it if landlords can readily regain possession of their properties, so any reforms that reduce landlords’ flexibility and freedom to recover capital could dampen their willingness to lend.
“It’s fair to say the buy to let market faces some significant challenges, including proposed renter reforms, the Building Safety Act and rising mortgage and energy costs. The danger is that the very reforms designed to help renters end up squeezing out investors from the buy to let market, with all the potential for disruption to supply and rents that could bring.”
