All change for landlord and tenant

19 June 2019

Hot on the heels of the consultation document on changes in the agricultural tenancy regime which was released on 9th April, the government has also issued details of a separate and unrelated initiative aimed at the residential tenancy sector.

The proposed new laws will ostensibly be aimed at “rogue landlords” (and are nothing to do with the votes of 4m individuals in privately rented accommodation). It is clear that they will have a massive effect on almost all residential lettings and will have an impact on rural businesses and estates just as much as multiple occupation lettings in urban areas.

The new proposals will see an effective end to the assured shorthold tenancies, which will simply become open-ended, with tenants able to stay on after the initial tenancy period has expired, and with landlords being unable to operate “section 21” eviction proceedings to regain possession, other than in very restricted circumstances.

In the words of James Brokenshire, MP:

“As part of a complete overhaul of the sector, the government has outlined plans to consult on new legislation to abolish Section 21 evictions – so-called ‘no-fault’ evictions. This will bring an end to private landlords uprooting tenants from their homes with as little as 8 weeks’ notice after the fixed-term contract has come to an end.

This will effectively create open-ended tenancies, bringing greater peace of mind to millions of families who live in rented accommodation. Many tenants live with the worry of being evicted at short notice or continue to live in poor accommodation for fear they will be asked to leave if they complain about problems with their home.”

Whilst the intention may be laudable, the consequences could be significant and possibly not what was intended. We might see, for example:

A reduction in the number and choice of rental properties as landlords regard this tilting of the tables in favour of the tenant as the last straw, following previous attacks on the sector by way of SDLT increases and the disallowance of interest relief for many.

The development of alternative methods of regaining possession such as corporate tenancies or automatic rent hikes after an initial period.

A switch in favour of furnished holiday lettings which will enjoy favourable CGT and interest relief status, as well as freedom from the landlord’s worst nightmare – that of being unable to regain possession.

A likely reduction in the value of properties which are subject to such open-ended tenancies – which may, perversely, reduce the IHT value.

Commenting on the changes, Sarah Dodds, Head of Agriculture and Rural Business remarked:

“This looks like another nail in the coffin of the private rented sector and far from protecting tenants. In the longer term, it is likely to reduce choice and see rents rise. I see it doing nothing to help tenants or young people in rural areas – on the contrary, landowners are almost being positively encouraged to let to holidaymakers rather than locals.”

Contact us to find out how we can help your rural business

For further information on this subject or to discuss how we can help with your business and its future plans. Please contact Head of Agriculture, Partner Sarah Dodds at sarah.dodds@mhllp.co.uk or call 01733 568 491.