Law firm says rental supply hit as Renters Reform Bill frightens investors

Another legal firm is reporting a “significant rise” in landlords selling up ahead of the Renters Reform Bill becoming law.

A blog on the website of London law firm Bishop & Sewell highlights the reason for the exodus of landlords as being the scrapping of Section 21 of the Housing Act 1988 which currently allows the eviction of tenancies without providing a reason.

Charlie Davidson, a senior associate in the firm’s residential team, says: “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.”

He continues: “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.”

He goes on to say that mortgage lenders as well as landlords prefer it if the owner can readily regain possession of a home.

“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” concludes Davidson.

Earlier in the summer another respected property lawyer accused the government of helping nuisance tenants at the expense of the weak and vulnerable.

Ian Narberth, a solicitor at law firm DMH Stallard, said scrapping Section 21 eviction powers - a pledge contained in the Renters Reform Bill - would backfire with unintended consequences.

He said the Renters Reform Bill allowed agents and landlords to evict for behaviours ‘capable of causing’ a nuisance or annoyance as opposed to behaviours ‘likely to cause’ a nuisance or annoyance. 

Research carried out by the Leaders Romans Group of lettings agents has found that Section 21 is rarely overused, and even more rarely misused. 

LRG surveyed landlords across its estate agency brands and found that 80 per cent of landlords had never used Section 21. Of those that had, 63 per cent did so because the tenant was in breach of the lease, and 38 per cent used a ‘no fault’ eviction.

LRG says that while it’s fully supportive of ‘professionalising’ the private rented sector, many of the proposed changes in the Renters Reform Bill - including the repeal of Section 21 - would pose new challenges to some landlords in some situations and could penalise both landlords and tenants.