The majority of student tenancies are Assured Shorthold Tenancies (AST). This tenancy is for a fixed period of time, usually from 42-52 weeks for student properties. This does not give the tenant security of tenure as the landlord can choose not to renew it, without giving a reason. This benefits student landlords as they can ensure their full property is vacant for the upcoming academic year by not renewing the current tenancy.
Proposed Changes
In April 2019, the government announced plans to bring an end to Section 21 evictions, as they feel its existence undermines a tenants ability to enjoy their tenancy as they can be evicted in as little as two months. Communities Secretary, James Brokenshire, MP says ‘every single person living in the private rented sector [to be] empowered to make the right housing choice for themselves’.
However student housing is very different to other aspects of the private rented sector, it has more structure as the market is more predictable, tenants know when they need the property and the financial success of a property relies heavily on the ability for a landlord to let accommodation for the next year before the current tenancy ends. While a landlord may not have to use a Section 21 notice, the security of having it available if needed is vital to the student sector.
Introduction to Section 21
Section 21 is the tool used to end an AST. A valid notice must be served by the landlord or agent, at least two months before the end of the tenancy to bring the tenancy to an end. Most student tenancies are Fixed Term, so a Section 21 notice must respect the term of the contract. If Section 21 is scrapped, then AST will also cease to exist, as the two are linked.
A landlord can serve a section 21 notice to student tenants to ensure they know they should vacate the property on the specified date at the end of the tenancy agreement. This ensures that the property is available for new tenants at the start of the next academic year. As the letting of student accommodation happens in advance – sometimes as early as October and November, a landlord must know that their property will be available. Section 21 allows for this.
After Section 21 is removed, a student tenant may choose to stay in a property until after the start of another academic year, and by the time the landlord has regained possession of the property it could be very difficult to re-let to students and they could be left with an expensive void period.
Current View
While the importance of Section 21 to student landlords is widely understood, the government have stated that they do not believe that an exception is necessary and that the Section 21 removal will apply to student properties as well.
With increased uncertainty in the sector, many landlords may decide that renting to students is too much trouble and either sell or rent to other tenant groups. This will not help the growing student numbers at UK universities as most cities have a deficit of student beds.
Institutional landlords – university operated student halls of residence – will not have to worry about this development as they can rely on Ground 4 of Section 8 to regain possession of their properties. It has been theorised that this ground may be extended to private landlords as well as universities.
Scotland
The same occurred in Scotland in December 2017. Scotland version of Section 21, Section 33, was axed and all tenancies were open ended. Students can now give as little as 28 days notice before leaving, meaning landlords cannot market their properties due to uncertainty. It is expected that fewer properties will be brought to market and that this will push rents up.
Whats Next
The government launched a consultation on their plans to abolish Section 21, which concluded on 12th October 2019, however the results of this have not yet been published. After this has been done, the view for student landlords will be much clearer. Going by past government consultations the abolition will likely go ahead, however there may be some changes. It is unlikely that any change in legislation will be introduced before the end of 2020 or early 2021, with a six month transition period, and any AST already signed will not be affected.
Fixed term tenancies are very appropriate for the student rental market, and the industry reiles on the ability for landlords to regain possession of their property, if required, before the next academic year. An abolition of Section 21 without sufficient support from other areas will severely limit their ability to do this. It is likely that landlords will stop renting to students to avoid any threat of expensive voids, and rents in those properties brought to market will rise.
References
Purple Frog Property. 2019. Accessed 12th November, 2019, from https://www.purplefrogproperty.com/blog/student-accommodation-section-21-consultation/
Purple Frog Property. 2019. Accessed 12th November, 2019, from https://www.purplefrogproperty.com/blog/government-announces-end-section-21-repossessions/
Residential Landlord Association. 2019. Accessed 12th November, 2019, from https://news.rla.org.uk/section-21-reform-what-about-student-landlords/
Residential Landlords Association. 2019. Accessed 12th November, 2019, from https://news.rla.org.uk/look-north/
National Landlords Association. 2019. Accessed 12th November, 2019, from https://landlords.org.uk/news-campaigns/news/government-launches-section-21-consultation#:~:targetText=The%20Ministry%20for%20Housing%2C%20Communities,closes%20on%2012%20October%202019.
