Below are some of the key takeaways lenders need to be aware of:
What lenders need to know
- Section 21 ‘no-fault’ evictions are no more - Receivers and Mortgagees must now rely on Section 8 for eviction proceedings based on specific legal grounds - either mandatory or discretionary
- Section 8 has increased tenants’ rights on longer notice periods
- Section 8 has, however, also been streamlined to allow Receivers to serve notice where they need vacant possession, i.e. a sale to maximise value. It is no longer a requirement that the mortgage was granted before the tenancy
- An increased notice period has also extended to arrears – mandatory arrears ground has now been increased from 2 to 3 months unpaid rent
- Landlords/Receivers are prohibited from re-letting a property for 12 months after serving a sale or owner occupation notice, which also extends to a property sold by a Receiver, so Lenders should consider this when underwriting new deals
- It is no longer a requirement to hold a Gas Safety Certificate or an Energy Performance Certificate in order to serve a section 8 notice for possession, the former being difficult to obtain in hostile circumstances
From an enforcement perspective, what can we do to help?
How a cashflow review can help
To account for the mandatory arrears ground which will slow down possession proceedings:
- Review lending criteria to ensure such greater protection is considered, i.e. factor in loan-to-value ratios offered and lending rates
- Review documents held to ensure there are robust records in place if possession proceedings are required
- Track tenancy dates to plan recovery strategy, particularly for portfolios
With the removal of Section 21 and the reforms to Section 8, the process is now shifting towards a more regulated and court-led approach, which could add further financial pressure.
KR8 Real Estate has a dedicated property team, including 8 chartered surveyors, members of NARA, fixed charge receivers and chartered building surveyors who will be able to advise on how best to deal with these changes.
