Update:
The Renters Reform Bill had its second reading in Parliament on Monday 23 October. The Government pulled short on having a vote on the Bill but here is what the the Government are proposing from that debate:
- A halt to bringing in Section 21 no fault evictions until the court process has been reformed/improved (digitising parts of the process). Evictions under Section 8, under the grounds of anti-social behaviour, have been re-affirmed by Government.
- A simplification of existing tenancy structures with rolling tenancies with 2 months’ minimum notice to terminate. There was push back to this proposal the counter argument being that the minimum rental period should be 12 months to incentivise landlords to remain within the market.
- That landlords can raise rents once a year in line with the market rates, the counter to this argument was that rental control
and inflation linked rental increases be considered. The government is essentially saying it will remain hands off in controlling rents.
- A searchable property portal with details of all landlords showing legal compliance be brought in. There was concern that this simply creates an administrative burden and will force landlords to leave the market. This would potentially better inform tenants.
- A legal right for tenants to request to keep pets be included in the Act and, to address concerns of damage, landlords will be able to request pet insurance. There was request that the Government consider the grounds for refusal, provided the landlord is acting reasonably, where multiple tenant interests are being considered.
- A new Housing Ombudsman to determine disputes in the private rented sector. To alleviate pressure on the courts system.
Renters Reform Bill
In June last year the Government published its white paper setting out its intention to create a “fairer private rented sector” and redress the balance between landlord and tenants. On 17 May 2023, the Renters (Reform) Bill was presented to Parliament with Michael Gove announcing that this would become law “in this Parliament”.
What are the key changes introduced by the Bill?
Abolition of section 21 notices
This has been referred to by many commentators as the end of no-fault evictions. Considering that Shelter reported an annual rise of 116% in no-fault evictions in May 2023, this will be one of the changes most likely to affect landlords.
As things currently are, section 21 allows landlords to seek possession without relying on any specific ground for possession. Under the Bill this will no longer be possible. The Bill however introduces new no-fault grounds (as detailed below) so the better way to describe this is the end of eviction without ground.
Importantly the changes will apply retrospectively, so section 21 will no longer be available even for tenancies granted before the Bill comes into force.
Grounds for eviction
As well as introducing new grounds for possession, the Bill brings in changes to existing grounds:
- Own occupation – This no-fault ground will be widened. Currently this only applies to the landlord or their immediate family, the Bill will extend this to a much wider pool including grandparents/children and siblings.
- Sale of property – This is a new ground (ground 1A) to enable landlords to sell their property with vacant possession subject to giving tenants two months’ notice and only where the tenancy is at least 6 months old.
- Sale by mortgagee – Mortgagees will be able to evict tenants even where the mortgage was entered into after the tenancy was granted.
- Redevelopment – Landlords will only be able to rely on this ground after 6 months. The intention being to bring more certainty to tenants.
- Anti-social behaviour – The Bill abolishes the need to give tenants 4 weeks’ notice in case of serious anti-social behaviour. The threshold has also been lowered as this will be available where the tenant’s behaviour is “capable of causing” rather than “likely to cause” nuisance/annoyance. The landlord will only be able to get a possession order after 14 days of giving notice, but this is unlikely to have any impact in practice given the notorious delays with the courts dealing with possession claims.
- Rent arrears – This is the fault ground most commonly used by landlords. The notice period will be increased from 2 to 4 weeks. As well as being available where there are arrears equivalent to 2 months’ rent, a new ground 8A will allow landlords to evict those bad payers that are able to avoid eviction by bring the arrears below the 2 months’ threshold just before the possession hearing. This will catch tenants who have, within 3 years before the notice, had at least 2 months’ arrears unpaid for at least a day on at least 3 separate occasions. As currently drafted this new ground 8A is likely to catch many tenants so we can expect the threshold to be increased.
Deposit protection
Under the current legislation, there is no restriction on landlords’ ability to seek possession under section 8 if they have not properly protected the tenant’s deposit. But with the abolition of section 21, these restrictions will be extended to section 8. It will be all the more important for landlords to ensure that they comply with the deposit protection rules or they will have to return the deposit in full before they can evict the tenant.
No fixed term tenancies
One of the objectives of the white paper was to bring more flexibility to tenants. Landlord will no longer be allowed to grant fixed terms tenancies. So, all tenancies will be rolling periodic tenancies of a maximum of one month. Again, this will apply retrospectively to existing tenancies and Landlord will not be permitted to get around this by requiring payment of rent in advance.
Tenants on the other hand will have the right to terminate at any time on 2 months’ notice with no minimum duration required.
This change is expected to have an impact on the student accommodation market where landlords need the letting period to be in synch with the academic year. While some purpose-built student accommodation will be exempt from this new rolling tenancy regime, this will not be the case of private landlords. Michael Gove has however already indicated that the Government is considering making an exception for private student accommodation.
Rent increases
Although Sadiq Khan had called for rent control in London, there is no such provision in the Bill. Tenants will however be able to challenge the agreed rent in the first 6 months of their tenancy by making an application to the First Tier Tribunal.
Landlords will only be able to increase rents annually by following the notice procedure under section 13 of the Housing Act 1988 and giving the tenant at least 2 months’ notice (up from one). Again, tenants will be able to challenge any increase by applying to the FTT.
In both cases, the FTT will determine the rent based on the open market rent. So while there will be an element of control this will be regulated by the market.
Landlord database and redress scheme
Although the details of this are yet to be confirmed, the Bill suggests regulations providing landlords will only be permitted to market properties if they are registered on the database, which will contain information about whether the landlord is subject to a banning order, a financial penalty or been convicted of an offence.
It also suggests the creation of a new landlord redress scheme which landlords will be required to join (and pay for).
Fines
Local Authorities will have the power to impose fines on landlords who fail to comply with the legislation, of up to £5,000 or £30,000 for the more serious offences. This will be the case for example if a landlord relets/remarkets their property within 3 months of having obtained termination on grounds such as own occupation, sale or redevelopment.
Conclusion
The Bill brings in a significant overall of the regulations affecting the private residential rented sector. While the reasons behind it, to get “rogue landlords” out of the market are laudable, there are concerns that it could had pressure to the sector and may lead to shortages with residential landlords being discouraged to rent their properties and/or increases in rents to counter-balance the increased risks on landlords, thereby defeating its very aim of “bring[ing] in a better deal for renters”.
