The Renters Reform Bill was introduced to Parliament, on 17th May 2023, and sets out the government’s plans to reform the private rented sector (PRS). The bill aims to standardise rental conditions, and to ensure that all PRS tenants have safe, fit-for-purpose homes, to live in. The publication of the bill takes the measures one step closer to being passed into law, in what’s being deemed as the most significant legal change in the lettings industry this generation has seen.
Both landlords and tenants will need to prepare to make sure they understand their legal obligations once the changes come into force. Whilst the implementation of the bill is still a way off, there is still time for amendments to be made before it gains royal assent. Have a read through on how we think the key components of the bill may impact both landlords and tenants in the future.
To read our blog post on the key components of the renter’s reform bill click here!
Abolish Section 21 Evictions
Currently a landlord can evict a tenant with 2 months’ notice, using a section 21, commonly referred to as a ‘no fault eviction’. Under the reforms, section 21’s will be eliminated, meaning a tenancy can only end if a tenant gives notice, or a landlord uses one of the valid section 8 grounds.
Landlords
This is one of the points that landlords in the sector have widely been most fearful of. For a long time Section 21’s have provided landlords with a feeling of safety, as they can acquire their asset back when needed, and has been a big reason why the PRS has flourished. The problem in some cases, is this power has been abused. This change will make it more difficult to evict a tenant, however the grounds covered in section 8 leave very few reasons why a landlord would want to evict a tenant anyway. As long as the courts, and section 8 system, work correctly, then this probably won’t have as big of an impact as many landlords are anticipating. However, an issue lies in that although the government have stated they will be updating the court system so it becomes a ‘modern, digital service’, they have also said they will be pausing ‘digital reform work on adoption and possession for now’. If the reforms are not completed in time for when the renters reform bill becomes active, then the current Section 8 system simply won’t work how its supposed to, with long, expensive waits for eviction proceedings.
Under the current system, the quickest way to evict a tenant who hasn’t left after being served a section 21 notice is to use an accelerated possession proceeding, which comes with the caveat that landlords cannot claim for any unpaid rent. Whereas using a section 8 notice in future will mean any rent arrears can be claimed back, leading to it hopefully being more financially beneficial for landlords.
Tenants
Tenants will no longer have a threat of a section 21 being used against them for no valid reason. There have been problematic cases where a tenant makes a complaint, usually to do with maintenance, and rather than deal with said complaint, a rogue landlord will serve a section 21 notice and the tenant effectively has no course of action to challenge this, leaving them with the only option as to find new accommodation. This can be an expensive process for the tenant, not only in terms of money, but in time, and emotionally as well. The reforms will hopefully lead to tenants feeling safer and more stable in their rental home, allowing them to plan for the future with more ease.
The downside for tenants is that under the current system, if they have done something to breach the tenancy agreement, such as fallen into rent arrears, or displayed anti-social behaviour, they would in most circumstances been served a section 21 notice, which does not require a reason, and gone on to find somewhere new to rent. In the new system, a section 8 notice will be needed to evict them, which does indicate the reason why they were asked to vacate. This could lead to future landlords not wanting them as tenants, potentially leaving some tenants at risk of not being able to find somewhere to live.
Single System of Periodic Tenancies
Under the bill there will be a single system of monthly periodic tenancies, meaning no more Assured Shorthold Tenancies (ASTs), or fixed term rental periods. The new measures will mean tenancies will be indefinite until either the tenant gives notice, or the landlord uses one of the reasonable grounds for eviction under section 8 rules. Written tenancy agreements will also now be mandatory, outlining the basic information and responsibilities for all parties involved.
Landlords
In 2017, a similar new type of tenancy system (the private residential tenancy) came into force in Scotland, replacing ASTs, and has shown to have very little impact on the general lifespan of a tenancy. Most tenancies currently end when the tenant gives notice, and therefore there should hopefully be little difference once this bill becomes law. We can mainly see it causing an issue in private student lets, which run on a yearly schedule. If the tenant is free to leave either before or after the common yearly timeline, then the landlord is left in jeopardy. If the tenants leave in the middle of an academic year, it will be difficult for a landlord to find a new group to take up the property. This is especially prevalent in selected licensing areas, such as Bath, where the property would most likely be an HMO, and therefore cannot be let out to family, as it would put the (expensive) HMO license at risk. If the tenant decides to stay past the yearly schedule, new groups that have already been signed up for the next academic year will be left with no where to live and the landlord being penalised. Having more flexible end and start dates could leave many landlords with an empty property for months over the summer when the majority of student don’t need the accommodation and makes it difficult to arrange a start date for new future tenancies as far in advance as the timeline currently operates. On the bright side, the system generally runs on a relationship of trust, with student tenants only wanting the property until a certain point in the year, and this will hopefully remain the case for the majority. Timescales of when to rent out the property for the new academic year may just have to be adjusted.
Although we like to believe all landlords are rolling in money, many are not, and landlords can incur high costs for switches in tenancies. If a succession of tenants decides to leave very quickly, there is nothing a landlord will be able to do about it, and we are fearful this will dissuade many landlords from continuing in the PRS.
Tenants
A single system of periodic tenancies will provide greater security and flexibility for tenants, as well as hopefully making things more straight forward for all parties involved. There will be less complicated contract types, switches, and notices that need to be understood and dealt with, leaving tenants in a more confident position of their rights. Tenants will no longer be locked into fixed terms on rentals that aren’t in a fit state, with a landlord refusing to do anything about it, or in a tenancy that is no longer suitable for a them due to a change in their circumstances such as a change of job, or relationship status.
Periodic tenancies unfortunately don’t guarantee long-term tenure for good tenants though. The bill states that landlords will not be able to evict within the first 6-months – so can serve a notice at the 4-month period. This could leave some tenants (such as a landlord selling and therefore not the tenant’s fault) looking for somewhere new to live very early on in a tenancy. This will leave them landed with the expensive moving costs, and find themselves in a worse position than if they were provided with a fixed term under an AST. Hopefully this will lead to a greater level of communication between landlords and tenants, both at the start of the tenancy, and throughout, maybe seeing an increase in the use of mediation services over the courts to deal with any issues that may arise.
With no set end date, landlords may become more wary on who they want to take on as tenants, a problematic tenant could be an expensive and stressful ordeal for a landlord trying to evict them with a Section 8. This may mean landlords look for a more encompassing referencing provider and taking out rent insurance to negate the risk. This will come with a cost, and undoubtedly be passed down to the tenants through increased rents, leaving lower-income tenants at risk.
Rent increases
Landlords will only be able to increase rents once per year and must now provide a 2-month notice. Tenants can challenge any rent increases through the first-tier tribunal, to avoid the rent being raised astronomically in a bid to force tenants out of a property. A Section 13 notice will now have to be used and rent review clauses will be banned from tenancy agreements.
Landlords
Whilst this component of the bill has made the headlines, it will not massively change how rent increases are dealt with currently. Under periodic tenancies rents can only be increased once per year as it is, and a section 13 notice can already be used. Getting rid of rent review clauses has effectively been negated by the fact that all tenancies will be periodic and therefore can use a section 13 notice every 12-months. The increase in the notice period being raised to 2-months is fairer for the tenants and will have little ramifications for the landlord.
Tenants
There have been calls that rent caps should have been included in this part of the bill to discourage both unreasonable rent increases and asking for multiple months’ rent in advance of a tenancy. Extreme rent increases could be used by rogue landlords as a form of a ‘backdoor revenge eviction’, and asking for a large amount of rent upfront could be used as a way of discriminating against lower-income tenants. However, with the increased notice period for rent increases, tenants will have more time, and therefore hopefully more confidence in challenging the rent increase with a tribunal.
Grounds for Eviction under Section 8
The government plans to strengthen the grounds for eviction under Section 8 of the Housing Act 1988. Unlike a section 21 notice, a section 8 notice can only be used if the tenant is in breach of certain criteria. The new system will introduce new grounds, make many of the existing grounds mandatory, and change several of the notice periods, to make it easier for landlords to regain possession of their property.
Landlords
Section 8 grounds being reformed so that landlords can only be granted possession for a valid reason seems very fair, and in essence is ideal. However, using section 8 notices have long been unnecessarily complicated and ineffective in allowing landlords to quickly regain possession when reasonably needed. The need to apply for a court order, in a court system that is currently experiencing an enormous backlog, with high-priority cases sometimes not being seen for years, foretells that possession cases will be at the end of the queue. As mentioned previously, if the court system is modernised and works quickly and correctly, this will be a perfect alternative to the Section 21 notices, however this is very much dependent on the courts.
The new rent arrears ground 8A allows for a mandatory eviction where a tenant has been in at least 2 months’ rent arrears, three times, in the previous 3 years, regardless of the amount of arrears the tenant is in at the time of the court hearing. The notice period for this ground is being increased to 4 weeks and will not apply to rent arrears that are caused through the timing of welfare payments. The revision of this ground does close the classic loophole of tenants paying rent so that they are a penny below the repossession threshold at the time of the court hearing, meaning the ground cannot be applied. However, it does seem slightly unjust to allow arrears to pile up for timing of welfare payments. What it does mean is that the landlord has to go without 2 months’ rent, plus a month’s rent arrears to cover the notice period of the ground, and the cost of taking that tenant to court three times, before an eviction can become mandatory. This could leave a landlord in 9 months’ rent arrears, and that’s only under the condition that they are seen in court immediately following the end of the notice period, which is virtually impossible. This is a scenario that few landlords would be able to sustain.
Tenants
Many of the notice periods for the grounds have been shortened, which may not give tenants enough time to find a new home. This is especially true if the reason they are being evicted is for grounds that cast negative aspersions on the tenant, which could lead to future landlords not wanting them as tenants, potentially leaving some tenants at risk of not being able to find somewhere to live.
Ground 14, for antisocial behaviour, has had its wording changed from ‘likely to cause nuisance and annoyance’ to ‘capable of causing nuisance and annoyance’, giving a wider range of behaviours to be considered. This language is very vague and could be exploited. It also leaves the tenant unsure to what classes as nuisance or annoyance, and therefore could be putting themselves at risk of validating this ground without even being aware.
The bill also includes amendments to homelessness legislation which means private tenants who receive a section 8 notice will no longer have the right to immediate help from the council, instead it will be left to the discretion of the council. This could waste time in helping that person to avoid eviction, sorting out rent arrears, or finding an alternative home. We see a large hole where tenants that are being evicted under certain grounds are being thrown into with no where to turn to for help
The amended & new grounds 1, 1A & B, allow a landlord to evict a tenant if they want to sell, or move themselves, or a family member in. If this ground is used a landlord would not be able to relist the property back on the rental market for 3 months. However, it is questioned whether this time period is enough to disincentivise landlords from abusing this ground and just using it with no intention to sell/move in, but as a way to evict the tenants.
Pets in Lets
This bill will legislate that consent is not unreasonably withheld when tenants request to have a pet in their home and gives the tenant a right to challenge a decision if consent is withheld.
Landlords
This is a good change for landlords, as tenants will more likely stay long-term in a pet-friendly home. To aid landlords with this adjustment, the Tenant Fees Act 2019 will be amended so that pet damage insurance becomes a permitted payment. This means landlords can either require a tenant to take out insurance or can take it out themselves and ask the tenants to reimburse them for any costs or excess payments. This should hopefully ease many landlords worries that a pet is likely to cause more damage to a property.
It remains unclear as to what reasoning landlords will be able to refuse a tenant with a pet. A property with a superior lease that refuses pets seems like a fairly straightforward case, however what would happen if a landlord decided a property isn’t suitable for a pet? For example, a top floor flat without a garden probably wouldn’t be appropriate for a tenant with 3 Great Danes, but will a landlord have the power to decide that? The government will need to provide greater clarity on what classes as reasonable withdrawal of consent.
Tenants
Pets are an important member of the family, and we have long encouraged the idea of pets in lets. This change will allow families to have pets, and reap their many loving benefits, without fear of struggling to find somewhere new to live with them if they had to leave their current rental. Whilst the pet insurance is a good middle ground to appease both landlords and tenants, there aren’t currently any providers for this type of insurance on the market, so the costs of this insurance are currently unknown. As these costs will be put towards the tenant, the hope is they won’t be too high and act as another barrier to having pets in lets.
There is also the possibility that in practise people that have pets may still be discriminated against. If a landlord has 10 applicants for a rental property, is it likely they will choose an applicant with a pet? They don’t have to justify why they choose applicants so could not be held accountable for not allowing a pet. However, as pets become more commonplace, hopefully the worry for landlords of having pets in their rental properties will naturally diminish as they find them to be no more destructive or troublesome than humans.
Property Ombudsman
The Renters Reform bill will require all private landlords to be part of the government approved property ombudsman. The point of an Ombudsman is to protect consumer rights by providing fair, impartial, and binding resolutions without needing to go to court. The Ombudsman will have powers to enforce landlords to take remedial actions, issue apologies, provide information and pay compensations, ensuring landlords become more accountable for their conduct and responsibilities. Failure to comply with the redress schemes binding decision for serial or serious offenders could result in a Banning Order.
Landlords
Since 2014 it has been a legal requirement for all letting agents and property managers to be part of a property Ombudsman, however the bill will require all landlords to join the scheme, regardless of whether they use an agent or not. It poses the questions of, if a property is owned by joint landlords, will all of them will have to be part of the scheme, or will only one suffice? As the cost of joining the Ombudsman has yet to be revealed, and there will be no choice of Ombudsman (as there is currently) this could be expensive for landlords. This will have a bigger effect on, for example, an accidental landlord of a 1-bedroom flat in a rural town, than a career landlord with multiple properties in a big city. We feel if a landlord is using a property manager, they should be exempt from having to join the Property Ombudsman as long as that property agent is a part of it and actively manages the tenancy.
The introduction of a mandatory Ombudsman results in decisions being made more quickly, cheaply and without the adversarial nature of the courts system and will hopefully evolve a more consistent answer to some ‘grey-area’ debates throughout the country, leaving landlords in a more confident position of their rights and responsibilities. In general, this is a logical, fair, and necessary part of the bill, which will bring the property sector in line with other consumer industries such as financial, legal and energy.
Tenants
The introduction of the Ombudsman throughout the sector will mean all tenants will have access to the Ombudsman services, allowing them to pursue redress for free, which will hopefully encourage tenants to feel more confident in making complaints where necessary. This will allow them to get resolutions more quickly, cheaply and without the oppositional nature of the courts system. The service will be free for all private renters to use and will hopefully work to drive up standards throughout the private rented sector.
We assume that if a tenant wants to use the service there will be an element of evidence that needs to be provided before a case is taken further. The details of the scale of evidence have not yet been provided. More clarity will be needed on this, to allow tenants to be informed of what they will need to provide so they are able to effectively make cases to the Ombudsman when necessary.
Property Portal
A new digital property portal will be created in England, initially used as a register of landlords and their privately rented properties. Joining the database will be a legal requirement, and a landlord can be fined if they have provided fraudulent information or try to advertise a property not on the register. The information a landlord will need to provide includes their name, details on property ownership and management, information relating to the property’s standard, and entries on Banning Orders, convictions for serious offences, and other breaches. Once this is in place the government hopes that the property portal will be the foundation of a future PRS service, providing an information hub for tenants, landlords, and local councils.
Landlords
What was initially presented as a helpful tool for all parties involved in the PRS, has now morphed, in its initial form, to simply be a landlord register. We hope it will eventually become a portal that can help landlords. Many landlords, especially single-property, and first-time landlords, find the current legislation around their responsibilities overwhelming and complex. This legislation is then also constantly being updated and these updates are not well communicated, usually with minimal notice, leaving many good landlords unintentionally failing to comply in some areas. This portal would therefore help landlords better understand existing requirements, any future updates that are implemented, and address the small minority of criminal landlords, who drag the reputation of the entire sector down.
In the meantime, you can see the register in 2-ways for landlords. Some will say that the value of the register will allow responsible landlords to showcase how credible they and their properties are, slowly driving criminal landlords out of the PRS. On the other hand, as there will obviously be a cost for landlords to register on the portal, the good landlords are seeing this as, yet another punitive measure used against them. The bill seems to be missing the point that rogue landlords will simply continue to not follow the rules set out.
There’s also a selection of landlords that are worried about their personal information being so readily available for all tenants to see. There has been speculation that a tenant will have to apply if they want to look at the landlord register, but no details have been released. It would potentially be a good idea for only local authorities and councils to be able to see all the information on the register to hopefully be able to enforce action against landlords/properties that aren’t up to standard, and allow tenants to only see details of if the property meets legal requirements.
Tenants
In its initial form, depending on how it works, the landlord register will hopefully give many tenants a peace of mind that their chosen rental property meets all legal requirements, and that their landlord has proven that they’re a fit and proper person before they enter into any contract. This will allow tenants to feel more comfortable giving the large sums of money it takes to begin a tenancy to a property they know, at the very least, is real and available to rent. This closes the loophole of fake landlords defrauding tenants out of their money. As with everything, there may also be a cost involved for tenants if they want to see the information on the portal, yet again discriminating against low-income tenants.
The portal could have gone so much further giving tenants information that could be really useful to them to ensure they are making an informed decision before agreeing to a tenancy. In its later role the portal may achieve this but with no details on when we will be seeing the evolvement, it is currently just speculation. In future they are hoping the Property Portal will play a key role in helping local authorities enforce the new rules under the Renters Reform Bill allowing councils to be able to fine landlords, and hand-out banning orders if they break certain terms of the bill.
Let’s be blunt, the PRS is a business, and the majority of landlords therefore only enter it to make money. Whether this is fair or not, a business is only viable if it makes money. The real issue of the PRS lies in the fact that there are a portion of landlords who do not provide adequate and decent accommodation for the rent they are being paid -and they are getting away with it! There is a lack of enforcement of the current legislation by the authorities which means the problems will never be fixed. The renters reform bill has many good qualities but is distinctly missing the main point – bad landlords should be stopped. The bill should have been more focussed on providing routine sanctions, close monitoring, and a solid process of reformative action against criminal landlords to wipe them from the sector entirely. A great place to start would have been the introduction of the regulation of property agents (ROPA), which many expected to see in the initial white paper. This would mandate that anyone letting or managing property, would need to be appropriately qualified to do so. This professionalisation of the sector would again virtually eradicate rogue landlords.
What never appears in the headlines are the stories about the good landlords, who make up the majority, who care about their tenants and work hard to follow the ever-changing legislation that surrounds the sector. This bill feels like it has been designed to stop criminal landlords (which 100% should be done!), but not at the cost of punishing good, law-abiding landlords. And we need the good landlords to make the system work. The worry of many, is that these changes will push landlords to sell up and leave, and with less options, this will mean it will be even more difficult for tenants to find accommodation in an already competitive landscape, causing rents to rise, and leaving more and more tenants vulnerable.
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