The Renters Reform Bill Finally Goes to Parliament – What Does it Mean for Landlords?
Nearly five years after the original consultation on reforming the private rental sector (A New Deal for Renting), The Renters (Reform) Bill finally started its parliamentary journey on 17 May 2023. The current proposed changes would signify the largest parliamentary reform to how tenancies have been governed since 1996, resulting in a significant shake-up of the current system.
The Bill seeks to make changes that landlords and tenants have campaigned for in recent years and which will improve the systems for the millions of renters and landlords throughout England.
It is likely that the Renters Reform Bill will be subject to amendments on its passage through Parliament, but it is important for landlords to be aware at this stage of the thrust of the changes in preparation for the Bill receiving Royal Assent.
In some cases, the Bill’s amendments, such as the abolition of Section 21 possession proceedings, could have a major impact on landlords, so it’s important to establish what the short and long-term changes are likely to include.
A summary of the Renters Reform Bill
The Renters Reform Bill introduces several changes to the private rented sector, namely:
- Abolition of Section 21 ‘no fault’ possession proceedings: landlords can only evict tenants where a specific ground for possession applies
- Abolition of all fixed term assured shorthold tenancies (ASTs), converting them to periodic tenancies
- A new Property Ombudsman to help landlords and tenants resolve issues quickly and cost effectively without the need to go to court
- A new digital property portal with information to help landlord understand their obligations and information for tenants to help them understand tenancy agreements
- Introduction of further grounds for possession so landlords can recover their property or repossess it if a tenant repeatedly fails to pay their rent or in cases of anti-social behaviour
- The right for tenants to request permission to keep pets which landlords must consider and cannot refuse unreasonably
- Introduction of The Decent Homes Standard in the private renting sector to give renters safer and better-quality housing
- Fines being imposed on landlords for breaching new rules
What will the effect on private landlords be?
Abolition of no-fault Section 21 evictions
The Bill imposes a ban on ‘no fault’ evictions under section 21 of the Housing Act 1988. The changes mean that landlords will only be able to evict a tenant where a specific ground for possession applies.
New grounds for possession have been introduced which arguably strengthen landlords’ position with key grounds being the sale of the property and landlords providing notice that they or a family member are to live in the property as their principal home. However, it’s important to remember that the new rules could still act as a detriment to landlords, particularly as fines could be issued for failing to comply.
An important new ground for landlords to be aware of is a new mandatory ground 8A concerning repeated rent arrears of over two months over a three-year period, providing more certainty than the ‘persistent arrears’ ground currently in place.
The protection this provides landlords is that tenants will be unable to employ the tactic of reducing their rent arrears to below two months so as to avoid a possession claim.
It should be noted that the reformed grounds for possession do not apply to Assured Agricultural Occupants.
Abolition of all fixed term tenancies
With the introduction of the Renters Reform Bill, there are to be no fixed term tenancies at all. There will only be periodic tenancies with a period not in excess of one month (save for secure and Rent Act tenancies).
Tenants will now be able to provide their landlord with two months’ notice at any time and leave the property. This will be an understandable cause for concern for private landlords and we expect there to be many debates on this point as the Bill makes its way through Parliament.
Tenancy deposits and sanctions
The current scheme prevents landlords from serving a section 21 eviction notice if they have failed to comply with the requirements of a tenancy deposit scheme. The proposed change is that courts will not be able to make a possession order on any ground unless the tenant is guilty of an offence or anti-social behaviour.
That reinforces the sanctions regime since currently landlords can still obtain possession of their property in cases such as when a tenant does not pay their rent.
It will be interesting to see whether the same sanction is introduced for failure to comply with other requirements such as service of an Energy Performance Certificate (EPC) or Gas Safety Certificate.
Pets in rental properties
Tenants will be able to make a request to keep pets in their rental property. Landlords will now no longer be able to refuse consent unreasonably and they must respond within 42 days of permission being sought.
Landlords can, in providing that consent, insist that the tenant seeks (or covers the cost of) pet insurance to cover the risk of damage to the property. Landlords who themselves hold the property under a lease will, upon receipt of a request, have to seek the consent of the superior landlord, but will not have to give consent if the superior landlord refuses it.
There is presently no requirement for a landlord to challenge a superior landlord’s refusal if it is unreasonable.
Introduction of the Decent Homes Standard
This reform was in the original Fairer Renting White Paper and has been discussed at length by the Secretary of State since its introduction. Many will be familiar with the Decent Homes Standard given that it is a key aspect of social sector renting as a tool to measure property standards and help the government deliver its Levelling Up goal to half the number of sub-standard homes in the rental sector by 2030.
Introducing such a requirement in the private sector may leave many landlords anxious and concerned as to the ‘habitable’ state of their properties – in particular with the proposal that Local Authorities will now have the ability to enforce the standard.
What does the Renters Reform Bill mean for long leases?
The Renters Reform Bill seeks to stop leases of more than seven years becoming assured tenancies. The change means all tenancies will become open ended and can be terminated either by the landlord or renter. While this may come as a welcome reform for renters, it does restrict some of the options available to landlords who may want to terminate an agreement on the grounds of possession.
In brief, rent can only be increased every 12 months and will require two months’ notice to be given by the landlord to the tenant. Tenants will either be able to agree the increased cost of rent or, alternatively, apply to the First-tier Tribunal for a determination, either within the first six months of the tenancy or on service of a Section 13 rent increase notice.
When will the Renters Reform Bill become law?
The Bill is currently set to be debated in Parliament with a view to receiving Royal Assent in Spring 2024. However, this is increasingly unlikely given further delays in The Bill progressing through Parliament. When the Bill eventually makes it through Parliament, it is expected that there will be a transitional period for existing tenancies.
The government have advised that the new system will be implemented in two stages and at least six months’ notice will be given for the first implementation date after which all new tenancies will be periodic and governed by the new rules. All existing tenancies will then transition to the new system on the second implementation date.
Here to Help
As discussed, the Renters Reform Bill is likely to have a major impact on landlords and the way they manage their existing property portfolios.
In the meantime, if you are a landlord seeking clarity on the proposed Renters Reform Bill or want to know how this may impact your home, property or portfolio, please get in touch with Shabnam Shekarian in our Property Litigation team for advice.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.