Fairer Private Rented Sector – The White Paper

This weekend just gone, I had some lovely plans. I had fully intended to enjoy a long-planned weekend trip to Whitstable, soak up the tail end of the heatwave and even have a paddle in the sea. The excitement fizzled out almost as quickly as the heat wave when the White Paper for the Renters Reform Bill was published on Thursday. Rather than enjoying seaside fish and chips, I spent Friday and Saturday evening trawling through the ‘Fairer Private Rented Sector’ PDF.

It was worth it though, to be able to report that it is not as bad as we had perhaps first thought. Indeed it took me back to when the Tenant Fees Act was first introduced in as far as these things always seem worse than they are.

Let us start by looking at the reasons behind the proposals. The Government are keen to introduce a level playing field across the Private Rented Sector (PRS). Fair enough, I think most of us would agree that is reasonable. Their feeling is that too many ‘rogue’ landlords get away with providing poor housing conditions and that tenants are fearful of eviction if they complain. Perhaps. Although 99% of landlords I engage with want to deal with repair issues and to ensure their tenants are happy in their homes. I recognise that this may not be the same in other areas of the country, in particular the larger cities.

The intended reforms cover poor housing conditions and increased enforcement by local authorities. These are important issues but most of you reading this will be more interested in some of the other changes tabled.

• Removing Fixed Term Tenancies – Currently you can ask a tenant to commit to a 6 or more month tenancy. This means both parties are committed for that period of time. At the end of the fixed term the tenancy can roll into a periodic (month by month agreement). The proposal is to remove the use of fixed term so that all tenancies start on a rolling month by month basis. This will mean that a tenant can leave at any time after the start of the tenancy by providing the landlord with two months notice. The argument is that if a tenant is unhappy with the property, they can simply leave.

• Removing Section 21 notices – If a landlord wants to end a tenancy at the moment they can serve a Section 21 notice giving the tenants two months notice. This can only be served after four months of the start of the tenancy and can only end after the fixed term expires. Tenant action groups such as Shelter, suggest these are used at an alarming rate by Landlords. In our experience they are only ever used because landlords circumstances change, or perhaps the relationship with the tenant is not as positive as they had hoped it would be. It is hard to see why else a landlord would want to evict a tenant. If you have a great tenant that pays their rent on time and in full, why would you want to get rid of them? For me, this does not meet the levelling up narrative.

• Possession Grounds – To regain possession of their property, landlords will have limited grounds on which to do so. We know there will be a ground should the landlord wish to sell, or if they or a member of their family wish to move in. Anti Social Behaviour will be another reason. But beyond this we do not have complete details so it is tricky to know the full impact of this. Presumably as is the case now with Section 8 grounds, the landlord will have to obtain a court order. This seems counter productive and time consuming and I am sure there will be further discussions around this.

• Ending the use of rent increase terms in tenancy agreements – Presently if all parties agree, a clause in the tenancy agreement can allow the rent to increase at the end of the fixed term. The intention here is to make such clauses unfair under Part 2 of the Consumer Rights Act 2015, thereby ensuring they are not enforceable. Instead a landlord will only be able to increase the rent once a year, using a Section 13 notice. This is a formal rent demand and provides the tenants with information on how they can appeal the increase through a tribunal.  This is not dis-similar to now and puts an end to any talks of rent controls being introduced.

• Pets – This one has been coming for a while so there is no great surprise here. The government will remove the landlords ability to refuse pets unless they have a very good reason. These reasons have not yet been defined (and probably won’t be. They’ll leave it up to a Court to decide). The concern here for landlords is around damage and the government have confirmed that they will amend the Tenant Fees Act so that tenants are required to take out pet insurance to protect against damage. This is helpful but will insurance cover things like loss of rent where the landlord has a void period because of the need to spend time repairing damage?

• Ban on ‘No Dss’ or ‘No families’ – In practice landlords do not do this anyway because of existing legislation that makes it an indirect discrimination. However, the Bill proposes to make it illegal not to consider tenants receiving benefits or families.

•  Life time deposits – This is interesting and I can see it working well for both tenants and landlords. The idea is that the tenant will be able to transfer a deposit from property to property, topping it up if they lose some for damage claims, or a higher deposit is needed. It is very likely that this will become an insurance backed scheme and if this is the case it could remove the requirement for the landlord to protect the deposit and issue the mammoth amounts of paperwork that go with that. One less piece of admin is always welcome.

• Rents in Advance – For one reason or another, sometimes it is appropriate to ask a tenant to pay six or twelve months rent in advance. Often this is because a tenant is moving from abroad and has no credit history here. The paper suggests that the intention is to limit the amount of rent a landlord can ask for in advance. The detail on this is sparse so this is one to watch as the Bill moves forward.

• Decent Homes Standard – This is currently in operation in the Social Rented Sector and the intention is to bring it into force in the PRS. This will expand on current rules including Homes (Fitness for Human Habitation) Act and the Housing Health and Rating System Regulations.

• Landlords Ombudsman – Every landlord will have to register with a Housing Ombudsman. This will then be the first port of call to resolve any disputes. A side effect of this, is that the government then holds a register of landlords. Undoubtably there will be a charge for this.

• Additional Detail – As the Bill unfolds there will be additional information and a clearer idea of how the government see it working. We already know that all tenancies will have to have written tenancy agreements to be lawful and that there will be a transitional period for existing tenancies.

Whether we agree or disagree it is clear that this Bill has plenty of support from all of the political parties and will come into force in one form or other. Whilst no timescale has been tabled, the original target date was March 2023 so it is reasonable to assume that this could be with us by late 2023 or early 2024.

That is not very far away so landlords need to start considering their current tenancies and the standard of their properties. Those that are accidental landlords and self-manage, will need to decide if they want to continue or hand to a Property Management Agent.

I have spoken to a number of landlords in recent days on this and opinion is split. Some see this as the final nail in the coffin and are already putting the For Sale board up, others are waiting to see how the bill unfolds as it goes through parliamentary process. At the moment we have the initial proposals, what comes out the other end of the sausage machine will be a refined version.

I believe there will be a short consultation with the industry in the near future and I would recommend that you contribute your views. (I’m also interested to see how mortgage lenders react to this). The more that do so, the greater the chance we have of having a fair and balanced reform that ACTUALLY does level the playing the field.

That’s it for now, I’m off to have a drink in lieu of the weekend.