An in depth look at the Renters Reform Bill

Almost a year since the release of the Fairer Private Rented Sector White Paper and four years after it was first announced by Theresa May, the Renters Reform Bill has been introduced to parliament. This will amend the Housing Act 1988.

We are still reviewing the draft legislation in detail so for now, here are some of the headline points.

Fixed Tenancies to be unlawful

Currently you can have a tenancy that is for a fixed period of time. For example a fixed 12 month contract from the 1st January to 31st December. The new legislation proposes to remove fixed contracts so that all contracts will start on a rolling month to month contract. This would mean that a tenant could serve notice a month after they have moved in if they wanted to leave.

This will also be problematic for student landlords. This market relies on having fixed contracts that follow the academic year.

Abolishing the Section 21 Notice

This is the notice that a landlord can serve on a tenant asking them to leave the property in two months. It is dubbed the ‘no fault eviction’ notice because a landlord does not need to give a reason for serving it.

Shelter claim that 230,000 of these were issued in the last year in order to suggest that landlords are evicting just for the sake of it. The reality is that they will have been issued where a tenant is in rent arrears, displaying anti-social behaviour or being uncooperative. This is because it is a simpler route than having to use the Section 8 process which is laborious and hampered by the delays in obtaining a court hearing.

Under the new laws, landlords will no longer be able to serve a Section 21. 

Strengthening Section 8 grounds

It seems as if the grounds on which you can serve a Section 8 notice are to be strengthened. This is a positive change as many of the current grounds are obsolete or not fit for purpose. You will find a list of the proposed new grounds, and their notice periods, at the end of this article. 

Student landlords in particular will be affected by removal of Section 21 as they need the assurity that current tenants will leave at the end of the academic year. There are no Section 8 grounds under the proposal that would allow student landlords to end tenancies making them wholly reliable on tenants giving notice.

Notice using grounds of wanting to sell or move back into the property for example, can not be served in the first six months of a new tenancy.

Breaches of deposit protection by landlords

Currently if a tenants deposit is not protected correctly with one of the approved schemes, you cannot serve a Section 21 notice (although you can use a Section 8) without first returning the deposit in full. The draft legislation will shift this requirement to Section 8 notices once the Section 21 is abolished. 

Notice by the tenant

The tenant will be required to give two months notice to end at the end of a rent period. 

Landlords Ombudsman 

There will be a mandatory requirement to join a single redress scheme. Tenants will have the ability to escalate complaints about their landlord to the scheme who will rule depending on the evidence. New regulations will be written allowing the schemes rulings to carry the same power as a court order.

Landlords will also be required to adhere to the Code of Practice and breaches of this can carry fines of up to £5,000 or in the case of repeated breaches, £30,000.

There will be a cost involved and landlords will be required to pay a fee  per property that they register. Letting Agents will continue to be members of their own Ombudsman.

Property Database

A database will be established which will be open to the public. Landlords will need to register themselves and details of their property. As there will be separate regulations written for this part of the Act, we do not yet have details of other information that will be required.

It is likely though, that this will mean having to upload gas and electrical safety records, Energy Performance Certificate and any licences. A fee will be payable for an entry on the database.

It will be unlawful to market a property to let unless the landlord and property are registered on the database, although it seems as if there will be a 28 day grace period from initial registration to comply with uploading safety records etc.

Pets 

The new legislation will make it a starting point that landlords must not refuse a tenants request for a pet without good reason. It will be up to the Redress Scheme or a court to decide what a reasonable refusal would be. This would include restrictive covenants by superior landlords (i.e blocks of flats). 

Landlords will be able to insist that a tenant takes out pet insurance to cover damage as part of their consent, or the landlord can take the insurance and charge the tenant for this.

Rent Increases

The draft legislation does not include rent controls. It does make it clear that rent can only rise in line with the current market value and notice of any increase will need to be two months long. Increases will only be allowed once a year using the Section 13 process. Tenants will still be able to appeal to the First Tier Tribunal. 

Additional Points

Some other takeaway points from the draft legislation include that all tenancies will need to be in writing, there will be increased enforcement powers for local authorities and increased penalties for landlords convicted of unlawful evictions under the Protection from Eviction Act 1977. 

The court process will be digitalized making it much quicker to obtain a hearing and less arduous.

Advertising with blanket bans including “no children” or “no housing benefits” will also be unlawful and landlords will need to demonstrate that they did not discriminate if favouring one tenant over another.

When will this become law? 

As the Bill makes its way through parliamentary process, there will be changes to the current proposals.

The second reading of the Bill will need to take place. After this the Bill will pass to the Committee Stage where it will be scrutinised by a cross-party committee of MP’s. At this stage evidence for improvements will be heard and new clauses suggested.

From here it moves to the Report Stage at which point all MP’s can suggest changes. The Third Reading swiftly follows before the Bill is then introduced into the House of Lords. The process is broadly similar to the House of Commons.

The final Bill will be produced once both Houses have agreed amendments, and will be sent for Royal Assent.

The Government have confirmed that they will give at least six months notice before implementation. That said, they will have one eye on a general election next year and as this is seen as a vote winner amongst tenants, it is likely this will come into effect in early 2024.

Summary

It is natural to be resistant to change and whilst we have known about this for a long time, there is always an initial sense of defiance. Having briefly read the draft legislation I am not so sure that decent landlords need be too concerned. The loss of Section 21 is an annoyance but the reality is that this notice is rarely used except when the landlord genuinely needs the property, or the tenant is misbehaving. The vast majority of landlords have never issued a Section 21 notice.

It is pleasing to see that Section 8 grounds are being strengthened. We have seen a rise in Anti Social Behaviour by tenants in recent years so the ability to end the tenancy more easily will be helpful. Databases and redress schemes will of course carry a cost (tax deductible!) but will improve the standards across the sector.

More detail will come in due course once draft regulations are published to support the new legislation so we will continue to monitor and post updates on our resources page.

Additional Guidance can be found here 

 Reformed grounds for possession

Please note the date this article was published as the law or the essence may have changed since it was posted. You should always seek independent legal advice if you are intending to rely on any of the contents.