Renters Reform Bill – Select Committees Response

I make no apologies that this blog is a long read, but it is important so if you can, stick with it.

In a social media post I read the other day, a tenant declared that it was now against the law for a landlord to refuse a pet. Another was adamant that landlords could not serve a Section 21 notice. A private landlord was convinced that they could make their tenants pay for a carpet clean.

All of these assertions are incorrect but with so much noise in the mainstream and social media about the ups and downs of the property market, it is tricky to keep up to date with the latest changes and easy to see why there is so much confusion.

For the last two years the Government have been making noises to reform the Private Rented Sector. The White Paper on a ‘Fairer Private Rented Sector’ was published last summer and for many only added fuel to the opinion that the government have an anti-landlord rhetoric.

Last week we welcomed the publication of a cross party Select Committees report which provided a detailed review of the government’s proposals for reforms to the sector. It carried a number of recommendations following consultation with landlords, tenants and organisations, including that the government needed to provide greater clarification to landlords around a number of important issues.

The report is lengthy read and I have spent some time digesting the main points. One message though, comes across clearly throughout the report – that there is currently a significant shortage of properties available to let. Any changes that result in landlords leaving the market will only exacerbate this, driving up rents as supply diminishes and therefore leaving tenants in a worse position. This is encouraging and a message that we can only hope the government will take heed of.

A summary of the recommendations can be seen below.

Periodic Tenancies

The intention is to remove fixed term tenancies so that all tenancies begin on a periodic basis (rolling month to month). To counter landlords concerns that this leaves them open to shorter tenants, the report recommends that:

• Tenants notice periods be increased to two months, and that a tenant cannot give notice until they have lived in the property for at least four months. This means the landlord has security for at least six months.

Student market 

Periodic tenancies for landlords that rent properties to students simply do not work. This area of the market relies on an 11 or 12 month fixed term tenancy. The committee recognises that landlords would exit the student market creating a shortage of affordable homes for students in University towns and Cities. The report recommends:

• The student market be exempt from the reforms to periodic tenancies. Student landlords will be required to register by joining a University Accreditation Scheme, or signing up to a single code of practice

Removing Section 21 notices

This was a headline of the government’s reform announcement and no doubt designed to be a vote winner amongst tenants. For landlords removing the ability to end a tenancy simply has not been welcomed.

Removing the Section 21 procedure would leave landlords having to use the Section 8 process. This would mean obtaining a possession order through the courts.

The White Paper proposals promise to allow landlords to obtain possession where there are serious rent arrears or anti social behaviour and where they want to sell or move back into a property. The report recognises that the courts consistently have too much of a backlog to deal with this quickly and efficiently. They recommend:

• Increasing the capacity of the courts by introducing a designated housing court to deal with claims by landlords.
• Make Ground 14 of the Section 8 process (anti social behaviour), a mandatory ground for possession along with guidelines for the courts on determining serious ASB.
• Introducing a new ground where tenants who have been in two months arrears on at least three occasions in the previous three years, then the landlord will be given a mandatory possession order.
• Landlords will be unable to serve notice where they are looking to sell or move back into the property, in the first 12 months of the tenancy.
• Notice periods in these instances to be 4 months.
• On expiry of these notices, it will be unlawful for a landlord to remarket or relet the property for at least 6 months.
• If selling the landlord should try to sell with their tenants in situ before being allowed to serve the tenant with notice

Ombudsman

Whilst there is currently a Rogue Landlord database, this can only be accessed by Local Authorities and landlords are rarely entered onto the database. The government recognises that whilst the vast majority of landlords provide good quality homes and experiences for their tenants, there are landlords who do not. The report reinforces:

• Requirement for all landlords to register with a single housing ombudsman who will oversee both private landlords and letting agents.

Decent Homes Standards (DHS)

The DHS is currently in use only in the Social Housing sector and the reforms intend to bring the Private Rented Sector under the same umbrella. In practical terms landlords already meet much of the DHS through the Housing Health and Safety Rating System Regulations and the relatively recent Homes (Fitness for Human Habitation) Act.

The report makes it clear that enforcement by local authorities is affected by the lack of funding. They make proposals around how this can be increased but make it clear that Local Authorities will need significant additional employment and funding.

The recommendations include:

• Improving enforcement by introducing a Property Portal and making it mandatory for all landlords to register their properties with the portal.
• Information on the portal to include: Gas and Electrical Safety Certificates and any works carried out, reports by tradespeople (damp surveys?), energy performance information, Ombudsman information and deposit scheme membership.
• Incorporating Minimum Energy Efficiency Standards into the DHS.

Rent Increases

Currently landlords can arrange a rent increase either by a clause in the tenancy agreement, a separate agreement with their tenant or by serving a Section 13 notice. Where a tenant disagrees they can make an appeal to the First Tier Tribunal. The report recognises the pressure this puts on the Tribunals so the following recommendations are made: 

• Landlords to be allowed to incorporate rent increase clauses into the tenancy agreement but that the clause must have a stipulation by how much the rent will increase.
• Provide more ability for a tenant to appeal.
• Remove pressure on the First Tier Tribunal by referring appeals to the Valuation Office in the first instance to determine whether the increase is fair based on their data.

Pets 

It is clear that the government would like to encourage landlords to allow their tenants to have pets, or at the very minimum not withholding consent unreasonably. However, they also recognise that it is unfair to enforce this on landlords. The committee recognise the need for balance and suggest:

• Landlords can require tenants to have pet insurance and make this a permitted payment under the Tenant Fees Act (currently prohibited).
• The government should give greater explanation by clearly clarifying  ‘withholding consent unreasonably’

Tenants on benefits

Implementing a ban on “No DSS” advertising is not straightforward and difficult to police. The ultimate right for a landlord to choose their tenant should not be removed and although landlords should give fair consideration to all, it would be impossible to enforce an outright ban.

The committee recommend that Local Housing Allowances which set the rate of benefit a tenant is entitled to, should be increased so as to level the playing field.

Taxation

In an interesting section, the committee recognise that governments taxation of private landlords in recent years has made investing in the sector less desirable and they recommend:

• A review is carried out to consider the impact of taxation changes on small landlords
• To make a clear declaration of whether the governments preferred long term view is that landlords are corporations or those with large portfolios, rather than having small landlords involved in the Private Rented Sector.

The direction of travel seems clear and regardless of which party is in power, legislation will happen in the near future. The nitty gritty is yet to be published but the Select Committees report feels balanced to both landlords and tenants and if their suggestions are adopted, will lead to a much fairer governance of the sector.

Whilst you ‘watch this space’ you can read the report in full here 

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.