The Renters (Reform) Bill: A Rundown For Landlords

On May 17th, the Renters (Reform) Bill (RRB) finally had its first reading in Parliament. It has been dubbed a "once-in-a-generation" chance to shake up the private rented sector, and with 5 years in the making already, was certainly hotly anticipated. Now that we have the first draft, let's take a look at the key things you need to know as a landlord:

Abolition of Assured Shorthold Tenancies and a new single system of periodic tenancies:

Under the new plans, all Assured Shorthold Tenancies (ASTs) will be moved to a single system of periodic tenancies. ASTs are currently the most common rental agreements, with tenants signing up to live in a property for a fixed period of 6 months or more. After this point, the tenant and landlord can then decide whether to switch to a periodic (month-by-month) tenancy, or renew for a further fixed term. The proposal to move to periodic tenancies will mean that there will only be indefinite tenancies, with periods not in excess of 1 month. At any time, a tenant will be able to give 2 months' notice to quit, and landlords would be able to gain possession only for a reason specified in law (through a beefed-up Section 8 process - see more on this below).

For Student Landlords: If you’re a student Landlord you might be wondering how this new system of periodic tenancies will work in a world where students sign up to properties 8 or 9 months in advance of an academic year. This allows them to lock in their housing for a 12-month period well in advance and provides stability and certainty. Unfortunately, there has been no provision in the Bill for keeping student tenancies on a fixed-term basis. Under the current plans, landlords of student properties would be reliant on the students providing 2 months' notice to end their tenancy at the end of the academic year. Landlords would have to wait until notice was given before allowing a new group to sign up and students would be left with no certainty searching for a property at a time of year when they would otherwise be concentrating on exams. We and many other agents and industry bodies are advocating for change in this area of the Bill in particular and for student tenancies to be exempt from the changes to fixed-term tenancies. There is significant lobbying happening in this area of the Bill, led by Ben Beadle at the NRLA who has a very clear understanding of the student lettings industry. The Bill will be redrafted as it makes its way through the House of Commons and House of Lords and Comfort Lettings will keep an eye on it.

The Abolition of Section 21

So-called 'No fault evictions', put simply, is the Section 21 process that enables landlords to repossess their properties without having to state a reason. The government plans to scrap this process entirely and instead strengthen the other mechanism by which landlords gain possession, the Section 8 process.

Strengthening of Section 8

The Section 8 process allows landlords to gain possession of their property if they have a reason specified within the law to do so. The Act introduces new grounds for possession and new notice periods for some existing grounds. The Section 8 grounds will include:

Rent Arrears: Landlords can initiate eviction proceedings if tenants are substantially in rent arrears. Landlords can currently gain possession on this ground if the tenant is over 2 months in arrears, but have found it difficult to use in cases where tenants persistently reduce arrears to just below the threshold for possession. The RRB expands this to include if the tenant has been in at least 2 months arrears 3 times within the previous 3 years, regardless of the balance at the hearing.

Compliance with Enforcement Action: If the landlord receives enforcement action banning them from renting their property, the tenants can be evicted.

Breach of Tenancy Agreement: If tenants violate the terms of the tenancy agreement, such as causing damage to the property or engaging in antisocial behaviour, landlords can pursue eviction.

Death of Tenant: In cases where the tenant has passed away and no succession rights apply, landlords can regain possession of the property.

Sale or Family Moving In: Where a landlord wishes to sell their property, and where a landlord wishes to move in to their property, or wishes to move in specified members of their family. These final 2 grounds can only apply after a tenant has been in a property for at least 6 months and landlords will be prohibited from re-letting for the next 3 months. Details of how this will be enforced are yet to be revealed.

Plus other more specific grounds such as those around agricultural workers, housing ministers of religion and properties needed for supported accommodation.

Rent review

Currently, rent can be increased at agreed periods, if set out in the tenancy agreement in a rent review clause. Otherwise, it’s no more than every 12 months under the Section 13 process. The Bill outlines plans to end the use of rent review clauses, so the only way to increase rent will be through the Section 13 process, the notice period of which is increasing from 1 to 2 months. There will be a new first tier Tribunal introduced in which tenants will be able to challenge proposed rent increases.

Pets

The RRB aims to make it easier for tenants to keep pets in rented properties by outlining a right for tenants to request permission to keep a pet in their home, to which the landlord cannot unreasonably withhold consent. The landlord must reply to the request within 42 days, and the tenant must provide written confirmation that they have pet damage insurance for any damages caused during the tenancy, or the landlord can take this insurance out and charge the tenants additional rent to cover the difference.

New Ombudsman and Property Portal

The government is proposing to compel all landlords (whether self- or agency-managed) to join an Ombudsman scheme to facilitate the resolution of disputes. The Ombudsman will have the power to issue fines of up to £30,000, issue banning orders, and compel remedial action. Alongside this Ombudsman scheme, there will be a property portal aimed at helping landlords demonstrate that they are legally compliant. Details of how this could work are scarce, but it is likely that this will also be mandatory and there will be fees for joining.

The Bill now has a long journey to navigate through parliament and will undoubtedly undergo amendments before it receives Royal Assent. There is no commencement date set yet, but industry figures are predicting it will be October 2024.

We will keep you posted as and when we have more updates!