After the Conservatives’ “Rental Reform Bill” was dropped after parliament was prorogued, the now incumbent Labour party has published the “Renters’ Rights Bill“, which is touted as delivering the largest changes to the private rental sector in decades.
NOTE: The information contained in this article is based primarily on the government’s ‘Guide to the Renters’ Rights Bill’, as the bill has not yet been passed, the information below is subject to change.
How will the proposed legislation affect landlords and the structure of the private rental sector? Let’s explore:
Here are the main changes that the bill has proposed:
Main provisions | Table of contents
Abolition of Section 21 Evictions
The ban on ‘No-fault evictions is intended to strengthen the security of a tenancy; the pledge to abolish Section 21 evictions was pledged by the Conservatives in the previous government, so the delivery of this change is practically guaranteed.
Though this change is the most prevalent in the bill, it is by no means the most impactful. This change will not affect most landlords, as there will be new Section 8 grounds to target tenants in breach of the contract, so theoretically, it will be simpler to gain repossession when truly necessary.
It does place a greater emphasis on referencing potential clients, so ensure that prospective tenants are referenced thoroughly to reduce the possibility of renting to a rogue or uncooperative renter.
Replacement of Assured Shorthold Tenancies with Periodic Tenancies
The shifting of the industry standard from Assured Shorthold Tenancies (AST) contracts to Assured Periodic Tenancies (APT) will be effective immediately from the date the law is passed, as applies to both new and existing tenancies.
It should also be noted that even superior leases which stipulate that all sub-operating leases must be granted on an AST basis, will be rendered ineffective from the date of implementation.
Under APT or ‘rolling’ tenancies, tenants will be required to issue two months’ written notice to vacate, which has increased from the one month which must be given now with ASTs.
Rent-To-Rent arrangements (in the PRS only) will be the most affected by this change, as current AST contracts can stipulate that a property is returned by the R2R operator in vacant possession; however, with AST null and void, there is no guarantee that the property will be returned in a vacant state.
Creation of a New Ombudsman for the Private Rental Sector.
The ombudsman service is intended to provide landlords and tenants with an alternative route to the courts to settle disputes similar to existing processes and redress schemes open to social housing and property agencies.
Private landlords will be legally required to join the ombudsman and could face fines or rent repayment orders if they consistently fail to join the ombudsman service.
Mandatory PRS Database
The bill would constitute the creation of a nationwide database which ensures that landlords are up to date with their legal obligations and new legislation, as well as providing prospective tenants with information about the landlord and the property in question before they enter a tenancy agreement with them
It will be required for landlords to register with this database before marketing or letting out a property; otherwise, they could face penalties. The bill states that a landlord would be required to pay to register themselves on the database, though a price or fee structure has not yet been released.
No bidding wars for advertised properties.
The bill makes a clear stance on advertising standards for property listings. Under this proposed legislation, a listing must be advertised with an actual price, the advertiser (landlord or agent) must not encourage bidding, nor can they accept any offer above the price; offers below can be accepted.
If the local authority believes this has been breached, the offender could face a civil penalty of up to £7,000, or £40,000 for repeat offences (twice or more in 5 years).
In the short term, this will artificially increase rental prices, as all advertisers will set the listing price as the highest possible figure and accept offers below, however with the changes that are being made to the way rent increases are handled, the rental prices will not experience such volatile growth which has been seen in the sector in recent years.
12-month protected tenancies from No-fault evictions.
Under the new periodic default tenancies, when a tenant moves into a property, they will be entitled to a 12-month ‘protected period’, where landlords cannot sell, or move into the property themselves.
This essentially prevents landlords from serving Section 8 notices on grounds where the tenant is not at fault.
Banning blanket bans on property listings
The bill plans to tackle issues of discrimination in the rental sector, setting its sights on blanket bans on property listings.
This means that “overt discriminatory practices” such as ‘No DSS’ on property listings will be outlawed.
Landlords and letting agents will still retain the right to have the ultimate choice on which candidate is chosen, given that it is done on the basis of affordability, and not on the basis that one party is in receipt of benefits or has children.
What if my mortgage/insurance/lease prevents me from letting to specific parties?
For mortgages and leases, government guidance states that terms in mortgages and superior agreements (leases) which prevent the renting of property to those with children/ in receipt of benefits will be outlawed, preventing any breaches of lease on the part of the landlord.
This means that a landlord cannot discriminate against prospective tenants on the basis of an agreement with a mortgage provider, insurance company, or superior landlord.
However, any existing insurance contracts that begin before the legislation comes into force will be exempt until that specific policy/contract expires or is renewed.
Right to request a pet
The bill pledges to prevent landlords from “unreasonably withholding consent” to allow tenants to own a pet in their rental property.
To address concerns about damage arising from pets, the bill will allow landlords to stipulate that tenants must acquire pet insurance, which will cover such potential damages.
Superior leases
The guidance deems that it is “always reasonable” for landlords to refuse pets in their rental property if the superior lease prohibits the keeping of pets in a specific property.
Disagreements
In cases where the tenant does not agree to a landlord’s decision to reject a pet in a property, they can escalate the issue to the new Ombudsman or to court.
The government will publish guidance for landlords and tenants before the new changes come into effect, so stay tuned.
Restrictions on rent reviews & increases
One of the core tenets of the Renters’ Rights Bill is the ability to challenge unreasonable rent increases.
The provisions of the bill will regulate the frequency of rent increases to once every year, and no more – this includes rent review clauses in tenancy agreements, which will be deemed impermissible.
Rent increases will be ratified using section 13 notices (with two months’ notice). Landlords can use these to raise the rent to ‘market rate’, that is, the price that the property would achieve if the property were newly advertised to rent.
Challenging rent increases
If a tenant believes their rent increase is unjustifiable, they can apply to the First-tier tribunal at no cost, which will determine the ‘market rent’, and thus, the reasonable price of the rent increase.
The provisions of the bill come alongside a reform of the Tribunal system, making tenants feel more confident when using it. The changes made to the Tribunal include:
- Ending the practice of backdating rent increases, meaning that tenants are not suddenly plunged into debt.
- Tribunal determinations on rent increase prices cannot exceed the initial increase, meaning the rent cannot be raised above what a landlord has already formally requested.
- Rent increases can be deferred up to a further two months (in cases of undue hardship).
Application of ‘Decent Homes Standard’ to PRS
The Decent Homes Standard (DHS) is currently used in the social housing sector to establish the minimum quality and safety requirements that a housing provider must uphold.
As the PRS becomes more professionalised, the DHS will serve as a baseline to which landlords can be held to regarding the condition of their dwellings.
This should help to eliminate some of the vagueness and ambiguity surrounding the quality of housing in the PRS.
Precise details on the Decent Homes Standard have not been made available yet, however we can use the guidance of the social rented sector to know what we can expect:
Under the 2006 guidance of ‘The Housing Act 2004’, in order for a home to be defined as ‘decent’ it must meet the following criteria:
1) Meet the “current statutory minimum standard for housing”
This requires a given dwelling to be free of category 1 hazards under the Housing Health and Safety Rating System
2) Be “in a reasonable state of repair”
There are a few ways in which a property can fail to meet this requirement, for example, due to the failure of major building components due to age.
‘Building components’ refers to structural parts of a building, such as wall/roof structure, heating appliances, and plumbing.
Building components can only fail in this criterion in relation to age if it is in disrepair; a component is not considered unsatisfactory by its age alone, it must also be in an unfit condition.
3) The dwelling “has reasonable facilities and services”
A property will fail to meet this criterion if it is not equipped with all of the following facilities:
– A kitchen with adequate space and layout – There should be enough space to store the necessities, such as a basin, cupboards, cooker space, worktops etc.
– An appropriately located bathroom and WC – Main bathroom should not be accessible only through a bedroom. The dwelling would also fail if the main WC were located on a different floor to the closest hand wash basin. It would also fail if a WC without a wash basin is located next to a food preparation area.
– Adequate external noise insulation – Noise originating from nearby road, railway, and aeroplane traffic, as well as nearby commercial operations such as factories can be deemed inadequate if there is insufficient acoustic glazing.
– Adequate size and layout of common entrance areas for blocks of flats – ‘Inadequate size and layout’ is categorised by narrow access ways, steep staircases, lack of handrails, low headroom, etc.
4) The dwelling “has a reasonable degree of thermal comfort” – This relates to a dwelling’s requirement to have efficient heating. Efficient heating is defined as:
– Programmable gas or oil central heating
– Electric storage heaters
– Warm air systems
– Underfloor systems
– Programmable LPG/solid fuel central heating
– Other efficient heating systems.
A property must also meet the Minimum Energy Efficiency Standards (MEES), currently in the private sector, this is measured by having an EPC score ‘E’ or above.
There are currently efforts to change the minimum EPC rating in the PRS to ‘C’, it has not been confirmed, and so EPC ‘E’ or above is still permissible.
Introduction of Awaab’s Law to PRS
Similarly to the Decent Homes Standard, Awaab’s Law is currently used in the social housing sector and will be implemented in the private rental sector.
Awaab’s Law functions by mandating the protocol followed by housing providers in the event where maintenance, such as damp and mould, is reported.
This provision will enable specific requirements (i.e. timescales) to be set, which landlords must abide by in order to keep their property in a safe and rentable condition.
Where these requirements are not met, tenants will be able to bring enforcement action against landlords using the court system or the new ombudsman.
Specific details on the application of Awaab’s Law to the PRS have not yet been laid out. When more guidance is released, we will update this article in due course.
Enforcement
Once the legislation has been passed, any breaches of these reforms may incur the following charges:
First time/minor non-compliance: Civil penalty up to £7,000
Persistent/repeat non-compliance: Civil penalty up to £40,000, carries potential for criminal prosecution.
Local authorities will be given greater jurisdiction to enforce these new reforms, which give them greater investigatory powers.
The new PRS ombudsman will handle issues relating to tenancy agreements and landlord-tenant complaints.
The First-tier Tribunal will handle all monetary-related matters, from rent repayment orders, deposit disputes, rent increases, etc.
Scope for amendments
With there being a considerable amount of discourse both for and against the bill, as well as extensive campaigning and lobbying for the bill, there is likely to be some proposed amendments made in the House of Lords in this stage and the next (Report Stage).
However, as the bill originated in the House of Commons and holds a large majority for its changes and provisions, there is unlikely to be any radical changes that will survive the ensuing ‘ping-pong’ stage.
This means large changes, such as the overturning of the Section 21 ban, for example, are very unlikely to be agreed by the Commons, and therefore will not become law.
When will it come into force?
Initially, the bill was expected to have received Royal Assent (the final step before a law becomes ratified) by Easter 2025.
As of writing this, the bill is currently in the House of Lords: Committee Stage, which means there are still a few steps before the bill leaves the Lords.
As is customary, any amendments that are made in the House of Lords must be considered and voted on by the House of Commons, as the bill originated there.
This could mean even more delay as the bill may enter an extended ‘ping-pong’ stage, where it is sent between the two parliamentary houses until there can be complete accordance with the bill’s provisions and exact wording.
Many predict that the bill will achieve Royal Assent in late spring/early summer, with the first commencement date (the date the changes take effect) set in mid-summer or early autumn.
Conclusion: How will landlords be affected?
Whilst it’s true that the Renters’ Rights Bill will make some very large changes to the private rental sector, the core tenets of landlording will remain unchanged.
The provisions of the bill will mostly be felt in the event a landlord needs to regain possession of the property.
For instance, when seeking repossession due to rent arrears, landlords who would have previously issued a Section 8 alongside a Section 21 notice for increased assurance, now must rely solely on the amended Section 8, which is now applicable after 3 months of nonpayment, rather than 2.
What can landlords do to overcome the bill?
As the bill is primarily intended to tackle rogue landlords, and drive them out of the sector, the same cannot be said for rogue tenants, as some of the provisions of the bill may serve to facilitate unscrupulous tenant practices.
This means that landlords should reference potential tenants much more thoroughly, so they can be more confident on the calibre and suitability of every tenant in their property; prevention is better than cure.
Stay tuned for more updates about the progress of the Renters’ Rights Bill and its core provisions. We will update this article and release others as the bill comes closer to ratification.
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