The Renters' Rights Bill - a first look

The government presented the Renters' Rights Bill to parliament on Wednesday 11th September. On first look, it is a rehash of the Rent Reform Bill being discussed by the Conservative Government which failed to go through in the wash-up before the election. There aren’t any surprises but there are some stricter terms and some items have been removed.

Here is my initial look and some of the key highlights in the Bill.

Abolishment of Section 21 and the Assured Shorthold Tenancy

Unsurprisingly, the Renters' Rights Bill cites that section 21 notices and fixed-term tenancies will be abolished, as will all assured shorthold tenancies. The removal of fixed-term tenancies is one of the biggest concerns to landlords and agents, along with the removal of Section 21 notices without court reform. However, from the long title of the Bill, it is clear that it intends to get rid of fixed-term tenancies, so any amendment that attempts to change this will be difficult.

This means that all residential tenancies that fall within the scope of the Housing Act 1988 will be assured periodic tenancies with no fixed end date.

Any superior leases such as head leases or rent to rent leases that state an assured shorthold tenancy must be in place will be ineffective.  More concerningly, any clause requiring the property to be returned with vacant possession will also be ineffective.

Possession

With Section 21 notices no longer available, all possession will be by using a Section 8 notice, citing one or more grounds for possession.

The key new grounds are very similar to those previously noted in the Renters' Reform Bill, there are new grounds for landlords looking to sell and a ground for possession where a landlord wants the property back for their or their family’s use. These have longer notice periods than previously with 4 months required now on both sides.

Other changes to notice periods are below:

• The notice period for grounds 7 where a tenant has died and someone else has remained in the property will be two months.
• For rent arrears (grounds 8, 10, and 11) which are usually used for section 8 notices the notice period is increased to four weeks.
• The student grounds 4A from the Renters' Reform Bill has remained. This has been changed back in the Renters' Rights Bill to how it was initially presented in the Renters' Reform Bill. The property must be both a HMO and occupied wholly by students in order for this ground to apply. Students in a one or two bedroom property would not be applicable, as would a HMO with professional sharers and one student.
• The mandatory ground 8 for rent arrears has been changed and will now require tenants to be in three months of arrears. Coupled with the increase in the notice period to four weeks this means that a tenant will be almost four months in arrears before court proceedings can even begin. Given that court proceedings remain slow with little prospect of improvement as no court reform has been discussed, this could mean landlords are owed a year or more of rent in tough arrears evictions. This means a rent and legal policy like the one used at Andrews is essential for all landlords to give you adequate protection.
• The previous ground for eviction cited in the Renters' Reform Bill where possession would be granted if a tenant was in arrears 3 times in 3 years has been unfortunately been removed.

Rental periods

When it comes to rental periods in tenancies, the wording from the previous bill has been made stricter. It will be impossible to take rent for any period longer than one month. This will be of concern to anyone who is looking to take rent for 6 months in advance or any other similar longer period.

Tenants will be able to give two months’ notice in writing to leave at any stage. It is not possible to dictate the form of that notice (so they can provide it by email) but it is possible to dictate where and to who the notice is given.

Rent increases

Positively, rent increases will still be possible once per year only using a Section 13 notice to increase market rent. The increase in market rent here is important. The notice period on this notice will be two months.

If a tenant is unhappy with this notice, they will be able to appeal to the First Tier Tribunal, however, these are free so it is likely there will be many referrals. Once they have made their determination, the First Tier Tribunal can increase the rent to the market level or the level on the original section 13 notice, but not more. That new rent will start from the next rent payment date after the determination but they can also delay the rent increase for up to two more months if they think it will cause undue hardship to the tenant.

Bidding wars

Rental bidding wars would also be banned. Landlords and letting agents would be required to list properties with a set asking price and would ultimately be prohibited from asking for or accepting bids above that price.

This proposed change aims to prevent prospective tenants from being forced to compete for properties by offering more money. It has also been stated on the Government website that they would be “cracking down on those who make the most of the housing crisis by forcing tenants to bid for their properties.”

This doesn’t however indicate how it would stop landlords from listing their properties for a high price in the first place and then just taking offers below this, what may happen is all landlords list for a high price, which will drive rental values up as comparisons are used to ascertain rental prices.

Pets and Discrimination

It will be illegal to discriminate against renters based on whether they have children or are receiving benefits. Any form of discrimination must have a legitimate objective, and clauses in tenancy agreements that are discriminatory will be void unless they meet this requirement.

While pets can be refused during marketing or letting, tenants can request a pet after moving in, and it will be difficult to deny. Additionally, pet insurance payment is now implied in tenancy agreements, so tenants not paying this can potentially face eviction.

Awaab’s law

The new Renters' Rights Bill includes provisions from "Awaab's Law" aimed at improving housing conditions for private renters. Under this law, landlords will be required to address damp and mould problems within a specified timeframe after being notified by tenants. If they fail to do so, they could face penalties. This law is named after Awaab Ishak, a young boy who tragically died due to prolonged exposure to mould in his home. It seeks to prevent similar incidents by ensuring healthier living conditions for tenants.

When will this come into effect?

A big concern for many is that the legislation would come into effect immediately after Royal Assent, has not materialised. The bill will be implemented gradually. However, there are indications that it could apply to both existing and new tenancies, though the commencement details are somewhat unclear and need further review.

Before receiving Royal Assent, it must pass through the House of Commons and the House of Lords. With Parliament on break for party conferences, progress will resume afterward. The Housing Minister has stated he aims to have this law enforced by the summer of 2025.

What are the positives from all this?

Contrary to what you initially may think, there are positives in this to be found for landlords.

If you are a long-term investor with your properties correctly protected by a managing agent and a rent and legal policy, then these changes should cause you little concern. If you are willing to provide your tenant with a safe, habitable home long-term, then you need not be concerned. Under the new rules, should you change your mind and need to sell or move back into the property, you will still be able to do this.

You will also still be able to rent your property for market rent and issue one rent increase notice per year, similar to what we already see with our rental portfolio. There has of course been a lot of noise in the press about these changes, but clever landlords should not feel worried about these changes and should spend the time educating themselves on what the changes will mean for them.

Should you not have a rent and legal policy that covers you if your tenant goes into arrears, please get in contact directly and we will be happy to talk to you more about our scheme.

Angharad Trueman – Group Lettings Director Andrews Property Group