Introduced to Parliament on 17th May, the Renters Reform Bill (RRB) forms part of the government’s ‘levelling up’ plans, and seeks to provide more security to tenants, whilst clamping down on irresponsible landlords.
The Bill is in the earliest stage of the parliamentary process, as it needs to pass through the House of Commons, then the House of Lords before receiving Royal Assent – a process likely to take around 18 months. The changes will apply to housing only, and it has since been clarified that they will not apply to student lets.
We summarise the key changes and potential implications for landlords and tenants below.
Abolishing no-fault evictions
Currently, under Section 21 of the 1988 Housing Act, a landlord can evict a tenant for no reason and without establishing fault on the part of the tenant, providing they give 2 months’ notice. This is proposed to be removed entirely, with landlords only being able to evict tenants under ‘reasonable circumstances’. These include anti-social behaviour, rent arrears of at least 2 months, occurring at least 3 times in the last 3 years, or if the landlord needs to sell the property or allow family to move in. These options are only available 6 months into the tenancy. The legal system will also be altered to expedite the process for lawful evictions, which is currently slow.
The end of Assured Shorthold Tenancies
Most renters currently sign an AST, generally involving an initial fixed period of 6 or 12 months, following by a monthly rolling tenancy which can be ended by the tenant or the landlord. ASTs will be replaced with periodic tenancies, which are month-to-month from the beginning of the tenancy. In addition to landlords losing the ability to evict a tenant without reason, the new tenancies will require the tenant to give 2 months’ notice to end their tenancy.
Limitations on rent increases
Under the new proposals, landlords will only be allowed to increase the rent once per year, and they must give tenants 2 months’ notice. Rent review clauses will be removed from tenancies, and tenants will have new routes to challenge rent increases through tribunals.
A new ombudsman
A new ombudsman will be established, with powers to compel landlords to remediate their properties, apologise to tenants or even compensate them for up to £25,000.
No more discrimination over pets, benefits or children
Under the current regulations, landlords can refuse to let to tenants who have pets or children or who are on benefits. This will change. Tenants can request to have a pet, and the landlord has 42 days to respond to a request. Consent cannot unreasonably be withheld. It will also be illegal to refuse to let a property to people with children or who are on benefits. One area of concern at this stage is that under the current bill, landlords will not be able to evict a tenant who has defaulted on their rental payments as a result of their universal credit payment being delayed.
Expansion of ‘Decent Homes Standard’
Currently, only affordable housing is required to meet certain standards in relation to the condition of properties, meaning a large number of private rental properties (25% in fact) are sub-standard. The Decent Homes Standard will apply to private rental properties, with landlords having a legal obligation to remediate their properties. Council’s enforcement powers will be strengthened, and the ombudsman will help to enforce the new standard.
How it will be implemented
Once the Bill has received Royal Assent and becomes law, the government will give 6 months’ notice before its implementation, by which point all new tenancies will be governed by the new rules. Existing tenancies will have a further 12 months to convert to the new system.
Our thoughts
This is widely considered to be the largest shakeup of the private rental sector in over 30 years. There are just over 4.4 million households in private rented accommodation in England (around 20% of households), and this is forecast to grow. Clearly, action needed to be taken to address the poor standard of some private rented accommodation and to provide more security to tenants.
The general consensus is that it will be harder for landlords to gain possession for no reason, but possibly quicker and easier to evict tenants who have breached their tenancy. The need for a tenant to fall behind on rent 3 times over a cumulative 6 months in 3 years before they can lawfully be evicted will be very worrying for buy-to-let landlords with only one property and/or a mortgage.
Raising standards of accommodation can only be a positive change, as well as the increased security for tenants. Good quality rented accommodation is a necessary option when house prices are high.
One of the possible consequences of the new bill is that buy-to-let landlords may leave the market. This would result in an increase in availability of homes to buy, potentially reducing house prices, but a resulting decrease in rental properties, pushing rental values up.
There are technicalities to resolve still, such as how a landlord can demonstrate that they genuinely have family who wish to move in (i.e. definition of family etc.), but it is very unlikely that the bill will be in its current form by the time it becomes law.
In conclusion, these changes are perhaps not as radical as the headlines might lead us to believe, but certainly seem more favourable for tenants than for landlords.