The Renters Reform Bill was introduced to Parliament in May and is now making its way through the House of Commons.
It's been called the biggest shake-up of the private rented sector since the 1988 Housing Act gave us the modern tenancy agreement that we use today. So why is the government making these changes now?
On the one hand, the overall purpose of the Bill is to improve standards in the Private Rented Sector, which is, of course, a positive. Rogue landlords are a problem that needs to be addressed - for tenants across the UK and for the integrity of our industry.
On the other hand, this Bill has some landlords questioning what the changes will mean for them practically. Will it be harder to say goodbye to problem tenants, and how will you be able to adjust rents based on market rates?
Here is what we know so far about what the Bill contains, with acknowledgement that nothing is set in stone yet.
A move to Periodic Tenancies
For bit of background, nearly all of our tenancies (and the majority of tenancies across England) are Assured Shorthold Tenancies, which can be fixed term or periodic.
With a fixed term, the tenant is liable to pay rent for a predefined period of time (often 12 months). When this comes to an end, the tenant and landlord can agree to renew for another fixed term, the tenancy moves onto a periodic (rolling) contract, or the tenant serves notice for the end of the fixed term.
A landlord can take back possession of their property by exercising a break clause (which would be pre-defined in the contract) or serving a Section 21 notice at the end of the fixed term. Section 21 notices are commonly known as 'no-fault' evictions and aren't dependent on the tenants' behaviour.
Of course, this is aside from grounds like non-payment of rent or antisocial behaviour, which have their own category of notice called the Section 8.
Alternatively, a periodic tenancy has no defined end date. If a tenant decides to end the contract, they must give 1 month's notice and pay rent until that period ends. If a landlord wants to take back possession, they can use a Section 21 notice to give 2 months' notice.
Under the new Renters Reform Bill, all Assured Shorthold Tenancies will be moved to "a single system of periodic tenancies", where tenants will need to give 2 month's notice if they want to move on.
Under the new system, the Section 21 notices will be abolished and the Section 8 notice will be strengthened.
Effectively, landlords will still be able to use the latter to take back possession in cases of anti-social behaviour and non-payment of rent, but they will also be able to use a Section 8 to sell, or for a close family member to move in.
It's important to keep in mind that right now, the Section 21 notice (or "no fault eviction") isn't commonly used to take back possession of a property. The vast majority of the time, when it is used, it's in a circumstance covered by the new strengthened Section 8.
At Paramount we have high standards for the properties we take on and the tenants we move in. The landlords we work with are not those that these changes are targeting.
Rent Increases
As it stands today, landlords can choose to increase rents at the end of a fixed-term tenancy, or use options like discretionary rent review clauses for periodic tenancies.
Under the new Bill, rent increases will be limited to once per year, with a 2 month notice period to inform tenants. This isn't any different than the frequency with which rents are adjusted today with our fixed-term ASTs.
Tenants will be able to challenge an increase if they feel it's unfair, but in reality, rents are set based on the market. Our landlords aren't increasing rents on a whim.
Pets
Currently, pets in a property are up to a landlord's discretion. A landlord can also choose to increase the deposit to cover any damage the pet may cause (up to a maximum outlined in the Tenant Fees Act 2019).
Under the new Renters Reform Bill, a landlord must have a reasonable ground to refuse a tenant's request to have a pet.
What 'reasonable' grounds constitute have yet to be clarified, but we see this affecting houses more than flats. For example, it's common in London for the freehold of a building not to allow leaseholders to have pets.
Landlords will also have the ability to request further information about a pet and won't have to give consent if it's not provided.
So what happens if the pet causes damage? Under the new Bill, the Tenant Fees Act 2019 will be amended to permit pet insurance as a payment. This means landlords will be able to require pet insurance to cover any potential damage.
For more on this, check out the government website here.
A new Private Renters' Ombudsman
A new property Ombudsman (or redress scheme) is being introduced to help tenants resolve issues fairly and impartially without involving the courts, making the process quicker and cheaper.
This is new for landlords - right now there are multiple redress schemes for agents to help settle disputes with tenants, but now landlords will sign up directly.
Which organisation will take on the role of this new Ombudsman? In short, it’s yet to be determined.
For more on this, check out the government website here.
Timeline
Nothing is certain yet and it's possible that things will change before we see anything implemented.
That being said, it's understood that the Bill will be carried over to the King's speech with an aim to achieve Royal Assent by early 2024. From this point, the government has said it will provide at least 6 months' notice before all new tenancies will become periodic and governed by the new rules.
Existing tenancies will transition to the new system on a second implementation date, which they say will be at least 12 months after the first date mentioned above.
If you are a landlord, or are planning to become one, it's important to resist the media fear-mongering. The reality of these changes are that they're targeting a relatively small (but important) problem in our industry.
We will continue to post here as we know more, so make sure to check back!
We keep our landlords prepared for any changes well in advance, so you know you're in good hands with Paramount.
