The government has published its Renters Rights Bill, which will radically overhaul the private rented sector in England.
The government's guide to the bill, which received its first reading in the House of Commons last week, says it will “improve the current system for both the 11 million private renters and 2.3 million landlords in England”, but what will actually change? We run through the most important areas.
Big changes to tenancies and evictions
Section 21 “no fault” evictions will be banned for both new and existing tenancies – although it isn’t yet clear what will happen to Section 21 notices that are issued before the bill comes into effect.
In addition, all tenancies will be periodic from day one. Tenants will be able to end a tenancy by giving two months' notice at any time.
Grounds for Section 8 evictions will further be overhauled. The mandatory threshold for rent arrears will be increased from two months to three months. But while the previous government’s Renters (Reform) Bill proposed a new mandatory eviction ground for persistent rent arrears below the mandatory threshold, this doesn’t appear in the Renters Rights Bill, although the government notes that landlords can use a discretionary ground for evicting tenants with arrears below the threshold.
The mandatory eviction grounds of landlords selling or moving into the property will stay, but landlords will not be able to invoke them within the first 12 months of a tenancy. Landlords will also need to give the tenant four months’ notice when using either of these grounds, and will not be able to remarket the property for rent within 12 months of evicting a tenant this way.
The government acknowledges the need for tenants to move on when the property is intended for a specific purpose, such as temporary and supported accommodation, and says it will bring in limited mandatory possession grounds to enable this.
This includes some student accommodation, which was a hotly debated topic when the old Renters (Reform) Bill was going through Parliament. Specified educational establishments will be able to evict non-student tenants at two weeks’ notice if the property was let to students in the previous 12 months,. All private rented sector landlords will be able to evict full-time student tenants at four months’ notice if the property is required for a new group of full-time student tenants at the start of the next academic year, so long as all the incoming tenants are students.
Landlords who evict tenants illegally will be subject to enforcement action from local councils.
Still on the topic of eviction, one key safeguard from the old Renters (Reform) Bill is missing. Following engagement with housing providers, the previous government pledged to delay their planned changes to the eviction process until after court capacity had been improved. This bill contains no such provisions, meaning that landlords face the prospect of longer, more costly waits to recover their properties. However, housing minister Matthew Pennycook has promised more investment in the court system, as well as a faster new digital system for possession claims.
What will change with rents?
Landlords will only be allowed to increase rent to the market rate once a year using a Section 13 notice, and must give at least two months’ notice of the increase. No other mechanisms for increasing rent – such as rent review clauses – will be permitted.
Tenants will be able to challenge Section 13 rent increases at the First-tier Tribunal. In a departure from current rules, the Tribunal will not be allowed to set a rent increase above what the landlord asked for. The Tribunal’s decision will also no longer be backdated to stop tenants from falling into debt unexpectedly. Instead, the new rent will apply from their decision date.
The government also plans to ban rental bidding. Landlords and agents will have to publish an asking rent for the property, and will be prohibited from “asking for, encouraging, or accepting” any bids over this price. However, rental industry figures have questioned how this will work, and pointed out that landlords could start with an extremely high asking rent and then let applicants bid an amount under it.
Another thing that isn’t in the Renters Rights Bill (despite lobbying from tenant groups) is rent controls. Rental increases may be limited to market rates by the First-tier Tribunal, but the government isn’t trying to dictate what those market rates are. In fact, they may go up as a result of the bill: landlords have already warned that they may need to raise rents by around 10% to make up for the extra uncertainty of open-ended tenancies.
Setting and enforcing housing standards
The government will introduce a Decent Homes Standard that will apply to all PRS homes let on assured tenancies, as well as supported housing under tenancies or licences. Awaab’s Law, which requires landlords to address hazards such as damp and mould within a specific timeframe, will also be extended to the PRS from the social rented sector. According to the most recent English Housing Survey, 21% of PRS households live in non-decent homes.
Councils will be given new investigatory powers when building cases against landlords, including powers to require information from third parties and to enter business premises such as letting agencies. They will also be able to issue civil penalties up to £7,000 for a first offence, or £40,000 for repeat and serious offences (currently the maximum is £30,000). For serious or repeated non-compliance, councils will also be able to pursue criminal prosecution and an unlimited fine.
Rent repayment orders will further be beefed up, with the maximum amount of rent to be repaid going up from 12 to 24 months. Landlords who have previously committed housing offences will automatically be charged the maximum amount. And the government will also overturn case law to allow rent repayment orders to be passed on to superior landlords or company directors where tenants were renting from a rent-to-rent provider.
In other changes, landlords will have to sign up to a new Private Rented Sector Landlord Ombudsman Service. Tenants will be able to complain to the Ombudsman, which will have the power to require landlords to pay compensation or take remedial action. Failing to join the scheme or abide by its decisions will open landlords up to enforcement action from local councils. Tenants will also be able to pursue a rent repayment order if their landlord doesn’t join the ombudsman scheme.
Other measures
Tenants will be given the right to request leave to keep a pet, which landlords will not be allowed to unreasonably refuse. The government plans to produce guidance to support decisions, and says that prohibitions by a senior landlord (for example in a leasehold property) will always be a good enough reason to say no.
Landlords who say yes will be allowed to require insurance for pet damage, either to be taken out by the tenant or taken by the landlord and then charged to the tenant.
Landlords and agents will also be banned from discriminating against prospective tenants who have children or who are in receipt of benefits.
What’s next?
Housing Minister Matthew Pennycook has said that the government wants the Renters Rights Bill passed by next summer. That gives the housing sector time to engage with politicians and work out some of the uncertainties. Key issues that will need to be addressed include improving court capacity to deal with extra Section 8 eviction cases, the status of student tenancies, and what exactly the ban on bidding wars means in practice. However, the government appears to be prioritising the bill: the Second Reading is scheduled for 9 October, almost as soon as MPs return to Parliament.
As things stand, the reaction from the industry is mixed. Some industry figures, including Benham & Reeves director Marc von Grundherr, warn that the bill could cause a landlord exodus – while others, like estate agent and former RICS residential chairman Jeremy Leaf, say that eviction reform has been in the pipeline for so long that worried landlords will already have left the sector.
Either way, experienced letting agents will have a key role to play – both in advising the government as to what effect their proposals will have on the ground, and in helping landlords understand what the Renters Rights Bill means for their investments.
Other tenant headlines:
Analyst: Tenants face tough times despite rental reforms – Landlord Today
My tenant has been secretly renting my own home on Airbnb – Daily Mail
Agent sees rise in fraud cases – Property Wire
