The much-anticipated and delayed Renters (Reform) Bill finally had its first reading in Parliament on 17th May - i.e. it was formally introduced as a Bill. However, this was just a brief description of the key points and no date has yet been set for the second reading, which is when MPs actually consider and debate the contents of the Bill.
Although some of the proposals might change during the course of Parliamentary debate, we believe that much of the 'meat'; of the Bill will stay more or less the same, so it's well worth you knowing what's in it and how it's likely to affect you as a landlord, your tenants and the wider lettings industry.
Here are 20 questions about the Renters Reform Bill and answers based on what we know so far:
What are the key changes in the Renters Reform Bill that landlords should know about?
- Assured Shorthold Tenancies (AST) will be scrapped and all tenancies will become periodic
- The Section 21 eviction process will be abolished
- Mandatory landlord registration will be introduced via a Privately Rented Property Portal
- A new Private Rented Sector Ombudsman will be created
- Tenants will have the right to request pets
- Landlords will not be able to increase the rent more than once a year
What isn't included that was expected?
There were three further proposals in last June's White Paper, ' A Fairer Private Rented Sector', that have not been included in this Bill:
- Extending the Decent Homes Standard to the Private Rented Sector (PRS)
- Outlawing the ability for landlords to issue blanket refusals to accept tenants on Universal Credit or housing support
- Strengthening local council powers of enforcement
However, the Government has stated that it does still plan to introduce these, stating on its website: "We remain fully committed to implementing these reforms and will bring forward legislation at the earliest opportunity."
What does it mean that the Assured Shorthold Tenancy (AST)is going to be scrapped?
There were three further proposals in last June's White Paper, 'A Fairer Private Rented Sector', that have not been included in this Bill:
This proposal means that fixed terms will cease to exist, and all tenancies will become periodic, or 'rolling'. Tenants will be able to give two months' notice at any point, without being tied into paying rent for longer than that, so this change means less financial security for landlords. That said, the reality is that if you're providing a good quality home, tenants don't tend to move without a good reason, so it's unlikely to make a huge difference in practice to most landlords.
Under the new rules, rental periods will also be restricted to either one month or 28 days, but this won't be a change for most landlords, who already charge rent on a monthly basis.
How will I evict a tenant if I can't issue a Section 21?
The Government is proposing to expand and strengthen the grounds under section 8 to ensure that landlords can regain possession if and when they need to, however, there will be no way to evict a tenant without giving a valid reason.
In reality, this shouldn't present a problem, as in our experience few landlords evict tenants without a cause! If the tenant has breached their agreement, you will still be able to use all the existing grounds, and if they haven't done anything wrong but you wish to sell the property or you or your close family want to move back in, those will be valid grounds for eviction. And the good news is that if your tenants are exhibiting anti-social behaviour, you should be able to evict them more quickly under the proposals.
... and what about prescribed information - will this still apply?
In order to be able to serve a valid Section 21, landlords must have provided the tenant with certain 'prescribed information', which includes the Energy Performance Certificate (EPC), deposit protection information and the current Gas Safety certificate. It's not yet clear what will come into place in relation to these documents once Section 21 disappears.
If landlords can't make accelerated possession claims under Section 21, could the courts be overwhelmed?
If a tenant refuses to leave the property having been served a S21, a landlord can apply online for an accelerated possession order, which doesn't require a court hearing (unlike a S8 eviction). Currently this type of claim represents around a third of all possession claims, so when S21 is abolished, there could be 50% more cases ending up in court.
The proposals outline two strategies to tackle this potential issue: putting more focus on mediation for landlords and tenants to help avoid evictions having to be escalated to court, and prioritising the most serious cases, such as evictions for anti-social behaviour.
For how much longer will I be able to still issue a Section 21?
Until the Bill becomes an Act and that Act comes into force, the current laws continue to apply. Realistically, that's likely to be for at least another 12-24 months for new tenancies and two years plus for existing tenancies.
What information will be on the new Privately Rented Property Portal?
The portal will have two main functions:
1. A publicly accessible database of landlords and their properties, with the basic registration information likely to include: the property address, the owner/landlord's details and those of the company managing it. The portal will replace the current Database of Rogue Landlords, with the Government stating: "We are still determining the exact information which will be available to the public and this will be set out in regulations. We are planning for this to include information related to property standards". The portal is expected to contain details of landlords who have received banning orders, along with details of related financial penalties or convictions.
Landlords will be legally required to register on the portal. If a property is advertised or let without first being registered, landlords could be fined £5,000 by the council. For persistent breaches or if a landlord provides fraudulent information, they could be fined up to £30,000 or face criminal prosecution and a Banning Order.
2. An information resource to help landlords understand and comply with their legal obligations, and it will also be a route for government to communicate legal changes to requirements.
Will there be a charge for landlords to register on the portal?
There will be a fee for landlords. While the amount hasn't yet been decided, the Government has said that it will "work to ensure that the fee is proportionate and good value".
If my property is already licenced, will I also have to register and pay for the portal?
It's not yet clear whether landlords who have already registered and paid for a licence will also have to pay for their information to be listed on the portal. This is something that should be clarified as the Bill makes its way through Parliament.
Will membership of the Ombudsman scheme be mandatory for landlords?
This Ombudsman will ensure that tenants who have complaints about their landlord have a route to redress via a government-approved scheme, so all private landlords will be required to join. The Government has said it plans to link the Ombudsman scheme and the new portal to ensure that landlords don't need to duplicate registration information.
While there will be a membership fee associated with the Ombudsman, as with the portal, the Government has stressed it will be "proportionate and good value".
Will landlords have to accept pets as part of the Renters Reform Bill
The proposal is that landlords shouldn't be able to turn down a tenant's written request to keep a pet without a good reason. So, if you do have a valid objection - for instance, if the tenant wants to keep a large dog, but it's a studio apartment and the tenant is at work most of the day - then you have the right to turn down their request.
This is another change that probably won't make a huge difference, as many landlords already allow pets. But if you have any concerns about your property being damaged, the good news is that pet insurance will become a 'permitted payment' under the Tenant Fees Act, so you'll be able to insist on your tenant taking out insurance, which will protect both you and them financially.
Will tenants be able to challenge annual rent rises?
As part of the Renters Reform Bill, landlords will have to give tenants two months' notice of a rent increase by issuing a section 13 notice - and will no longer be able to write rolling rent rises into the tenancy agreement. If the tenant feels the proposed increase is unreasonable, they can take their objection to the First-Tier Tribunal.
At the moment, the process via the tribunal is time-consuming, so very few tenants actually use it, but the Government is proposing to make this easier, mainly through digitisation. While this is positive news for tenants, it could mean more landlords will find more annual rent increases being challenged in the future.
What extra powers are proposed for councils?
In last June's White Paper, the Government outlined its proposals for ensuring local councils have 'strong and effective enforcement tools to crack down on poor practice'. While these haven't been included in the first draft of the Bill, it seems likely they will be added at some point.
As it stands, these proposals include:
- Seeking to increase investigative powers
- Strengthening fine regimes for serious offences
- Running pilot schemes with selected local councils to explore different ways of enforcing standards and working with landlords to speed up the adoption of the Decent Homes Standard
- Requiring local councils to report their housing enforcement activity to the Departmentfor Levelling Up Housing and Communities (DLUHC)
...so, will councils be given more money to enforce?
Of course, if local councils are able to collect more in fines, they will be able to self-fund additional enforcement efforts in the future. However, it's not yet clear how the Government plans to pay for the initial increase in activity required to identify more criminal landlords - certainly no funding has been specified.
This is something that needs to be addressed as the Bill progresses. They can already fine criminal landlords up to £30,000 without going to court, yet there are still clearly too many landlords getting away with breaking the law - hence the new proposals!
What might change from what's proposed in the Bill?
We expect a lot more detail and clarity to be added throughout the Bill as it's debated - including what will happen with prescribed information and what the requirement will be for registering properties on the portal that are already licenced - but one area that we believe needs much more consideration is the proposed scrapping of the Assured Shorthold Tenancy (AST), with particular reference to landlords of student properties.
Currently, most student landlords issue rental agreements for a fixed 12-month term, so that they have rent year-round. However, if fixed terms disappear and tenants can leave at any time with two months' notice, students may choose to move out at the end of the academic year - which for some courses can be as early as May - leaving landlords potentially without rent until the new term begins in September. Some students may move out after just a few months because they've given up their course or maybe want to move in with a partner, and it's incredibly hard for landlords of student properties to find replacement tenants in the middle of the year.
Given the current shortage of suitable private rental accommodation in most towns and cities across England, the Government should do all it can to avoid a mass-exodus of student landlords from the market.
Now that the Renters Reform Bill has been introduced, what are the next steps?
The next step for this Bill is a 'second reading' in the House of Commons, where MPs have their first opportunity to debate the key points. After that's complete, it moves to the 'committee' stage, which is a more in-depth analysis and debate of all the clauses and proposals for change. Following that, there's a 'report' stage, where any proposed amendments can be further debated, then the finalised Bill gets a 'third reading' and if it's approved, it moves on to the House of Lords, where it goes all the way through a similar process. Once the Bill has been voted through at the third reading in the House of Lords, it will go to the King for Royal Assent - and at that point it becomes an Act. You can see full details about each stage on the UK Parliament site.
When will things be finalised and impact on landlords?
Bills can vary in time, but can take around a year to progress through Parliament and then the Act generally comes into force around 6 months later, in either April or October. Given that a date for the second reading hasn't yet been set, it's unlikely to happen until the Autumn, meaning the Bill might not be passed until Autumn 2024 at the earliest, with enforcement for new tenancies not before April 2025. In lettings, laws are usually applied to new tenancies first and then come into force for existing tenancies a year later.
There's one thing to be aware of that could potentially derail the proposals. If there is a UK general election before the Bill becomes law and Labour comes to power, it's highly likely that the Bill would be substantially amended or even withdrawn entirely to take account of any new government policies. The next general election is expected to be held before the end of January 2025.
What will I have to do differently as a landlord once the Bill is passed?
Although we don't yet know the details on exactly how the changes will be administered, here's a run-down of what you'll need to do, if and when the proposals become law:
- Register yourself and your properties on the Privately Rented Property Portal
- Sign up to the Ombudsman scheme
- Adapt current tenancy agreements so that they comply with the new rules regarding periodic tenancies and issue new paperwork for new tenancies (as required)
- Serve a section 13 notice for rent increases (Form 4 on the government website), giving your tenant at least two months' notice
- Understand the revised section 8 grounds for possession
- Understand changes to prescribed information - which has yet to be clarified
If we are carrying out a Fully Managed Landlord Servicefor you, we will manage the new changes on your behalf.
Who is the biggest beneficiary of the changes - tenants or landlords?
This Bill really shouldn't make much difference to good landlords who are already letting professionally, although there will be the additional cost of joining the Ombudsman and registering on the portal. The two most significant benefits are probably the strengthened grounds for possession and the Government's pledge to prioritise serious court cases, meaning landlords should be able to evict tricky tenants more quickly. However, this is subject to the current problems with the courts - which include long delays in cases being heard - being resolved.
Overall, the changes probably benefit tenants more:
They will be able to check their landlord via the new portal
- With the removal of fixed terms, they won't be tied into paying rent on a property that turns out to be unsuitable
- Responsible pet owners should have a wider choice of rental accommodation if landlords are no longer able to unreasonably refuse pets
- The process for challenging unfair rent rises will be made less onerous
- The Ombudsman will give them a route to redress if they have complaints about their landlord
If you have any more questions or would like to discuss what we've covered here in more detail, just get in touch with the team in your local Reeds Rains branch - we're always here to help.