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30/06/22
Landlord

What landlords need to know about the Renters Reform Bill

The Renters Reform Bill white paper has been published and certainly generated lots of headlines as “the biggest rental sector shake-up in 30 years”.

There’s no doubt the proposals in the Bill will have a big impact on landlords if and when they become law.

“But it’s important not to panic at this stage,” stresses Whitegates Managing Director Rob Smith.

“We don’t expect the Bill to become law before 2024, so there is plenty of time for landlords to understand and weigh up the impact it will have on them.

“There’s also a long process to go through, with amendments and debate on the Bill, so we’d expect several revisions before it becomes law.

“The best thing for landlords to do right now is read and understand all the elements of the Bill, so they’re prepared for what will happen in the next couple of years.

“This guide is a great starting point for that.”

What is the Renters Reform Bill?

The Renters Reform Bill aims to provide more security for tenants and improve standards in the Private Rented Sector (PRS), while also ensuring landlords retain certain rights to possession of their properties.

The Bill first came to the public’s attention in 2019 when it was mooted by then Prime Minister Theresa May.

The Covid-19 pandemic, however, delayed the Bill’s passage through parliament until June 2022 when its long-awaited white paper was published.

How the Renters Reform Bill will impact landlords

The Renters Reform Bill contains a number of proposals that are certain to have an impact on landlords, including:

  • The abolition of section 21
  • The end of fixed term tenancies
  • Changes to landlord grounds for possession
  • The end of blanket bans on tenant demographics
  • Renting to tenants with pets
  • The Decent Homes Standard
  • A landlord portal and a requirement to join a new ombudsman scheme
  • Changes to how rents are reviewed and increased notice periods
  • Allowing tenants to modify properties

1. The abolition of section 21

Arguably the biggest change proposed in the Bill, the abolition of section 21 is certain to have a big impact on landlords.

Removing section 21, or ‘no fault’ evictions, means landlords will have to use grounds for possession under section 8 if they wish to get their properties back.

The Bill proposes to add additional grounds for possession to section 8, while also strengthening existing grounds and improving the court process – making it easier for landlords to regain possession under certain circumstances.

To use section 21 under current rules, landlords need to have provided tenants with:

  • A copy of the property’s Energy Performance Certificate
  • A copy of the ‘How to Rent’ guide
  • A valid gas safety certificate
  • Proof you have placed their deposit in a protection scheme within 30 days of receipt

But under the Renters Reform Bill, landlords will only have to prove they’ve protected a tenant’s deposit to use section 8.

The timeline for section 21

The Renters Reform Bill pledges to remove section 21 in two stages:

  • From the legislation’s initial date, Landlords will be unable to use section 21 for any new tenancies and will need to use a revised section 8 instead
  • Between the initial date of implementation and the second date, landlords can continue to use section 21 for existing periodic and fixed term tenancies signed before the initial date
  • From the second date of implementation, which is likely to be at least 12 months after the initial date, section 21 will be abolished for all tenancies

2. The end of fixed term tenancies

Another huge change proposed in the Renters Reform Bill is the abolition of fixed term tenancy agreements.

Should the Bill become law, all tenancies would instead be periodic from day one – leaving tenants free to leave at any point if they provide two months’ notice.

The Bill also proposes to ban notice periods of longer than two months.

As part of a revised section 8, landlords would be able to give a tenant two months’ notice should they wish to sell or move into their rental property, while notice periods for other grounds (anti-social behaviour, rent arrears, etc) will continue to vary.

3. Landlord grounds for possession

With no section 21 for landlords to use, the Renters Reform Bill pledges to overhaul section 8 grounds for possession, to make it easier for landlords to regain possession of their properties through the courts.

The Bill says this will give landlords the power to:

  • Regain possession from anti-social tenants
  • Regain possession from tenants in rent arrears
  • Sell a rental property when they need to
  • Move into a rental property if they wish

Most section 8 grounds would become mandatory, too, meaning a judge would have to grant possession to a landlord when a ground is proven.

Moving family into a rental property

Under current section 8 rules, landlords can give tenants notice if they wish to move into their rental property themselves.

However, there’s no ground that states a landlord’s close family or children can move in, but this looks set to change under the Renters Reform Bill.

A revised section 8 ground is proposed which would allow a landlord to give notice if they wish to move close family members into their property.

This ground, however, can only be used once a tenant has lived in the property for at least six months and two months’ notice would need to be given to the tenant.

Selling a rental property

A new section 8 ground will be created for landlords who want to sell a rental property without tenants in situ, while the current mortgage repossession ground will remain in place.

Tenants will need to be given two months’ notice of a landlord’s intent to sell, while this ground cannot be used when a tenant has been renting the property for less than six months.

Rental arrears ground amendments

Under the Renters Reform Bill, landlords will be able to issue a section 8 notice to tenants who have been in at least two months of rent arrears on at least three occasions in three years – regardless of whether they’re in arrears when the hearing reaches court.

If this mandatory ground is proven, landlords will only need to give a tenant four weeks’ notice to leave the property.

Anti-social behaviour ground amendments

In the case of serious anti-social or criminal behaviour from a tenant, notice periods will be reduced to two weeks.

4. No more blanket bans

Blanket bans on letting a property to tenants with children or those on benefits will be made illegal under the Renters Reform Bill.

5. Renting to tenants with pets

Amending their model tenancy agreement to make consent for pets a default position was the government’s first step towards more pet-friendly rental properties.

The Renters Reform Bill aims to take that another step further, but more detail is needed on exactly how this will work.

The Bill pledges to ensure landlords can’t unreasonably withhold consent when a tenant requests to keep a pet, while the Tenant Fees Act would be amended to allow pet insurance as a chargeable fee.

But it’s unclear how the law would work for properties such as flats where pets are banned in the lease, or for Houses in Multiple Occupation (HMOs) where other tenants’ needs would have to be considered.

6. The Decent Homes Standard

Under the Renters Reform Bill, the Decent Homes Standard would be applied to privately rented properties for the first time.

This, the white paper says, would be a huge step towards tackling the estimated 12% of UK rental properties that pose “an imminent risk to the health and safety of tenants”.

Several steps to raise property standards have already been taken, including:

  • The requirement for smoke and CO2 detectors in private rented homes
  • The implementation of the Homes (Fitness for Human Habitation) Act 2018
  • Electrical Installation Condition Reports (EICRs) being required for all private rental homes
  • Minimum Energy Efficiency Standards (MEES) in private rented homes

Local councils will be given more powers to enforce the Decent Homes Standard and crack down on landlords who don’t comply as part of the Bill.

7. Lifetime deposits

It appears the introduction of so-called ‘lifetime deposits’ has been taken off the table in thee Renters Reform Bill white paper.

Lifetime deposits were intended to follow a tenant from property to property, meaning they wouldn’t have to save a new deposit while waiting for an existing one to be returned.

A workable plan for this is lacking, however, and we don’t expect to see lifetime deposits any time soon.

8. Student lets

Student landlords have raised concerns about how the Renters Reform Bill will affect student rental properties.

Student rentals are often agreed with those in education well in advance of them moving in and are usually fixed for an academic year.

Because all tenancies would be periodic under the Renters Reform Bill, student landlords could be in a situation where a tenant gives notice in the middle of the academic year – leaving them unable to find a replacement.

And with no guarantee of vacant possession following the abolition of section 21, they say they may not be able to let to new students at the start of the next academic year.

9. Landlord portal and ombudsman

A new mandatory Private Renters’ Ombudsman would be created under the Renters Reform Bill, requiring registration from all landlords.

The ombudsman would be in place to help landlords and tenants find dispute resolutions without the need to attend court.

Landlords who use a letting agent to manage their properties already benefit from their agent being part of a mandatory redress scheme.

A new property portal would also be introduced under the Bill, with landlords required to register their properties.

The portal would be in place to give tenants more information on the standard of the property they wish to rent and local councils more details should any dispute or problems arise.

10. Rent reviews and increase notice periods

The Renters Reform Bill proposes that landlords are restricted to one rent review per year alongside an increased notice period of two months for any rise in rent.

Tenants will also be able to challenge a rent increase if they deem it to be unfair, with rent review clauses in tenancy agreements banned.

11. Tenant modifications

Under the Renters Reform Bill, tenants would be allowed to modify rental properties on condition that it is returned to its original condition at the end of their tenancy.

12. Holiday Lets

Landlords who rent their properties as short term holiday lets during the summer and on assured shorthold tenancies (ASTs) during the winter will also be affected by the Renters Reform Bill.

With no grounds for possession during the AST, those landlords will have no guarantee of vacant possession at the start of the summer short-let season.

What next?

The Renters Reform Bill is not law yet and the white paper only outlines the proposals behind the it.

The next step will be for draft legislation to be published, which will be debated and scrutinised, with working groups consulting with the government and suggesting amendments.

Following the committee stage, the Bill will be debated in the House of Commons and House of Lords, and we expect the first implementation date to be in late 2023 or early 2024.

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