Spotlight on: Renters Reform
Background
It is estimated that there are 11 million tenants in England, which represents circa 4.6 million private rented households1. It is predicted that the number of private rented households could grow by 1 million by 2031. When you couple this with the significant increase in rental growth in the sector over the past 5 years, it is little wonder that the Government has been looking at whether the law strikes a fair balance between the rights of private landlords and tenants.
Under current legislation, where a residential tenant is in occupation on an assured shorthold tenancy, a landlord can bring the tenancy to an end by serving what is known as a section 21 notice. A section 21 notice can, depending upon the facts of the case, give as little as two months' notice to the tenant to vacate their property. Perhaps the most controversial aspect of this procedure is that the landlord does not need a reason to serve a section 21 notice. This is why the section 21 notice procedure is commonly referred to as the "no-fault" eviction.
Back in 2019, to help give tenants more security over their residential tenancies, the Conservative manifesto included a promise to abolish no-fault evictions. From that promise, the Renters (Reform) Bill was born. However, the Bill became one of the many casualties of the snap election in July and never made it past the 2nd reading in the House of Lords.
The Labour government, which has previously supported the motion to ban section 21 evictions, has now published details of its own proposed legislation, called The Renters' Rights Bill. We take a look at the old and new proposals below.
Are the two parties aligned in approach?
Both parties' proposals seek to abolish fixed-term assured shorthold tenancies and the use of section 21 notices. Under both proposals, those on a fixed-term tenancy will move onto a new periodic tenancy. Unlike a fixed term agreement, a periodic tenancy does not have a set end date and instead rolls over from one period to the next (e.g. a monthly periodic tenancy will roll from month to month).
A tenant under the Renters' Right Bill will be able to end a tenancy by giving 2 months’ notice. However, the position isn't as straight forward for landlords. Instead of being able to serve section 21 notices, both the Renters (Reform) Bill and the Renters' Rights Bill list a limited number of statutory grounds upon which a landlord can rely on if it wants to recover possession of its property. The table below sets out some of the key grounds and how the two bills compare in terms of proposed notice periods:
|
Ground |
Position under the new Renters' Right Bill |
Position under the old Renters (Reform) Bill |
|---|---|---|
| Occupation by the landlord or family (e.g. parents, grandparents, siblings, children, grandchildren) | Not available for use during first 12 months of a new tenancy. Thereafter, 4 months' notice required. | Not available for use during first 6 months of a new tenancy. Thereafter, 2 months' notice required. |
| Sale of dwelling-house | Not available for use during first 12 months of a new tenancy. Thereafter, 4 months' notice required. | Not available for use during first 6 months of a new tenancy. Thereafter, 2 months' notice required. |
| Sale by mortgagee | 4 months' notice to be given. | 2 months' notice to be given. |
| Rent arrears | The tenant has at least 3 months’ rent arrears (or 13 weeks’ arrears if rent is paid weekly or fortnightly). 4 weeks' notice required. | The tenant had to be in at least 2 months’ rent arrears. 4 weeks' notice required. |
| Repeated rent arrears | If the tenant has persistently delayed paying their rent, then the landlord can serve notice on 4 weeks' notice. | If the tenant has been in at least 2 months’ rent arrears at least three times within the last three years, then the landlord can serve notice on 4 weeks' notice. |
| Anti-social behaviour | Proceedings can start immediately. | Proceedings can start immediately. |
Notwithstanding the significant number of grounds available to landlords to recover possession of their premises, the proposed legislation removes the landlord's ability to serve a notice without needing to give a reason. The Renters' Right Bill goes further than the Renters (Reform) Bill to protect the tenants' position by proposing longer notice periods that need to be given by landlords in respect of certain grounds.
Additional Changes
The Renters' Rights Bill also includes the following key features, which were not included in the Conservatives' proposed reforms:
- The introduction of a new digital PRS database service which will be mandatory for landlords to join and will require landlords to register details of the properties they let out. Further regulations will be forthcoming to detail how the database will work in practice. Landlords should note, the Renters' Right Bill prevents the court in certain instances from granting a possession order where the landlord hasn't created an active entry in the private rented sector database.
- Under the Renters' Right Bill, landlords would still be able to increase rents, once a year, to the market price for their properties. Whilst the Renters' Right Bill doesn’t cap rental amounts, it does create a mechanism whereby tenants can lodge an appeal with the First-Tier Tribunal to challenge above-market rent increases, which would include increases that are designed to force tenants out of their accommodation (thereby preventing backdoor evictions).
- Granting tenants the right to request a pet, which the landlord must consider and cannot unreasonably refuse.
How has the Renters (Reform) Bill been received?
For many landlords there will be a sense of relief that Labour's new proposals will not attempt to cap and regulate rent increases in a manner similar to what is happening in Scotland. In Scotland, an emergency rent cap was introduced during the cost-of-living crisis and further legislation which seeks to control rent increases is expected to be forthcoming – which, according to some market experts, has caused an increase in landlords selling their properties and the number of landlord purchases falling to all-time lows.
Others may be concerned that the Renters' Right Bill could negatively impact levels of future investment. For example, might the contractual uncertainty about the duration of the tenant's occupation deter investment in property because it would become more difficult to accurately forecast future rental revenue?
In trying to balance competing interests, the Renters' Right Bill will arguably be of most concern to small private landlords (e.g. those who have a small number of properties that they let out). This is because the increase in protections offered to tenants may be abused by a small minority – which could result in smaller landlords being disproportionately affected by the delays faced in recovering their property whilst incurring legal fees and potentially suffering loss of rent. Without a wider portfolio to offset the risk, such instances will be difficult for smaller private landlords to withstand. Presently, landlords can still serve section 21 notices. To the extent smaller private landlords are unsatisfied with the upcoming legislative changes, they may look to recover possession now and sell their property, which would lead to an increase in section 21 notices being served.
With the Renters' Right Bill aiming to become law by Summer 2025, we won't have long to wait to see what impact the Bill will have upon the wider market.
1 Renters (Reform) Bill - Hansard - UK Parliament
