The Renters (Reform) Bill – Will it have the desired effect?
15 Aug 2023 | Shilpa Mathuradas
Table of Contents
There has been much publicity recently over the Renters (Reform) Bill, the assumption being that the government have their eye firmly on votes for the election next year. However the second reading of the Bill which was expected to take place before the summer recess has been delayed to autumn. The Bill is famously known to be abolishing no fault evictions as well as making some significant further changes to the current law.
The scrapping of no-fault evictions was first proposed by Theresa May’s government in April 2019. It has been more than four years since that announcement and in that time the world has lived through a global pandemic. The objective behind the Bill is to “bring in a better deal for renters”, the general feeling being that the current legislation favours the landlord and not the tenant especially in the current market where there is a cost of living crisis and rents are increasing faster than has ever been seen and there is a shortage of rental properties.
Below is a summary of the changes the Bill is intended to bring:
Abolition of assured shorthold tenancies
It will not be possible to create assured shorthold tenancies in the future and all tenancies created or granted after the Act comes into force will be periodic assured tenancies. There will be transitional provisions which will mean all existing tenancies will become periodic assured tenancy.
The intention is to discourage fixed term contracts between landlords and tenants. Landlords will have to get used to having less control over their properties. This process will enable tenants to give notice to leave poor quality properties without remaining liable for the rent and will mean they can move more easily if their circumstances change. Essentially, tenants will be able to stay in a property until they decide to leave by giving two months’ notice, or unless the landlord can evidence a valid ground for possession. This means landlords will not be able to use assured shorthold tenancies effectively or flexibly for short-term letting for whatever reason as it may simply not be commercially viable to then have to prove one of the ground to get vacant possession.
Ban on no fault evictions
The abolition of section 21 of the Housing Act 1988 will be a fundamental change for residential landlords in England. Currently a landlord does not need to give a reason for wanting to recover possession of premises let on an assured shorthold tenancy. It can serve a notice, wait a minimum period, commence possession proceedings and obtain a possession order in reliance on that notice. This is largely an administrative process although the requirements of the Deregulation Act 2015 have seen many landlords struggle with this process.
Under the Bill unless the tenant terminates the tenancy or the tenancy is surrendered by agreement, a landlord will in future only be able to recover possession if it serves a section 8 notice relying on one or more of the grounds for possession. It is proposed to extend the grounds for possession.
Grounds for possession
It is proposed to extend the existing grounds for possession under Schedule 2 of the Housing Act 1988. Ground 1 is a mandatory ground for possession which currently allow the landlord to claim possession if they intend to occupy the property themselves and have lived in the property previously. This will be extended to cover occupation by close family member and there will no longer be a requirement for the landlord, partner or close family member to have lived in the property previously.
It is proposed to introduce a new Ground 1A which will allow a landlord to get possession where it intends to sell the property. This ground will not be available in the first six months of the tenancy thereby deterring short term letting. It has been indicated that it will allow flexibility. The government will not mandate the evidence that has to be provided to make out the ground, but instructing an estate agent or solicitor would likely be sufficient to show an intention to sell.
In addition, it is proposed to add other mandatory grounds to cover enforcement action and antisocial and criminal behaviour by the tenant. It is also proposed to extend the notice period for the mandatory rent arrears ground from two weeks to four weeks which will be a concern for landlords.
Rent Increases
It will no longer be possible for a landlord to rely on a rent increase clause in the tenancy agreement to increase the rent. The government wishing to abolish to practice of landlords increasing rent exorbitantly in an attempt to force a tenant to surrender their tenancy. The rent can be increased by using a section 13 notice, by a determination from the Tribunal or by written agreement following a determination.
Pets
It is also going to be made easier for tenants to keep a pet. A new right for a tenant to request permission to have a pet is to be introduced. The right is to be implied into every assured tenancy. If a tenant requests to keep a pet at the property then such consent is not to be unreasonably refused. Pending further guidance, it has been stated that it would be reasonable to refuse consent where consenting to a pet would put the landlord in breach of an agreement with a superior landlord. The application by the tenant must be in writing and must be dealt with before the 42nd day after the request. As part of providing consent, the landlord may impose a condition requiring insurance for pet damage to the property.
Further duties of landlords
A landlord is now required to give a tenant a written statement before the start of the tenancy. The statement must include:
- Terms of tenancy as are specified in regulations made by the Secretary of State. These terms of the tenancy can take the form of a written agreement;
- A statement that the landlord may want to recover possession of the property on specific grounds
- Other information setting out the rights and obligations of each party.
Landlord’s Redress Scheme
At present there is no obligation on landlords to join a dedicated landlord redress scheme. The Bill empowers the Secretary of State to make regulations requiring residential landlords to join a landlord redress scheme. This is a scheme which provides for a complaint by or on behalf of a prospective, current or former residential tenant against a member of the scheme to be independently investigated and determined by an independent individual. The Secretary of State can make regulations to enable a decision under a landlord redress scheme to be enforceable as if it were an order of the court.
Database
It is proposed that Secretary of State will appoint a person to become a database operator which should contain a database of:
- Any person who is or intends to become a landlord;
- Properties which are or are intended to be let under residential tenancies
- Any landlords who have been subject to sanctions.
It is thought this database will be used by HMRC to extract maximum tax from landlords.
These measures have are intended to encourage more consistency in living standards amongst tenants and give them more secure tenure. It is also intended to empower tenants. There is some concern however that the legislation will result in less housing being available especially in circumstances where making things more difficult for landlords will result in them simply selling their properties and leaving the rental market. There are already signs of landlords leaving in their droves because of higher interest rates, the proposed reforms and more extensive energy efficiency rules. Mortgage interest relief which was previously available to landlords has been abolished and there are calls to re-introduce it to encourage landlords to remain in the market.
The statistics show 43% of landlords own one rental property, representing 20% of all tenancies. A surprisingly large amount of landlords do not become landlords through choice. and certainly now there appears to be even less incentive for them to remain in the market. Understandably the reforms proposed pose concern that this will only serve to exacerbate the shortage in housing.
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