When it comes into force, in either late 2025 or early 2026, the Renters’ Rights Bill will be the biggest change to the private rental sector for decades. The new legislation is designed to update the experience of renters in England, offering greater security and flexibility for tenants.
As property professionals, Martin & Co have spent the last two years preparing for this new legislation. In this guide, we explain what these changes are, how they will affect landlords, and offer some guidance on the best way to prepare for the changes.
Abolition of Section 21 ‘No Fault’ Evictions
The aspect of the Bill that has attracted the most media attention is the plan to end Section 21 evictions. Landlords can currently use to end a tenancy with two months’ notice, without having to justify or give a reason for eviction.
When the Renters’ Rights Bill becomes law landlords will have to give a specific reason and lay out the grounds in a Section 8 notice. The governments’ justification for the abolition of Section 21 notices is that it will give tenants greater security and enable them to voice concerns about the condition of their property without fear of retaliatory action.
“In our experience, most of the Section 21 notices we serve are for landlords who want to either sell their property or move back into it themselves. Both grounds will of course still be permissible once the Renters’ Rights Bill becomes law. Also instances of rent arrears, or anti-social behaviour where a Section 21 may have been the easiest and quickest way for a landlord to take back their property, are still valid grounds for eviction. The difference will be that in lieu of a Section 21, the landlord will have to raise a Section 8 notice. This does mean that the process may take longer and will incur additional costs, so more than ever our advice to landlords is to ensure that you have Rent Guarantee Insurance in place. This will insure against any rent arears and legal fees associated with taking back your property, and for a cost of less than £1 per day, this is extremely good value”
An end to Fixed Term Tenancies
The aspect of the Renters’ Rights Bill that is likely to have the biggest impact on landlords is the end of assured shorthold tenancies or AST’s. When a new tenant moves in, they are usually offered either a six or a twelve-month tenancy, at the end of which both parties will usually agree to end, extend, or allow the tenancy to become periodic.
All tenancies will now be periodic and will be open-ended continuing until the tenant decides to leave by giving two months’ notice, or the landlord provides a valid legal reason to bring an end to the tenancy. A landlord can’t reclaim their property within the first 12-months of a tenancy and must provide 4-months’ notice of their intention to do so.
The intention of this change is to provide tenants more flexibility, whilst also offering them security. If for example their circumstances change and they are offered a job in a different part of the country, or there is a relationship break-up, they aren’t faced with the complication of extricating themselves from a fixed term contract.
“Whilst it will save landlords from the need and expense of having to renew and renegotiate contracts, it will mean that they lose the financial security of having tenants tied to a fixed term. This change will affect all landlords, as once implemented law will override existing contracts and all assured shorthold tenancies will automatically be changed to periodic ones.
If landlords are concerned about the potential for tenants who are just looking for a short-term let, our advice is to speak to your letting agent. We will screen all potential tenants, discuss their situation and circumstances, both on viewings and again during the referencing process. If there are warning signs that they may be looking for a very short-term let, there is every chance we will pick up on them and share them with you. Our job is to find you good quality, long-term tenants. Historically, instances of tenants looking for early release from fixed-term contracts are relatively few and far between. We see no reason why the fact that tenants can ask to leave in the first 12-months of a tenancy, makes it significantly more likely that they will”
Rent Increases
The Bill introduces new rules for rent increases. Landlords will only be able to increase rent once per year but must do so by serving a notice under Section 13 of the Housing Act 1988, giving two months’ notice before the increase takes effect.
There is no limit to the percentage increase a landlord can apply, but there is a new mechanism by which tenants can challenge an increase is they feel that the rent they are being charged exceeds the market rate. These new rules are primarily intended to prevent landlords from using excessive rent increases as a means of eviction.
“A decent letting agent will already be ensuring that rents are keeping up with market rates, providing regular rent reviews and increases at contract renewal or changes of tenancy. Landlords should take advantage of their right to implement an annual increase, and letting agents have a range of tools available to provide the market data to advise on what the rates are, and how to ensure the Section 13 notices are applied in the correct way”
Rent in Advance and Over the Asking Price Offers
The new legislation will see a limit on how much rent landlords can ask for in advance, and current proposals are that they wouldn’t be able to ask for more than one month’s rent as an upfront payment. Landlords will also be prevented from accepting a higher offer than the advertised rent. This is designed to end bidding wars where properties are let.
“We understand some agents, and in some areas, bidding wars have become commonplace in the rental market. Even during busy periods, bidding wars are something that we haven’t really encouraged or become involved with. Our approach has always been to set a fair asking price for the property and concentrate on finding the most suitable tenants. Those that are willing to pay the most aren’t always necessarily the best”.
Tenants’ Rights to Keep Pets
Under the new rules, tenants are likely to be given stronger rights regarding pet ownership, with the current wording expected to be that landlords will not be able to turn down ‘reasonable requests’ from tenants to keep a pet.
In a lot of leasehold properties, there may be a clause in the master lease that forbids tenants to keep pets at their property, and this will certainly count as grounds to refuse. Whilst it looks like enforcing mandatory pet insurance on tenants is unlikely, it is possible that the legislation will allow landlords to ask for an additional deposit above the current 5 weeks rent to cover any additional damage caused by pets.
“Whilst we should avoid the tendency to generalise, pet owners tend to make good tenants, they stay longer and look after their properties and accepting pets broadens the pool of potential tenants from which to choose. If the property is suitable for pets, our advice has always been to permit them. However, whilst the rules suggest landlords will no longer be able to refuse reasonable requests from tenants, for landlords who really would rather not have pets, they will be no obligation to accept applications from existing pet owners”.
The Private Rented Sector Landlord Database and Ombudsman
In a move to professionalise the private rented sector, it is proposed that all landlords will have will need to register both themselves and their properties on public database and join the Private Rental Sector Ombudsman Service. This will apply to all landlords, whether using a letting agent or managing the property themselves.
Registration will likely involve a small annual fee, but penalties for failing to register till be severe, with £7,000 for a first offence and up to £40,000 for continued non-compliance.
The purpose of the ombudsman is to handle tenant complaints and settle disputes between landlords and tenants. The decisions of the ombudsman will be binding. The database will provide tenants with transparency and access to information about the property they intend to rent.
“Good landlords have nothing to worry about and should welcome the professionalisation of the PRS. For those who seek positive relationships with their tenants and maintain good standards of their properties, the existence of a database and ombudsman is a good thing. Whilst the ombudsman will provide a backstop for dispute resolution, this is what a good managing agent is there for. Having a letting agent manage that relationship with your tenant will in most cases prevent the need to use the services of the industry ombudsman”.
If you have any questions about any aspect of the Renters’ Rights Bill and how it might affect you and your property, please do not hesitate to contact Martin & Co, your local lettings experts.
