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29/06/22
Renting

The renters reform bill: What you need to know as a landlord

After many delays since 2019, the government has now released its white paper on the long-awaited Renters Reform Bill.

Labelled “the biggest shake-up of the private rented sector in 30 years”, the ‘Fairer Private Rented Sector’ white paper has certainly caused some major headlines.

“It’s important to stress there’s no need to panic at this stage,” advises Martin & Co Managing Director Eric Walker.

“There is still a long process to go through before any of the Bill becomes law and that process will include many revisions and changes as it goes through parliament over the next two years.

“For landlords, though, it’s important to be prepared for what’s coming and fully understand the impact the Bill could have on you.”

In this updated guide, we explain what the Renters Reform Bill is and examine the impact the legislation could have on UK landlords.

What is the Renters Reform Bill?

The Renters Reform Bill was first mooted in 2019 by then Prime Minister Theresa May but has faced a number of delays due to the Covid-19 pandemic.

The Bill’s aim is to address what the government described as an ‘imbalance’ between tenants and landlords, providing more security for tenants and improving standards in the Private Rented Sector.

How the Renters Reform Bill will impact landlords

The Renters Reform Bill contains several important elements that will affect landlords:

  • 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

The biggest single change in the Renters Reform Bill is the proposed abolition of section 21 ‘no fault’ evictions.

This means tenancies will only end if the tenant decides to, or if you have grounds for possession under section 8.

The Bill promises to strengthen those grounds for possession and improve court processes, so landlords can quickly and effectively regain access to their properties when a tenant fails to meet their obligations.

Under current rules, you can’t use section 21 if you’ve failed to provide your 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

Under new rules proposed in the Renters Reform Bill, only deposit protection will need to be proven to use revised section 8 procedures to regain possession of your property.

Timeline for change: Section 21

The Bill proposes to remove section 21 in two phases.

From the legislation’s initial date, you’ll 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, you’ll be able to 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

The Renters Reform Bill also proposes to abolish all fixed term tenancies, with agreements instead being periodic from day one.

This will leave tenants free to give notice at any stage during their tenancy, while you will need to have grounds for possession under section 8 to regain possession of your rental property.

Tenants will need to give you a notice period of two months to exit their tenancy under the proposed periodic tenancy rules and notice periods of longer than two months will be banned.

For landlords, you’ll be able to give your tenants two months’ notice if you wish to sell or move into your rental property, with notice periods for other grounds (such as anti-social behaviour or rent arrears) varying.

3. Landlord grounds for possession

To protect responsible landlords, the Renters Reform Bill proposes to overhaul the section 8 grounds for possession.

This means you’ll be able to:

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

Many grounds will become mandatory, according to the white paper, meaning you’ll have more certainty in court if you can prove the ground has been met.

Moving into your rental property

Current rules state that a section 8 notice can be served if you wish move into your rental property and live in it as your main home.

However, this doesn’t extend to your children or other family members.

As part of the Renters Reform Bill, a new section 8 ground will be introduced that allows you and close members of your family to move in.

However, this ground can’t be used in the first six months of the tenancy and your tenants would need two months’ notice.

Selling your property

If you wish to sell your rental property, you’ll be able to do so using a section 8 ground under the new legislation.

The current mortgage repossession ground will remain, with new grounds created for other circumstances where you wish to sell.

For the first six months of a tenancy, however, these grounds can’t be used, while tenants will also require two months’ notice of your intent to sell.

Rental arrears ground amendments

Under new section 8 rules regarding rental arrears, you’ll be able to use a new mandatory ground if your tenant has been in at least two months of arrears on at least three occasions in the past three years.

This will apply even if the tenant is not currently in two months of arrears when the hearing reaches court.

If this ground is proven, you’ll only need to give your 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

Under the legislation proposed in the Renters Reform Bill, it will become illegal for landlords and letting agents to apply blanket bans on renting to tenants with children or those on benefits.

5. Renting to tenants with pets

The government has already updated its model tenancy agreement and this document now contains a clause where allowing pets is a default position.

The Renters Reform Bill pledges to ensure landlords do not unreasonably withhold consent when a tenant requests to keep a pet, while tenants will also be able to challenge refusals.

The Tenant Fees Act 2019 will also be amended so tenant pet insurance can be requested by landlords as condition of keeping a pet.

In reality, more detail on this element of the Bill is needed, especially when it comes to properties where pets are banned in the headlease, or Houses in Multiple Occupation (HMOs) where the needs of other tenants will need to be considered.

6. The Decent Homes Standard

It’s estimated around 12% of rental properties in the UK “pose an imminent risk to the health and safety of tenants” according to the white paper.

Under any new legislation, the Decent Homes Standard would be applied to the Private Rented Sector for the first time.

Many steps to raise property standards in the sector 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

The white paper states that councils will be given more powers to enforce the Decent Homes Standard – cracking down on non-compliant landlords.

7. Lifetime deposits

Lifetime deposits were heralded as a major part of the Renters Reform Bill when it was first mooted.

However, this has now been taken off the table through the publication of the Bill white paper.

The idea behind lifetime deposits was that a tenant’s deposit would travel with them from property to property – negating the need to save a new deposit while waiting for a previous one to be returned.

But it appears a workable plan for this is still some way away.

8. Student lets

Legislation arising from the Renters Reform Bill will also apply to student rental properties, the government has confirmed.

However, student landlords have raised concerns that student lets often work differently to other privately rented homes.

Students often commit to a rental property many months in advance of moving in, while student properties are usually let for a fixed time of one academic year.

Under a periodic tenancy model as proposed in the Renters Reform Bill, students would be able to leave their rental property at any time with two months’ notice.

And student landlords say they may be unable to let the property to new tenants in the middle of the academic year.

Moreover, these landlords say they may not be able to let to new students at the start of the academic year with no guarantee of vacant possession.

9. Landlord portal and ombudsman

To help ease pressure on the court system with no section 21, the Bill proposes a new Private Renters’ Ombudsman is created to help landlords and tenant disputes outside of the courtroom.

Although it would be mandatory for all landlords to join the ombudsman, landlords using a letting agent to manage their properties already benefit from those agents being part of mandatory redress schemes.

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

The aim of the portal is to give tenants more transparent information on the standard of the property they wish to rent and local councils more details if or when problems arise at a property.

10. Rent reviews and increase notice periods

Rent increases would be limited to once per year under the Renters Reform Bill, with the notice period required to inform tenants of a rise in rent increased to two months.

Tenants will also be able to challenge if they feel a rent increase is unfair, while rent review clauses, that lock tenants in to rises, will be banned from tenancy agreements.

11. Tenant modifications

The Renters Reform Bill also stipulates tenants will be permitted to make modifications to their rental properties, so long as the properties are returned to their start-of-tenancy condition when the tenant moves out.

12. Holiday Lets

Some landlords rent their properties as short term or holiday lets over the summer months, and then rent on an assured shorthold tenancy (AST) over the winter.

Under the new proposals, a landlord will have no grounds to obtain possession nor certainty that the property will be available for the holiday season.

What next?

The white paper represents the government’s proposals and once draft legislation is published, the detail will be scrutinised.

Working groups will consult with the government and suggest amendments before the Bill goes to the committee stage.

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

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