Key changes
The draft Bill is largely drawn from the previous Renters (Reform) Bill, and proposes the following changes:
Periodic tenancies
The Bill proposes to abolish all new and existing assured tenancies and assured shorthold tenancies (ASTs) (characterised by having a fixed term with no right of renewal), replacing them with monthly periodic tenancies. This means tenants would be able to stay at the property indefinitely unless and until they serve 2 months’ notice to leave.
Landlord’s termination rights
Landlords will no longer be able to use the “section 21” process to serve 2 months’ notice on tenants to terminate the tenancy at, or after the end of the contractual period of the tenancy (so-called “no fault” evictions). They will now have to give notice seeking possession based on prescribed grounds in order to terminate a tenancy, and go to Court to demonstrate those grounds are satisfied in order to remove the tenant if they do not leave at the end of the notice period.
The Bill introduces various mandatory grounds which, if established, the court must order possession, as well as discretionary grounds which mean the court may order possession.
Mandatory grounds
Landlords will not be able to terminate tenancies in the first 12 months (except in the case of serious anti-social or criminal behaviour), and thereafter will need to give tenants 4 months’ notice to terminate if they want to sell the property, redevelop it or move into it themselves.
The Bill has raised the bar as regards the amount of rent arrears that have accrued before a landlord can remove a tenant on a mandatory basis, from two months’ arrears to three months’ arrears, and requires the landlord to give four weeks’ notice to terminate the tenancy (rather than the current two) in those circumstances.
However, landlords will under the new legislation retain the right to give two weeks’ notice to remove tenants who have committed antisocial behaviour or been convicted of criminal behaviour, and on 4 weeks’ notice for persistent rent arrears.
There is also a welcome carve out for landlords of properties let to full-time students, who will be able to terminate tenancies and obtain possession to re-let their properties for the new academic year on four months’ notice.
Discretionary grounds
Landlords can also terminate on the discretionary grounds of rent arrears that don’t quite hit the above-mentioned threshold, or persistent rent arrears on 4 weeks’ notice; and for breach of the tenancy agreement or deterioration in the condition of the property on 2 weeks’ notice.
Concerns about pressure on the court system
While the section 21 process does not require court intervention and landlords currently only need to have recourse to the courts to obtain possession against tenants who have outstayed their tenancy and are trespassing, landlords wanting to terminate a tenancy on any of the grounds set out in the new legislation will need to go to court and prove those grounds if tenants do not voluntarily leave by the end of the relevant notice period. Landlords are already facing significant delays for removing trespassers under the current regime, and the pressure on the courts is likely to increase several times over when these changes are implemented.
The previous government said it would defer these changes to the regime pending court reform and heavy investment in the necessary resources, but the current government has dismissed those concerns, on the basis that “landlords will only need to go through the courts in a small minority of cases where a tenant doesn’t leave at the end of the notice period” and argue that these reforms will reduce demand on the courts “because only cases where there is a clear, well-evidenced ground for possession will be able to proceed”. They say they are working with the courts to ensure the county court is prepared for these changes.
The Bill also aims to resolve disputes before they reach court by way of landlord-initiated mediation through the new ombudsman (set out in more detail below), and the government has said that they are “working with the Ministry of Justice to explore further options for early dispute resolution”. However, voluntary methods are unlikely to help where a tenant is unwilling to leave the property and participate in the process.
Rent increases
The bill does not introduce rent controls, but limits rent increases to once a year at market rent. Landlords will be required to give tenants two months’ notice of any increases, and tenancies will not contain rent review clauses.
Tenants will be able to challenge rent increases in the First Tier Tribunal if they consider it exceeds market rent, and the Tribunal will then determine what the market rent should be (but cannot order a figure greater than the rent proposed by the landlord, and cannot back-date increases (though can defer them for up to 2 months)).
Ombudsman
The Bill introduces a new ombudsman scheme that all private landlords will be required to join (and pay a membership fee), including those who use a managing agents. The current scheme providing redress against managing agents will also be retained.
Tenants will be able to complain to the ombudsman, who will have the power to compel landlords to issue an apology, provide information, take remedial action and/or pay compensation. There is currently no mechanism for landlords to resolve issues they are having with tenants, though there are proposals for a separate landlord-initiated mediation service.
Private rented sector database
Landlords will also be required to register on a new private rented sector database, which will provide guidance to landlords on current requirements, as well as providing information to tenants on individual properties and landlords (including previous offences) before they commit to a tenancy, and about when they can refer issues to the ombudsman during the term of the tenancy.
This database is also likely to be used as an enforcement tool by local councils, targeting non-compliant landlords. Landlords will not be able to seek a possession order if they have not registered on the database.
Additional changes
In addition to advancing the changes proposed by the previous government in the Renters (Reform) Bill, the Renters Rights Bill introduces the following additional changes, which were proposed by the last government but did not make it into their draft legislation:
Non-discrimination provisions
The Bill contains prohibitions on refusing to rent to tenants with children, or who receive benefits. This will also nullify provisions in insurance contracts, mortgages or superior leases which prevent letting on that basis. However, landlords can still carry out referencing checks, and consider the suitability of tenants based on affordability.
Pets
Landlords cannot unreasonably withhold consent to a tenant’s request to have a pet in their home, and tenants can challenge unreasonable refusals. This is subject to a right for the landlord to recover insurance costs to cover pet damage or through the tenant’s deposit
Unlike the non-discrimination provisions, it will always be reasonable for a landlord to refuse consent where the superior landlord prohibits pets.
Decent homes standard
The Decent Homes Standard, already applicable to social housing, will now apply to the private rented sector.
Awaab’s Law, introduced for social housing in 2003 following the tragic death of a 2 year old due to health issues caused by mould in his home, will also extend to the private rented sector. This requires landlords to rectify issues such as damp and mould within a specified period (to be set out in supporting regulations), failing which tenants can bring enforcement action through the ombudsman or the court.
Some might think that it is surprising there are not already minimum standards for rented properties, and these changes will be welcomed by tenants, but also by the majority of landlords, who already provide decent, safe housing.
New provisions to avoid bidding wars
The Renters Rights Bill also introduces new provisions – which go beyond the previous government’s proposals - aimed at preventing bidding wars that unreasonably inflate rents and cause difficulties for prospective tenants, similar to provisions brought in in New Zealand in 2021.
While the Bill does not introduce rent controls, it requires landlords and letting agents to publish an asking rent for their property, and prohibits them from encouraging or accepting bids over that price, with hefty sanctions for breaches.
Fines and criminal Sanctions
Landlords who breach their obligations under the Bill – including joining the ombudsman and registering on the private rented sector database – could be subject to fines of £7,000 - £40,000 for breaches or face criminal prosecution and an unlimited fine for serious or repeated non-compliance. Local councils will be given greater investigatory powers – including to request information, or to enter properties – to enforce these new provisions.
Rent repayment orders – under which landlords can be required to repay rent to tenants - will also be extended to offences under the Bill, and to superior landlords and company directors. Landlords could be required to pay up to 2 years’ rent under these orders for up to 2 years after the relevant offence.
Any landlords who have committed an offence under the Bill or incurred a fine will also be required to repay the maximum of 2 years’ rent, so these provisions are designed to have a deterrent effect.
Timing
Critics have said that reform of the short term tenancy sector is long overdue and has been pushed to the bottom of government’s list of priorities for too long. However, the current government is aiming for the Renters Rights Bill to come into force by Spring 2025. With the new government picking up where the preceding government left off, and with government time increasingly taken up by passionate calls for reform in the residential letting sector as a whole (whether short term tenancies or long leases), it seems that change is now firmly on the horizon.
