Renter's Reform Bill: How It Affects Landlords

As recently reported, The Renter's Reform Bill, currently making its way through the many stages of the UK Parliament, aims to bring significant changes to the private rented sector in England. It is important to note that the Bill will likely be amended before it becomes law and is unlikely to come into effect this year. Some key proposed changes include the abolition of assured shorthold tenancies, modifying grounds for possession, and introducing Landlord Redress Schemes.

Abolition of assured shorthold tenancies

Section 2 of The Renter's Reform Bill proposes the abolition of assured shorthold tenancies (ASTs), the most common type of tenancy agreement in the private rented sector in England. This change will have a significant impact on landlords and the way they manage their rental properties.

Under the current law, the Housing Act 1988 establishes two types of assured tenancies: assured and assured shorthold tenancies. ASTs are popular among landlords because they allow for more flexibility in regaining possession of the property through Section 21 'no fault' (we prefer the more accurate term 'no reason') evictions.

The change will result that the vast majority of tenancies in England will be "assured". Tenancies of more than seven years are not to be assured tenancies.

Removing shorthold means landlords can no longer use Section 21 notices to regain possession of their property. Instead, they will need to rely on more comprehensive possession grounds, introduced as part of the Renter's Reform Bill, to recover their property in cases where the tenant is at fault or when the landlord wishes to sell the property or move in close family members.

Assured tenancies to be periodic with a rent period not exceeding a month

Section 1 of the Renter's Reform Bill proposes changes to the structure of assured tenancies in England. The critical points of this section are:

Fixed-term assured tenancies will no longer be allowed. All assured tenancies will be periodic, meaning they will continue indefinitely until the tenant decides to end the tenancy or the landlord can provide a reason for possession.

The rent period for these periodic tenancies can be up to 28 days unless it is a monthly rent period. This means landlords can only charge rent weekly, fortnightly, four-weekly or monthly.

If the original tenancy agreement had a rent period longer than a month or is not in line with the new rules, the tenancy will be adjusted to have successive rent periods of one month, starting from the first day of the tenancy. The rent for each new monthly rent period will be calculated using a formula in the Bill. This formula considers the original rent amount and the number of days in the first rental period.

Landlords and tenants can still agree to vary the tenancy terms if they do not conflict with the new rules on rent periods and fixed-term tenancies.

The Bill clarifies that a "monthly" rent period is payable for successive periods of one month, with some flexibility for the first period to be a different period not exceeding 30 days.

In summary, this section of the Renter's Reform Bill aims to simplify the tenancy structure by making all assured tenancies periodic and limiting rent periods to a maximum of one month.

There is considerable opposition to periodic tenancies in respect of student lettings. Similar resistance changed the minds of the Welsh Government because they started with the position of abolishing Fixed Terms. Still, when the Renting Homes (Wales) Act commenced in December 2022, fixed terms were allowed (although, be careful what you wish for because fixed terms in Wales can be problematic due to the last-minute wording included in the rules).

Changes to grounds for possession

As section 21 will no longer be available, there will only be a section 8 notice available which is currently used commonly for grounds 8, 10 and 11 (rent arrears). The Renter's Reform Bill proposes new grounds and amendments to some existing grounds. The length of the section 8 notice varies depending on the grounds.

New and amended grounds

Amendments of Ground 1: occupation by the landlord or family

This amendment changes Ground 1 for possession, which refers to the landlord or their family requiring the property as their principal home. The new Ground 1 states that, at the specified date in the Section 8 notice, the current tenancy must have lasted for at least six months. It also clarifies who can require the dwelling as their principal home: the landlord, their spouse, their civil partner, or someone the landlord lives with as though they are married or in a civil partnership. The list includes parents, grandparents, siblings, children or grandchildren of the landlord, or a child or grandchild of someone mentioned in the relationship section (i.e., spouse, civil partner, etc.). Half-blood relationships are to be considered the same as whole-blood relationships. In cases where joint landlords seek possession, this ground applies if at least one of the joint landlords falls under the mentioned conditions.

New Ground 1A: sale of dwelling-house

This new ground introduces conditions under which a landlord can seek possession of a property to sell it. The requirements are as follows:

• The landlord intends to sell the dwelling house.
• The assured tenancy is not a result of any provision from Schedule 1 to the Rent Act 1977 or Section 4 of the Rent (Agriculture) Act 1976.
• At the specified date in the section 8 notice, either: i) the current tenancy has existed for at least six months, or ii) a compulsory purchase order has become operative, and the landlord intends to sell the dwelling-house to the person authorised to purchase it under the compulsory purchase order.
• The landlord seeking possession is not a social housing provider.

"Sell" is clarified to include transferring the property.

Other grounds

• New Ground 1B: This allows possession if the landlord intends to sell the dwelling-house and the assured tenancy was entered into as part of a rent-to-buy agreement where the agreed-upon period has expired, and the landlord has complied with the requirements stated in the contract.
• New Ground 2ZA: This ground applies when the landlord holds the interest in the dwelling-house under a superior tenancy, and the superior tenancy will end within 12 months after the service of notice under section 8.
• New Ground 2ZB: This ground applies when the current landlord gained possession of the dwelling-house within the past six months under certain conditions related to social housing or supported accommodation.
• New Ground 5A applies when the landlord requires the dwelling house to house an agricultural worker as a seasonal or permanent employee.
• New Ground 5B: This ground applies to private registered social housing providers when the dwelling-house accommodates persons with specific employment requirements, and the current tenant no longer meets those requirements.
• New Ground 6A: This ground applies when possession of the dwelling-house is necessary for the landlord to comply with enforcement actions related to various housing regulations.
• Amended Ground 7: Key amendments include extending the period the executor or administrator can recover possession after the tenant's death from 12 to 24 months.
• Amended Ground 8: Ground 8 no longer covers rent arrears due to pending universal credit payments.
• New Ground 8A: This new ground allows possession if, within three years, rent arrears have occurred on at least three separate occasions.
• Amended Ground 14: In the anti-social behaviour ground, the words “likely to cause” are substituted with “capable of causing”. How that is the promised improvement to obtaining possession on anti-social behaviour grounds remains to be seen!

Length of section 8 notice

The amendments clarify that if the only grounds for possession are Grounds 7A and 14 (relating to anti-social behaviour and criminal convictions), the court may not grant possession within 14 days from the date of the section 8 notice. Additionally, there are new notice periods depending on the grounds specified in the notice:

• Two months for grounds 1, 1A, 1B, 2, 2ZA, 2ZB, 5, 5A, 5B, 5C, 5D, 6, 6A, 7, and 9;
• Four weeks for grounds 5E, 5F, 5G, 8, 8A, 10, 11, and 18;
• Two weeks for grounds 4, 7B, 12, 13, 14ZA, 14A, 15, and 17.

The amendments alter the wording of Ground 14, now referring to "either or both of Grounds 7A and 14" instead of just "Ground 14." This change would allow possession to be sought immediately after service of the notice for either or both grounds.

Form of notice

Section 8 of the Housing Act 1988 is amended by adding a new subsection (7). This subsection outlines the regulations regarding the form and publication of notices for possession proceedings (a notice that a landlord must serve on a tenant if they want to regain possession of their property).

The new subsection (7) has two main points:

• The section 8 form will be prescribed (as is already the case).
• The form to be used by landlords is the version that has an effect when the requirement applies. This means landlords must use the most up-to-date version of the form when serving a notice for possession.

Rent increases

The "Statutory procedure for increases of rent" section amends Section 13 of the 1988 Act, which deals with rent increases in assured tenancies. The fundamental changes are as follows:

• The amendments apply to assured tenancies (other than relevant low-cost tenancies operated by social housing).
• The minimum notice period for rent increases is changed from "one month" to "two months".
• Rent increase clauses in tenancy agreements will be banned and have no effect. The rent for a period may not be greater than the rent for the previous period except for the following:
  • after a section 13 notice and procedure have been followed
  • a tribunal determines the rent amount
  • the landlord and tenant agree to a new rent lower than proposed in the section 13 notice or lower than a determination by the appropriate tribunal.

In summary, these changes update the rules for rent increases in assured tenancies, setting a two-month minimum notice period and clarifying the conditions under which rent may be increased. Additionally, a rent increase clause will be of no effect, and only a section 13 notice will be available.

Challenging the rent

This part of the Renter's Reform Bill addresses the challenge of rent amounts and increases for assured tenancies. Here are the key points:

Tenants can challenge the rent payable under an assured tenancy by applying to the appropriate tribunal. However, they cannot do this if a previous tribunal decision already determines the rent or if more than six months have passed since the beginning of the tenancy.

Tenants can also challenge a new rent proposed in a notice under section 13 by applying to the appropriate tribunal.

The tribunal will determine the rent payable based on the application, considering the tenancy periods and the application date.

The tribunal-determined rent will take effect from the date the tribunal directs, which cannot be earlier than the date of the application.

In summary, the existing rules remain similar. The Bill allows tenants to challenge the rent payable or a proposed rent increase under assured tenancies by applying to an appropriate tribunal.

Pets

The Renter's Reform Bill includes provisions related to tenants' right to request permission to keep a pet in the rented property. According to the Bill:

Tenants may request permission to keep a pet at the dwelling, and landlords must not unreasonably refuse consent.

Landlords must provide a written response to the request within 42 days, with certain exceptions allowing for the delay in responding.

If landlords request further information about the pet within 42 days, tenants must provide it. If tenants do not provide the information, landlords are not required to respond to the request.

If the landlord needs consent from a superior landlord, they may delay their response until they receive consent or refusal from the superior landlord.

Tenants must make their request in writing and include a description of the pet for which consent is sought.

Landlords may reasonably refuse consent if keeping the pet would breach an agreement with a superior landlord or if the superior landlord's approval is required but not given.

If the landlord consents to the tenant keeping a pet, they may require the tenant to maintain insurance covering pet damage, or the tenant may pay the landlord's reasonable costs of maintaining such insurance.

The Tenant Fees Act 2019 is amended to include pet insurance as a permitted fee.

“Pet” means an animal kept by a person mainly for

(a) personal interest, (b) companionship, (c) ornamental purposes, or (d) any combination of paragraphs (a) to (c);

These provisions aim to provide more rights to tenants with pets while protecting the interests of landlords in case of pet-related damage to the property.

Duties of landlords

This section of the Renter's (Reform) Bill proposes new duties and obligations for landlords in England concerning assured tenancies. Key points include:

Landlords must provide tenants with a written statement of terms before the tenancy begins. This statement must contain specific terms specified by the Secretary of State, any grounds on which the landlord may wish to recover possession, and any other required information about the tenancy, dwelling-house, tenant, landlord, and their respective rights.

Landlords cannot:

create fixed-term assured tenancies,

end a tenancy with a notice to quit,

serve a notice under Section 8 in an incorrect form,

serve a notice under Section 8 listing grounds they are not entitled to rely on,

serve a notice under Section 8 with specific grounds if no statement was given to the tenant regarding those grounds, or

serve a notice under Section 8 specifying specific grounds with a date earlier than six months after the beginning of the tenancy.

If a person obtains possession of a dwelling-house through a notice under Section 8 with Ground 1 or 1A, they must not let the property or market it for at least three months starting from the specified date in the notice nor authorise a letting agent to market the property for at least three months.

Penalties

The Renter's Reform Bill introduces financial penalties and offences for landlords who contravene specific regulations related to assured tenancies, particularly those listed above.

A local housing authority can impose a financial penalty on a landlord if they are satisfied that the landlord has contravened specific regulations.

More than one penalty can be imposed for continued infringement. However, certain conditions need to be met.

A local housing authority can impose financial penalties as an alternative to prosecution if a landlord is guilty of specific duties. The penalty can be up to £30,000.

Notice to quit by the tenant

Tenants are allowed to give a notice to quit at least two months before the date the notice takes effect unless the landlord has agreed upon a different time frame in writing (which can be up to two months).

Any provisions that bind a tenant regarding the means of giving written notice to quit under an assured tenancy are considered of no effect.

Tenants can withdraw their notice to quit before it takes effect, provided it's agreed upon in writing with the landlord.

Four weeks' notice to quit continues to apply to non-assured tenancies.

Tenancy Deposit Schemes

Tenancy deposit schemes will apply to all assured tenancies, not just assured shorthold ones.

The court may only order possession of a dwelling-house let on an assured tenancy if the tenancy deposit is being held under an authorised scheme and specific requirements have been met.

Exceptions are made in possession orders made on grounds 7A or 14 (anti-social behaviour), where the tenancy deposit has been returned, or an application concerning a late penalty has been completed.

Landlord Redress Schemes

One of the main proposals in Chapter 2 of the Bill is the establishment of Landlord Redress Schemes. Here are the critical points for landlords:

The Bill allows the Secretary of State to make regulations requiring residential landlords to join a Landlord Redress Scheme.

These schemes will independently investigate and determine complaints made by or on behalf of current, former, or prospective residential tenants against member landlords.

Landlords may be required to join a Landlord Redress Scheme before marketing a property to create a residential tenancy.

The Bill sets out conditions for the approval, designation, and administration of Landlord Redress Schemes.

Local housing authorities can impose financial penalties on landlords who breach regulations related to the Landlord Redress Schemes or commit offences under the proposed law. The penalties can range from £5,000 to £30,000, depending on the nature of the breach or violation.

A landlord may be found guilty of an offence if they continue to breach regulations after a relevant penalty has been imposed or if they commit a different breach within five years of the imposed penalty.

Decisions made under a Landlord Redress Scheme may be enforceable as if they were a court order upon the authorisation of the scheme administrator.

The Secretary of State may issue guidance to local housing authorities and administrators of Landlord Redress Schemes regarding cooperation between the authorities and persons exercising functions under the schemes. Local housing authorities must have regard to any guidance issued or approved.

Private Rented Sector Database

Chapter 3 of the Renter's Reform Bill focuses on establishing and operating a Private Rented Sector Database. Here are the key points relevant to landlords:

The database operator will establish a database containing entries for landlords, dwellings, and persons with banning orders or convictions related to housing offences.

Regulations may be introduced to detail the process of making landlord and dwelling entries, how to keep them up-to-date, and the circumstances under which active entries become inactive, and vice versa.

The database operator may collect fees for landlord and dwelling entries.

A person must only market a dwelling to create a residential tenancy if there is an active landlord entry in the database for the person who will be the residential landlord and an active dwelling entry in the database for the dwelling.

Written advertisements for a dwelling must include the unique identifiers allocated by the database operator for the residential landlord and the dwelling.

Residential landlords must ensure an active landlord entry in the database for themselves and an active dwelling entry in the database and comply with relevant regulations.

Enforcement authorities may only use information obtained from the database for purposes connected to their functions relating to housing, landlords, or tenancies.

The database operator must remove inactive landlord or dwelling entries from the database if they have been inactive for five years and remove entries related to banning orders or convictions after a certain period.

Transitional provisions and existing shorthold tenancies

The transitional provisions in the Renters (Reform) Bill explain how the new rules will apply to existing tenancies.

New tenancies will be assured from commencement. Some rules apply to existing tenancies from the "extended application date".

The "extended application date" has two meanings depending on the existing tenancy's circumstances:

(a) For assured tenancies that convert to a periodic tenancy (i.e., become a periodic tenancy after the expiry of a fixed term) on or after the commencement date (the date when the new rules start to apply) but before the date appointed by regulations, the extended application date will be the date when the tenancy is converted to a periodic tenancy.

(b) For any other assured tenancies, the extended application date is appointed by the Secretary of State through regulations.

The new rules for calculating rent periods will apply to rent periods that begin on or after the extended application date.

Suppose a valid Section 21 notice was given before the extended application date, and proceedings for possession have not been concluded or have not become time-barred. In that case, the tenancy remains an assured shorthold tenancy.

The new rules won't affect any valid rent increases under existing tenancies applied before the extended application date.

The written statement won't apply for written tenancies, but landlords must give the tenants any information needed by new regulations. The landlord must provide the information necessary before the extended application date for oral tenancies.

Landlords won't face financial penalties or criminal offences for conduct before the extended application date related to existing tenancies.

If a notice to quit was given under Section 5 of the Protection from Eviction Act 1977 for an existing tenancy before the extended application date, the validity of the notice won't be affected by new rules.

The amendments made regarding tenancy deposits won't apply to existing tenancies that were assured (but not assured shorthold tenancies) immediately before the extended application date.

Conclusion

If passed, the Renter's Reform Bill will bring about various changes to the private rental sector that will impact landlords and letting agents. The Guild of Residential Landlords already provides an assured tenancy, which will be updated when the final legislation is published. It is crucial for landlords and letting agents to stay informed about these changes and prepare accordingly.