Wednesday, 23rd October 2024

The Renters’ Rights Bill

The Renters’ Rights Bill (the ‘Bill’) was introduced to Parliament in September 2024 to deliver on the Government’s commitment to “bring in a better deal for renters”.  Labour officials expect the Bill to become law by the summer of 2025.  

Overview of the Bill

The most noticeable proposals of the Bill are as follows:

1. The abolition of Section 21 evictions.
2. The end of Assured Shorthold Tenancies (ASTs).
3. Changes in rent increases.
4. The establishment of a new private rental sector Landlord Ombudsman.
5. The right for tenants to request permission to keep a pet.
6. The establishment of a Private Rented Sector Database

 

The Abolition of Section 21 evictions

The abolition of the section 21 ‘no-fault’ eviction was widely expected and is designed to provide greater security to tenants, allowing them to reside in their properties without fear of eviction, except in a few circumstances, namely:

Rent Arrears

Ground 8 of the Housing Act 1988 (the ‘1988 Act’) is to be amended so that:

• if rent is payable weekly/ fortnightly, at least thirteen weeks’ rent must be outstanding (up from eight weeks), and
• if rent is payable monthly, at least three months’ rent must be outstanding (up from two months).

The notice period that landlords must give tenants will increase from two to four weeks. After this period, tenants must either vacate the property, or landlords may start court proceedings to regain possession.

Sale of Property

A new statutory provision enables a landlord to regain possession if they intend to sell their property.  This is a mandatory ground and therefore if evidenced, the court must award possession.  Notice of four months is required, but possession cannot be obtained until after the first 12 months of the tenancy.  Once possession has been recovered, landlords are unable to re-let their property for a period of 12 months from the date on which the notice period expires.

Occupation of Property

Possession can be obtained if the landlord or their family intend to occupy the property as their only or principal home. Possession cannot be obtained during the first 12 months of the tenancy and landlords are prohibited from re-letting their property for a period of 12 months from the date on which the notice period expires.  Notice of four months must be given to tenants.

The s.21 procedure will remain effective until the Bill comes into force.  The transition provisions of the Bill confirm that if a valid s.21 notice is served prior to the commencement date of the Bill, landlords will be able to bring proceedings to request an order for possession before the date that is the earlier of (i) six months from the service of the notice, or (ii) three months from the commencement date of the Bill.

The end of ASTs

ASTs are to be abolished and replaced by periodic tenancies with a rental period not exceeding one month.  There are to be no transitional provisions, but rather a single date when all private tenancies will automatically revert to periodic assured tenancies, save for tenancies which are the subject of existing possession proceedings.

Tenants will be entitled to terminate their periodic tenancy at any time by giving two months’ notice.  To mitigate losses arising from tenants terminating their tenancy early, landlords could seek to agree with agents that any fees paid will be refunded if the tenant does not stay in occupation for at least 6 months.

Rent increases

Landlords are entitled to serve a statutory notice to increase rent not more than once in each calendar year, with the increased rent taking effect two months after the date of service of the notice.

Tenants are entitled to dispute the increase in rent if they consider it to be more than the market rate for the property. Such dispute shall be referred to and determined by the First Tier Tribunal (FTT).  The FTT’s determined rent can only be the lower of (i) the market rent for the property, or (ii) the landlord’s proposed rent.  The FTT no longer has the power to determine a rent that is higher than the landlord’s proposed rent.

The rent determined by the FTT will take effect from the date of determination or such other date as the FTT directs, but not later than two months from the date of determination by the FTT.

By removing the risk of the FTT determining that the open market rent is higher than the landlords’ proposed rent, the Bill may incentivise tenants to challenge even the fairest of rent increases, as the new rent will only be payable once the FTT has made its determination, which could take several weeks, and will in any case be either the landlord’s proposed rent or a lesser amount.

All existing rent review clauses that are not in line with the Bill will be of no effect.

Establishment of a new private rental sector Landlord Ombudsman

The creation of an Ombudsman is designed to offer tenants greater access to redress services through which they can challenge the conduct of their landlords, particularly to issues relating to property standards, repairs, maintenance and poor landlord practices.  The Ombudsman shall have the power to compel landlords to take remedial action, issue apologies, provide information, and/or pay compensation of up to £25,000 and their determination shall be binding on all parties.

All landlords with assured and/or regulated tenancies will be required to join the Ombudsmen service, regardless of whether an agent has been appointed to manage the property on their behalf. The Ombudsman service will be introduced shortly after the Bill receives Royal Assent and it is expected that landlords will contribute a fee towards its operating costs. A failure to join the Ombudsmen service will lead to possible financial and criminal sanctions.

Whilst the introduction of the Ombudsman will benefit tenants, it is an additional cost for landlords which, coupled with the introduction of the Private Sector Rental Database (see section 6 below) and the increase in the number of local authorities requiring landlords to obtain licences to rent, will add further economic uncertainty.

Right to keep a pet in a rental property

The Bill will give tenants right to request a pet, which landlords must consider and cannot unreasonably refuse.  The Bill provides two examples of circumstances in which it would be reasonable for a landlord to refuse consent, both of which relate to situations where granting consent would place them in breach of an agreement with a superior landlord.  Such examples are not exhaustive.

Landlords will be advised to judge requests on a case-by-case basis, and where there is disagreement, a tenant may escalate their complaint to the Ombudsman.

As a condition for granting consent to keep a pet at the property, a landlord is entitled to demand that either (a) the tenant has insurance to cover the risk of pet damage against the property, or (b) the tenant contributes towards the landlord’s costs of having insurance that covers against the risk of pet damage. The latter option appears to be most sensible to ensure that satisfactory cover is in place for the duration of the tenant’s occupation of the property.

Private Sector Rental Database

All landlords of assured and regulated tenancies will be required to register themselves and their properties to a new private rented sector database.  For landlords, this will provide a centralised database where they can access guidance to better understand their obligations.

Tenant’s will benefit from being able to access key information prior to agreeing a tenancy.  It is likely that the database will include gas safety certificates, EPCs, electrical installation certificates, as well as any penalties, banning orders or similar adverse orders made against the landlord.

Landlords will be required to pay to register on the database but no indication has been given as to the anticipated cost.  If a landlord fails to register their property and/or is in breach of the requirement to keep active entries up to date, they are not permitted to market or advertise their property and a court is not permitted to make an order for possession. Local housing authorities will have the power to fine landlords between £7,000 and £40,000 if they are satisfied beyond reasonable doubt that a landlord has breached a requirement of the act or knowingly or recklessly provided false information to the database operator.

 

Landlords, tenants and letting agents are advised to follow the Bill’s progression closely.  If enacted in its current form or thereabouts it will have far reaching consequences.  It is important to understand your rights and obligations once the Bill comes into force, but also, it may be prudent to consider what steps ought to be taken now, in anticipation of that date, in relation to any existing tenancies to protect your position.

The Government is clearly keen to push the Bill through and, as mentioned above it seems likely that it will become law by Summer 2025.  It remains to be seen if the (limited) protections built into the Bill will be sufficient to keep a nervous landlord in the market for much longer.

If you have any queries regarding this note or require further information about anything covered in this briefing, do get in touch with Paul Twomey, Henry Braithwaite or your usual contact at the firm on +44 (0)20 7526 6000.

This article is for general purpose and guidance only and does not constitute legal advice.  It should not replace legal advice tailored to your specific circumstances.