RENTERS REFORM BILL - WHAT WE KNOW SO FAR

Details: Published: 02 August 2023; Hits: 1106

The Renters (Reform) Bill will deliver on the government’s commitment to “bring in a better deal for renters”, including abolishing ‘no fault’ evictions and reforming landlord possession grounds. It will legislate for reforms set out in the private rented sector white paper published in June 2022.

Quote: https://www.gov.uk/guidance/guide-to-the-renters-reform-bill

The Renters Reform Bill is causing a huge stir in the private rented sector right now. Many landlords are concerned about its implication and are asking questions on my views on what it will all mean. I am writing this article about what we know so far regarding the Renters Reform Bill, and in places am giving my personal views on what I think this means to the landlords and tenants that we look after.

There has been an enormous surge in the number of private rented properties over the last 20 years. The Government have become increasingly concerned about the standards of properties available, and very concerned about the increase in much highlighted and sometimes very tragic cases due to the living conditions within some of these properties.

The bill is being used to address the following:

Abolish the Section 21 notice.

Section 21 is commonly referred to as a ‘no fault eviction’. In our experience, landlords use a Section 21 notice most commonly when they wish to end a tenancy for the following reasons:

When they need the property back to live in themselves or house a close family member.

When they wish to sell the property

When they wish to carry out extensive refurbishments to a property

When their tenants are not abiding by the terms of the tenancy. This may be; constantly paying rent late, or missing rental payments, or not living in a manner that is conducive with looking after the property, or causing a nuisance to other neighbours.

For a landlord to use a Section 21 notice he will always have a reason that he needs to regain possession of his property. A Section 21 is a speedy and cost-effective way for landlords to legally regain possession.

The abolishment of the Section 21 will have a huge impact on the private rental sector. The government are saying that to ease the process and still give landlords rights to regain possession of their properties they will, in turn, revise the Section 8 notice grounds.

Introduce more comprehensive grounds so landlords can recover possession of their property within the Section 8 notice.

Currently landlords prefer to use a section 21 notice as it is cheaper and quicker than the Section 8 route, plus it is far less complicated. Using a Section 8 notice is a much more complicated legal process. Set ‘grounds’ must be met, and even if grounds are met, some of these grounds are ‘discretionary’ when it comes to a judge issuing a possession order. It is therefore possible to have identical situations before 2 different judges, and for one judge to grant a possession order and the other not to. Under the current system, there are some ‘mandatory’ grounds for possession. So, if tenants meet these grounds the judge must grant a possession order. If a landlord seeks possession using a Section 8 notice he will almost certainly choose to use a legally qualified professional to represent him, and there will always be a court case. We have recent Section 8 notices that have taken 18 months to get to court. The court system is bursting at its seams, my view is that it currently isn’t fit for purpose, so with the weight of additional cases when the Section 21 route is no longer an option, I can see the system and process taking even longer than it currently does. Leaving landlords financially out of pocket by tens of thousands of pounds. The government recognise this too and have undertaken to work alongside the Ministry of Justice and the HM Court and Tribunal Service to improve the system. They have announced that they are also looking at end to end digitisation. I just hope that any changes regarding the abolishment of the Section 21 do not happen until the court process has been radically reformed.

With the abolition of the Section 21 notice, grounds that are being suggested as added to the Section 8 notice will include: sale of the rental property and additional grounds for anti-social behaviour. Full details of how this will work haven’t been released yet.

Provide stronger protection against ‘back door’ evictions if a tenants rent is increased excessively, forcing the tenant to leave as they can no longer afford to stay.

The Bill still says it will allow landlords to charge ‘market rent’, plus increase rents annually. The notice period given to tenants for a proposed rental increase will increase from one month to two months.

Some landlords have become very concerned about this part of the bill, but then I remind them that this will not change the fact that they can still increase rents annually, and still increase them to market rents. I also remind landlords that there is already a mechanism in place to protect tenants against landlords who look to charge higher rents than market rents, by way of a tenant appeal under the first-tier tribunal. https://www.gov.uk/housing-tribunals

In my view, this part of the bill is a belt and braces approach. The bill is not going to make increasing rents illegal, but it wants to stop landlords who are maybe looking to evict tenants, of using the fact the tenants refuse rent increases (or run into large rent arrears due to a rent increase) from regaining possession. I suspect this is being introduced into the bill as currently landlords simply serve a section 21 notice, and it could have been a loop hole to evict tenants under the revised legislation if this wasn’t within the bill.

Introduce a new rented Sector Ombudsman

We are waiting on the full details of this. Currently landlords who use gps lettings are already using an agent who is part of an Ombudsman Scheme, and we are also part of a redress scheme. This means that tenants (and landlords) have channels they can already go to if they feel they have not been treated fairly and correctly by us.

The government feel that with the abolishment of the Section 21, that it will ease pressure on the courts if rather than then having to simply rely on a (new and revised) Section 8 notice, that there is an alternative dispute resolution process in place.

The Bill proposes making it mandatory for all landlords to join the Ombudsman Scheme, but there are lots of details within this to establish, especially surrounding landlords whose agents belong to schemes and how the new Ombudsman scheme will work in these instances.

Create a private rental property portal.

The idea behind this is that all landlords and tenants can log into a portal and check their legal obligations, plus check how legally complaint the rental property is.

There is mention on this draft, that local authorities can also use this to check compliance of landlords and target enforcement.

Again, we need more details on how this is all going to work in practice before we can advise further on this.

Tenants will be given the right to request a pet in a property, landlords must not unreasonably refuse.

This has also caused a lot of comments and discussions. From my understanding, and knowing our landlord’s attitude to pets in properties, I do not believe that very much will change. Landlords will still be able to refuse certain pets in flats where the head lease already stipulates this. Landlords will still be able to refuse certain pets if the property is deemed unsuitable.

We obviously need more clarity in the wording surrounding this part of the Bill. But our experience regarding landlords allowing pets in properties is that landlords do already take a realistic view. We are a nation of pet lovers, and the problem with pets is normally nothing to do with the pet itself, more the property being totally unsuitable for that particular pet or the pet owner leaving their pet alone and unsupervised for extended periods of time.

One thing that has been said regarding this within the Bill is that there will be an amendment to the Tenant Fees Act, as if this is passed, landlords will be able to insist on pet insurance to cover any damage that the pet may make to their rental property (currently this would be banned under the existing tenant fee act as a prohibited payment)

Remove Assured Shorthold Tenancies and replace them with periodic tenancies.

So, we have a divided landlord and tenant base on if this will be something you prefer / like.

Currently all our tenancies start off as a fixed term 6- or 12-month contract. The pluses for this are that you all know where you ‘stand’. The tenancy starts on x date and will expire on y date. On expiry you know you need to decide to renew the contract or look to end the contract. If you renew both landlord and tenant then decide if they want to renew for another fixed term contract, typically another 6 or 12 months, or move to a statutory periodic tenancy (rolling contract). During a fixed term neither party can just ‘end’ the contract. If it is close to the end of a fixed term, then currently a landlord must serve the tenant a section 21 notice (2 months’ notice) to end the contract. The tenant doesn’t have to serve any notice and can just leave at the end of the contract. If the tenancy is on a statutory periodic tenancy, then the landlord still needs to serve the 2-month notice, but the tenant only must serve one (to coincide with a rental term)

If you read the above, you can see that the current system isn’t equal for landlord and tenant and can be confusing.

Also with the current system, what happens if one party or the other desperately needs to end the tenancy? This can only be achieved by mutual consent and will involve one party ‘buying themselves’ out of the contract. It is not common sense to simply assume that as there is a 12-month contract in place, that both parties will stay within the terms of that contract, and that nothing in their lives will change, within that 12 months. Things do happen, and tenancies do sometimes need to be ended.

The new proposal is that all tenancies will be ‘rolling monthly’ contracts and a tenant will be able to serve notice to end that contract by serving the landlord with 2 months’ notice. The landlord will only be able to end the contract by using one of the grounds within a Section 8 notice (which will be extended upon).

Make it illegal to have a blanket ban on renting to tenants on benefits or tenants with children.

This Is mentioned in the guidance notes for the bill but may not be implemented when the bill becomes law. It could possibly be added at a later stage?

On a day-to-day basis, if this is implemented, we cannot see how this will negatively impact landlords. Landlords still have a right to choose who rents their property. They cannot discriminate against a tenant on any of the protected characteristics in law. https://www.gov.uk/guidance/equality-act-2010-guidance

Landlords will choose the best applicants at the time. A landlord’s view will vary from landlord to landlord about who makes the ‘best’ tenant. Some landlords prefer couples, some families, some single tenants. Some landlords will always look at income only. Some landlords are more concerned about if they think the tenants will be long term.

For many landlords their rental property is an investment. It makes very bad business sense to keep any rental property empty if there are applications available.

It is more difficult to be accepted if you are ‘competing’ with several other applications for the same property and your financial status isn’t as strong. It is also more difficult to be accepted if you have a very large family and are looking at smaller family houses, or you have pets, and other applications maybe do not. We have tenants in these situations who have asked us to pass on letters to landlords, addressing any concerns the landlord may have. We would suggest to tenants who feel they keep missing out on properties because other applications always appear stronger to consider doing this, plus maybe also submitting a reference from a previous landlord at the time you apply. Remember, landlords only have a ‘on paper view’ of you. Which can be very cold and clinical. If you have additional information with your application that personalises you and shows a landlord how much you fell in love with their property, it could be the piece of the puzzle that secures the let for you.

Conclusion

This has been written as a simple overview of what we currently know about the Renters Reform Bill. It isn’t to be read as definitive legal advice, and any points that you want to rely on, should only be done so after seeking your own legal advice.

I am not a solicitor. I am a letting agent who has worked within the property industry for more than 30 years (since 1988). During that time, I have seen enormous changes in legislation and changes within the private rented sector in general. This Bill will be the biggest change that has happened since the Housing Act 1988. Personally, I feel that the Government aren’t giving enough consideration to how much they need the Private Rented Sector to fill the huge void in property available. When the Housing Act 1988 was introduced and replaced the Rent Act 1977, there was an enormous increase in private landlords, and therefore rental properties. This was largely due to the fact that finally some control was being given to private landlords, they were able to create fixed term contracts, and they were able to regain possession of properties fairly simply and cheaply if their circumstances changed or if the tenants breached their contracts.

For the Reform Bill to ‘work’ the court system must have a massive overhaul. To remove the ‘no fault eviction’ and to make all landlords rely on a Section 8 Notice, which in turn relies totally on how swiftly the court system can handle the cases will be a total disaster unless the courts can handle these cases efficiently and speedily.

We are of course waiting for the final version of the Reform Bill to be published, during the draft and consultation periods already things have changed, some things have been excluded, so until we have the final version no one knows where we all stand.

We remain hopeful that additional rights for possession are added to the Section 8 notice, and these aren’t completely restrictive. We also remain hopeful that the process once using a Section 8 is expedited and not costly.

I have always recommended landlords have rent guarantee insurance in place, If landlords do not have this already, I suggest looking into getting this product. If landlords need help with this, then please contact us.

Once more details are released, I will write a new update on my views and how we can manage this latest change in legislation.