Renters' Rights Bill
25 September 2024
On 11 September, the Government published the Renters' Rights Bill. The Bill delivers on the Government’s manifesto commitment to abolish section 21 evictions and to introduce a Decent Homes Standard in the private sector for the first time. The Bill mostly applies to England only, but a handful of provisions also apply to Wales and Scotland.
The Bill replaces the previous Government's Renters (Reform) Bill, which never made it to the statute books. As expected, much of the old Bill has been carried over, but with some important changes.
Perhaps most importantly, the changes will now take effect very quickly – transitional provisions have been scrapped, and there is a good chance that the Bill will become law by the end of the year.
What is the same as in the previous Bill, and what are the updates?
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What is the same? |
What is new? |
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1. The assured shorthold tenancy (AST) is effectively abolished. All assured tenancies will be periodic, i.e., without a fixed end date and on a rolling monthly (or shorter) basis. |
The previous Bill envisaged a transitional period of at least 18 months for ASTs already in existence. There are now no transitional provisions for tenancies that are already in existence at the date of commencement of the Act. All existing ASTs will become periodic on a date to be specified in regulations (save where there are ongoing possession proceedings). |
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2. Tenants will be able to end a tenancy by providing two months' notice. No minimum term is currently proposed. |
The amendment to the previous Bill which prevented the service of a notice to quit in the first four months of the term has been dropped. This may leave landlords exposed to short lets. |
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3. Section 21 no-fault evictions will be abolished. Instead, landlords will need to demonstrate that they have satisfied a statutory ground for possession. |
The previous Government planned to delay abolition until after there had been significant improvements in the court process. There will now be no delay - no-fault evictions will end as soon as the new Bill becomes law. |
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4. The statutory possession grounds will be strengthened. Some grounds are mandatory while others are discretionary. In particular, landlords will be able to take possession when they wish to sell, move into, or redevelop the property, or in the case of anti-social behaviour or non-payment of rent. Each possession ground has its own minimum notice period.
Where the landlord relies on the ground that it wishes to sell or move in, there is a prohibition on advertising the property for re-letting, and on actively re-letting, for a period after possession |
The mandatory possession ground for rent arrears now requires three rather than two months' arrears. Landlords cannot rely on the ground that it wishes to sell or move back in during the first 12 months of a tenancy and the notice period for this ground (and some others) has increased from two to four months. The previous three-month prohibition on re-marketing, and actively re-letting the property following possession for sale or moving in has increased to twelve-months. |
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5. The landlord will not be able to increase rent more than once a year and it will no longer be possible to include contractual rent reviews in the tenancy. The landlord will only be able to raise rent by serving a section 13 notice. This is an existing mechanism under the Housing Act 1988, but it is rarely used at present because contractual rent increases are normally agreed when a fixed-term AST is granted
Under the section 13 procedure, the landlord must give two months' notice of the proposed rent increase. If the tenant chooses to challenge the increase, the FTT will determine the new rent based on the open market rent. As a result the rent could go up or down. The proposed compulsory use of the section 13 procedure means uncertainty for both parties and is likely to be time consuming if the tenant chooses to challenge the landlord's proposal. |
The FTT will only be able to determine the rent as the lower of (i) the market rent and (ii) the landlord's proposed rent.
The FTT also have jurisdiction to determine the validity of the section 13 notice. |
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6. A new ombudsman will be created and all private residential landlords must join an approved redress scheme. |
No change |
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7. A new private rented sector database will record all persons who are, or intend to become, residential landlords and the dwellings that are, or will be, let under residential tenancies. Marketing and letting of dwellings will be prohibited unless both landlord and dwelling are on the database. It is understood that at least part of the database will be open to the public. |
No change |
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8. All tenants will have a legal right to request to keep a pet, which cannot be unreasonably refused. |
Pet insurance will be an implied term in the tenancy. |
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9. Local authorities will be responsible for enforcement in respect of any breaches of the Bill. |
No change, but local authorities' enforcement powers are strengthened (see below) and the Secretary of State can establish a national "lead enforcement authority". |
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10. Landlords will not be able to discriminate against tenants in receipt of benefits or with children. Landlords can carry out reference checks to make sure that the tenant can afford the rent. |
This is extended to Wales and Scotland. |
New features of the Renters' Rights Bill
As well as the updates to existing provisions from the old Bill, there are some wholly new provisions:
1. Strengthening councils' enforcement powers
The previous Government recognised the importance of this, but did not include it in the previous Bill, instead stating that it would be legislated for at the earliest opportunity. The new Bill includes these provisions.
Local housing authorities will:
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have a new duty to take enforcement action
- benefit from a range of new investigatory powers, including powers to require information from relevant persons and powers of entry to business and residential premises.
Initial or minor non-compliance will incur a civil penalty of up to £7,000. Serious, persistent, or repeat non-compliance will incur a civil penalty of up to £40,000, with the alternative of a criminal prosecution.
2. Rent Repayment Orders (RROs)
Tenants and local authorities have been able to apply for RROs for several years in certain situations where landlords have not complied with law.
The new Bill significantly expands the scope of RROs, by:
- extending them to new offences,
- making superior landlords and company directors liable,
- doubling the maximum penalty and
- doubling the period in which tenants and local authorities can apply for an RRO.
3. Rental bidding
Landlords and letting agents will be required to publish an asking rent for their property. They will be banned from asking for or encouraging any bids above this price, and from letting at more than the advertised rent.
4. Awaab's Law
Awaab’s Law already applies to social housing tenancies, and the Bill extends it to privately rented homes. This will ensure that all tenants in England can challenge dangerous conditions and that all landlords must take action to make sure homes are safe.
The measures will allow new requirements to be set requiring private rented sector landlords to address hazards, such as damp and mould, within a specified period. If landlords do not comply, tenants will be able to bring enforcement action through the courts.
5. Decent Homes Standard
The new Bill introduces a Decent Homes Standard (DHS) in the private rented sector for the first time. The new Bill allows regulations to be made setting out DHS requirements for private rented sector homes and will provide local councils with enforcement powers.
How does the new Bill apply to student accommodation?
It appears that fixed-term tenancies will be permitted for purpose-built student accommodation, which typically cannot be let to non-students. Although student accommodation is not expressly mentioned in the new Bill, the Explanatory Notes state that providers of purpose-built student accommodation who belong to a government approved Code will be exempt from the changes.
The Bill will apply to non-purpose-built student accommodation (HMOs). There is a specific provision allowing landlords of properties let to full-time students to obtain possession ahead of each new academic year (between June to September) if notice is served before the tenancy is entered into. However landlords may be left with a void over the summer as tenants will now be able to give 2 months’ notice to terminate their tenancy as early as they wish.
How does it affect build to rent (BTR)?
The policy behind these changes has been welcomed by the BTR sector for the most part. The objective of improving management and reducing uncertainty for renters in the private sector is very welcome to BTR landlords, which already provide security to tenants that isn't always available in the traditional private rented sector.
Despite this, and as with the previous Bill, landlords will be exposed to new risks, in particular:
- The potential for very short tenancies lasting for only two months, as there is no prescribed period at the start of the tenancy during which the tenant cannot serve a notice to quit.
- A prolonged process via the FTT to settle rent reviews if tenants challenge rent increases, leading to cost and delay.
BTR landlords who are subject to section 106 obligations to provide tenancies for a minimum fixed term should also consider whether such obligations will conflict with the new regime. This point needs clarifying, but arguably if the tenant can control the duration of the term under the new regime there may be scope for conflict between new periodic tenancies and BTR section 106 obligations.
Local authorities will also need to consider existing BTR planning policies to ensure that the proposed reforms will not prevent new developments satisfying the BTR criteria for a viable scheme.
What are the implications for long leases?
The new Bill retains the provision that a fixed-term tenancy of more than seven years cannot be an assured tenancy. This will cover shared ownership leases and long leases with escalating ground rents. It means that no matter how high the ground rent is, the long lease cannot acquire assured status. As a result, the usual forfeiture rules will apply, and landlords will not be able to make use of the mandatory possession grounds under the Housing Act 1988.
Where do we go from here?
The Government has put tenancy reform centre stage so we can expect this new Bill to make quick progress through Parliament and it is likely to hit the statute books before the end of the year.
As a result, we may see more landlords electing to serve section 21 notices now, before the new Bill becomes law which could also lead to a surge in possession proceedings.
Once the Bill is in force, claims will inevitably increase as landlords try to recover properties when they need to. The court system is already struggling, and significant improvements are needed quickly for it to cope with the inevitable increase in claims.
We also need to see how local authorities use their new enforcement powers. Local authorities are already over-stretched, and there is a danger that in trying to meet tenant expectations local authorities will open investigations into landlords with little scrutiny of the complaint, and that the investigations will then take a long time to resolve. It is in no-one's interests for the private rental sector to be weighed down with lengthy investigations.
The pace of change will be fast over the next year and landlords, the courts, local authorities will need to adapt quickly so that this sector can continue to flourish.
Authors: Henry Moss, Partner; Charlie Reid, Partner; Alison Murrin, Expertise Counsel; Alice Rowland, Associate
