The Renters (Reform) Bill – currently undergoing its second reading in the House of Commons – details the government’s plans to reform the UK’s private rental sector and improve the housing quality for tenants. Including propositions that will end assured shorthold tenancies and abolish Section 21 of the Housing Act 1988, this Bill promises to be the most significant change to the sector in decades. Though it has yet to receive Royal Assent and be introduced as official legislation, it is important that landlords and tenants be aware of the changes proposed in this Bill.
Section 21: ‘No Fault’ Evictions
At present, Section 21 of the Housing Act 1988 enables private landlords to repossess their properties from assured shorthold tenants without having to establish fault on the part of the tenant. The Renters (Reform) Bill will abolish Section 21 from legislation, meaning landlords can only evict tenants under reasonable circumstances, and would be best served providing evidence to substantiate their petition to the court. This will empower tenants to challenge their landlords over poor practices, such as any disproportionate rent increases, and incentivise landlords to improve engagement with their tenants and resolve any issues they may have.
To protect landlords from unscrupulous tenants, the Bill proposes to strengthen Section 8 of the Act, which lays out the grounds upon which a landlord may legally evict their tenant. At present, there are seventeen grounds upon which a landlord may legally evict their tenant, eight mandatory grounds and nine discretionary grounds. There will be new grounds introduced, including a mandatory ground for repeated rental arrears. Should the tenant fall at least two months behind on three separate occasions inside a three-year period, regardless of their balance at the hearing, eviction will be mandatory. There will also be a ground that permits a landlord to apply Section 8 should they wish to sell a property or allow a close family member to move into a property. This ground can only be applied after the tenant has lived in the property for at least six months.
The Government has also stated that it will work with the Ministry of Justice (MoJ) and HM Courts and Tribunals Service (HMCTS) to introduce reforms that will eliminate common issues currently causing delays in possession proceedings. Details on the precise nature of these reforms are yet to be released.
Interested in knowing more about Section 8? Click to read about current mandatory and discretionary grounds, and what changes could be introduced with the Renters (Reform) Bill.
New Tenancy Structure
The Bill also proposes to simply the existing tenancy structure by creating a single system of periodic tenancies that will replace the current system of fixed term and assured shorthold tenancies. Since the Housing Act 1988, assured shorthold tenancies have been the most popular choice for landlords. They offered flexibility to landlords, who may wish to adjust the terms of the tenancy, and to tenants, who may not wish to be tied into a long-term contract. Once the term had expired the landlord could then make amendments to the contract, such as increasing the rent to remain in line with the rental market, and the tenant would have the option to renew the contract or terminate their tenancy.
Under the new system, tenancies will operate on a periodic basis, rolling over each month without a fixed end date until either party decides to end the tenancy. Tenants will be required to provide the landlord with two months’ notice of their intention to leave, to help landlords avoid lengthy void periods and recover the costs of finding a tenant quicker. However, the tenant will be able to do so at any point during the tenancy as they are not bound to remain in the property for a fixed period before they can leave. As previously mentioned, landlords will only be able to evict tenants under reasonable circumstances and have evidence to support their decision.
Click to learn more about the new tenancy system.
Rent Increase Changes
Through this Bill, the Government plans to end Rent Review clauses in tenancy agreements to prevent tenants being locked into automatic rent increases that may be vague and not accurately reflect any changes in the market price. Landlords and letting agents will be allowed to raise rent prices once per year, in line with the existing Section 13 rules, but it must reflect present market rates and tenants are required to have two months’ notice given ahead of any increases. The Government will publish a new form that landlords will be required to serve tenants with to notify them of an upcoming rent increase. Should the tenant agree, they will pay the new amount once the notification period has elapsed.
Tenants will be able to challenge disproportionate rent increases under the new system, and Courts will be empowered to choose whether or not to increase rents for tenants, which will compel tenants to conduct their own research before issuing a frivolous challenge. They will also have powers to stop the Tribunal increasing the rent beyond the revised amount the landlord initially asked for.
Rights for Pet Owners
Another change proposed in the new Bill is increasing the rights of pet owners to bring their pets with them into a new rental property. Landlords can no longer unreasonably withhold consent for a tenant to bring their pet and must be required to fully explain and defend their position if they refuse. They must provide their consent or their refusal within forty-two days of the tenant’s request. This period can be extended by one week, should the landlord request further information.
It is important to note landlords will receive some additional protections under the Bill. Tenants will have to provide written confirmation they have purchased insurance for their pet or confirm they will make reasonable contributions to cover the landlord’s insurance in case of pet damage.
A New Ombudsman
The Bill may require landlords to join a government-approved ombudsman scheme that will cover all private landlords renting out property in England, including those who use letting agents. The scheme would enable current and former tenants to initiate an independent investigation into complaints they have against their landlord. The ombudsman would be empowered to compel landlords to correct the issue, whether the resolution is an apology, providing information to the tenant, taking remedial action to correct issues with the property, and/or pay compensation of up to £25,000.
The ombudsman will also be empowered to compel landlords to reimburse tenants where the service or standard of the property falls short of the minimum legislative requirements. This section of the Bill aims to protect tenants from accepting injustices such as substandard living conditions due to fear of angering their landlords and being forced from their homes.
Once an investigation has concluded, the ombudsman’s decisions will be binding on the landlord. If the complainant accepts the ombudsman’s final determination, and fail to comply with their directive, further penalties could be awarded, and repeat or serious offenders may be liable for a Banning Order.
Click to read more on a Banning Order.
A Property Portal
The Bill also aims to introduce a new digital property portal, designed to provide a single point for UK landlords to understand and demonstrate compliance with their legal requirements. Private landlords will be required to register their properties with the online portal, or face penalties enforced by their local authorities. The portal’s precise function has yet to be outlined, however it is the Government’s aim to make sure the portal is user-friendly or landlords, tenants, and local authorities and that it will be flexible enough to incorporate future policy developments. The Government have proposed the portal with the hope of reducing the number of tenants renting substandard properties from landlords, and empower all local councils to pursue and enforce against any criminal landlords. This may include a function where landlords cannot rent a property that does not meet the minimum legal requirements for rental properties in the UK.