A Deep Dive into The Renters Reform Bill
The new Renters (Reform) Bill has had its first reading in Parliament so we now have some more detail on the various clauses. Daren has recorded a video in which he looks at the primary clauses in the Bill and also offers his thoughts on how this will affect landlords, tenants and the private rental sector. You can also read his thoughts below..
What is the Renters Reform Bill?
The long awaited Bill was first discussed in 2019. A policy paper was published in June 2022 and now the Bill has had its first reading. Once the bill does become law it will lead to a monumental shake up of the private rental sector in England.
It is very important to understand that the Bill not come into force for a significant period of time.
The second reading of the Bill will probably be in early June and, after it's reading, Labour, as the official opposition party, will respond.
After that, it goes to a Committee stage where a panel of MP’s look at each clause in detail and can consider any amendments put forward.
Then, we go to Report stage when, in the House of Commons, any amendments to the Bill are discussed.
Lastly comes the Third reading. Yet another discussion on the amended Bill. At this stage, no further amendments are allowed.
As if that isn’t enough, the whole process is pretty much mirrored in the House of Lords.
Finally, the Bill receives Royal Assent, and becomes law.
So, effectively, it is still a working document and subject to change.
Personally, I suspect that it will happen in 2024. If previous government actions are anything to go by, the Bill will be introduced for new tenancies initially, followed by a period of time before existing tenancies are affected.
Will section 21 be abolished?
Yes. The bill will abolish Section 21 notices.
This has long been the main focus of the Bill and was one of the governments commitments when the Bill was first consulted on in 2019.
However, as I’ve already said, this will apply initially to new tenancies only and then later on to existing tenancies.
If a Section 21 notice has been served before the act comes into force, the tenancy will continue to be an Assured Shorthold Tenancy, and the notice will be valid until it either expires or a possession is obtained.
How will I regain possession?
A Section 8 notice will need to be served to end a tenancy and obtain possession.
With a Section 21 notice, no reason had to be given to give notice to the tenant. Hence the term ‘No fault’ evictions. With a Section 8 notice, you are required to specify the reason why you are seeking possession of the property.
To protect landlords so that possession can be obtained when necessary, the bill includes a number of changes to the current Section 8 possession grounds.
The additional grounds are;
- The landlord wants to sell the property;
- A family member is moving into the property;
- The tenant has been in at least two months of arrears at least three times in the last three years.
- The landlord has been served with an enforcement notice by the local authority and needs possession to comply with the order
These new grounds are mandatory grounds. This means that a court must grant possession if the specific ground can be proven.
Other mandatory grounds will remain in force, such as -
- The landlord intends to move back into the property
- The tenants have no right to rent.
- The tenant has been convicted of severe anti-social behaviour
Before recoding this video I had a look at the Section 21’s that we have served over the last 6 months. There were 34 in total and all of them were because of the reasons I have already mentioned. None of them were a ‘no fault’ eviction.
What type of tenancy will become law?
There will be no more Assured Shorthold Tenancies or Fixed Term tenancies.
The AST will be replaced by periodic assured tenancies.
Will I have to give the tenant a new tenancy?
As it stands at the moment, the Bill doesn’t require a landlord to provide updated contract terms if the tenancy existed before the Act comes into force and the tenant has already signed a tenancy agreement.
However, the likelihood is that you will have to provide some mandatory information to your tenants when the Bill comes into force and the assured shorthold tenancy becomes a periodic assured tenancy.
I would suggest this will be a government produced document similar to the ‘How to Rent’ guide issued to tenants at the start of a tenancy.
What notice will a tenant have to give to end the periodic tenancy?
The tenants will be able to give up to two months' notice to end the contract at any time and it may also be withdrawn if the landlord agrees.
Will I still have to protect the deposit?
Yes. Nothing will change with regards to the Tenancy Deposit. The deposit will still need registering within 30 days of receipt. The same penalties that apply now will still apply if the deposit isn’t registered or prescribed information is not provided.
Unlike Section 21 notices, you can register the deposit after the 30 day time limited to be able to serve a Section 8 notice but the financial penalty for late protection will still apply.
Must pets be Allowed?
No. Allowing pets is not obligatory.
However, it will be an implied term in the tenancy that a tenant can have a pet in the property if they ask for consent in writing and receive the landlord’s consent.
Under normal circumstances, landlords will be required to fully consider all requests and must grant, or deny, permission in writing on or before the 42nd day after the date of the request.
Just to reiterate, provided there are reasonable reasons to refuse a pet, you are not obliged to allow one.
If a landlord does agree to allow a pet in the property, the tenant may be charged for either the costs of the pet insurance that the landlord takes out, or the tenant is required to have their own pet insurance.
The Tenant Fee Act 2019 will be amended to reflect this.
Will I have to register my properties on a database?
Yes.
Currently, the Bill lacks the finer details of what information must be included but this is assumed to be things like landlord details, their compliance history including any fines or penalties, details of the rental property and probably much more.
Once it is created, landlords or agents must register the property if it is to be advertised and marketed to tenants. If a landlord fails to join the database or a property isn’t registered, fines up to £5,000 can be issued by the local authority. Repeat offenders could be fined up to £30,000.
Letting agents will also need to check if a landlord and property are correctly registered on the database before they market a property for let. Agents could also face penalties if they market properties to let which are not registered.
The bill does include provisions for fees to register, but not what they will be.
Local authorities will be able to access this portal to view the information which does beg the question whether licencing schemes will be necessary in the future.
We’ll have to wait and see on this one.
Will I have to join a redress scheme as well?
Yes.
According to the Department for Levelling Up, Housing and Communities, the Bill will require all private landlords who rent out property in England to join a government approved redress scheme, regardless of whether they use an agent.
As with current redress schemes for letting agents, landlords must comply with any decision by the Ombudsman.
Not joining the scheme or failure to comply with any decision given will result in expulsion as well as possible fines – again, £5000 up to £30000.
What is the Decent Homes Standard?
The government has committed to introducing the Decent Homes Standard to the private rented sector. It currently applies to social housing only.
However, it is not referenced in the bills first reading but will be introduced separately 'at the earliest available opportunity'.
Will court reform be part of the bill?
This is a big one for me.
Court reform is not a specific part of the Bill, however, the Secretary of State has said that they will 'align the abolition of section 21 and new possession grounds with court improvements. This includes end-to-end digitisation of the process and our work with the courts to explore the prioritisation of certain cases, including antisocial behaviour.'
Court reforms have to happen with the abolishment of section 21 and the added grounds of Section 8.
Landlords need to be confident that they can seek possession where there is a genuine requirement.
In Conclusion
Firstly, a message to landlords; don’t panic!
I don’t believe that there is anything in the Bill that should alarm good, compliant landlords with properties that are in a suitable condition to rent to tenants.
We will obviously keep you posted with any updates from the second reading of the bill expected in early to mid June.
The Bill, when it does eventually come into force, will only be effective if landlords and tenants are both aware of and understand their rights and responsibilities.
As a letting agent, we always try and keep all landlords informed of any changes in legislation.