COMING SOON... The Renters' Reform Bill
The Renters’ Reform Bill will result in a monumental shake-up of the private rented sector, probably the biggest in 30 years. Since initial consultations in April 2019 and the publication of its policy paper in June 2022, the proposals have still not been passed into law. So where are we now and what do the changes mean for landlords and tenants?
What is the Renters’ Reform Bill?
In April 2019, after a consultation period about reforming the Private Rental Sector in England, the government set out a blueprint that would deliver a “fairer, more secure, and higher quality” set of rules.
A white paper followed in June 2022; 'A Fairer Private Rented Sector', introducing what Michael Gove called a “New Deal” for 4.4 million households under the care of private landlords.
However, we have heard nothing regarding when the Bill will formally become law across the country. While the government has said it remains committed to the reforms outlined in the white paper, no date has been confirmed although it is expected to be introduced in the current session of Parliament, which ends in May 2023.
The Main Points
- The reforms will ban Section 21 evictions and extend the Decent Homes Standard to the sector.
- It will also end what it calls “arbitrary rent review clauses, give tenants stronger powers to challenge poor practice, unjustified rent increases and enable them to be repaid rent for non-decent homes.”
- It will be illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.
- It will make it easier for tenants to have pets, a right which the landlord must consider and cannot unreasonably refuse.
- All tenants are to be moved onto a single system of periodic tenancies, which in the government’s words mean “they can leave poor quality housing without remaining liable for the rent or move more easily when their circumstances change.”
- A tenancy will only end if a tenant ends or a landlord has a valid reason, defined in law.
- There will be a doubling of notice periods for rent increases and tenants will have stronger powers to challenge them if they are unjustified.
- The government says it is also “giving councils stronger powers to tackle the worst offenders, backed by enforcement pilots, and increasing fines for serious offences.”
- There will also be a new Private Renters’ Ombudsman to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.
- What the government calls “responsible landlords” will be able to gain possession of their properties efficiently from anti-social tenants “and can sell their properties when they need to.”
- There will be a new property portal that will “provide a single front door to help landlords to understand, and comply with, their responsibilities as well as giving councils and tenants the information they need to tackle rogue operators.
The Government says: “These reforms will help to ease the cost of living pressures renters are facing, saving families from unnecessarily moving from one privately rented home to another hundreds of pounds in moving costs. We have already taken significant action over the past decade to improve private renting, including reducing the proportion of non-decent private rented homes from 37% to 21%, capping tenancy deposits and banning tenancy fees for tenancy agreements signed after 1 June 2019".
Rent Reforms - Tenants
Looking at the above list of reforms, on the face of it, it looks like the changes are going to benefit tenants enormously:
- The removal of Section 21 ‘no-fault’ evictions;
- Extending the Decent Homes Standard to cover the private rented sector.
- Giving tenants stronger powers to challenge landlords and claim back rent where homes don’t meet the Decent Homes Standard.
- Strengthening the current bans on not renting to tenants with children or those receiving benefits under consumer protection law, by making it explicit under property law.
- Stopping landlords from refusing a tenant’s request to have a pet in the property without a good reason, but allowing them to require the tenant to get insurance to cover any damage.
- Requiring standard tenancy agreements to be a periodic tenancy with no end date.
- Allowing tenants to terminate their tenancy at any point with two months’ notice.
- Preventing landlords from ending a tenancy and evicting a tenant without going to court with a valid reason, defined in law, such as rent arrears, anti-social behaviour or needing to sell or occupy the property.
- Creating a new Private Renters’ Ombudsman to settle disputes between private renters and landlords at a lower cost than going to court.
- Requiring landlords and agents to give tenants two months’ notice of any rent increase and allowing tenants to challenge the rent increase through the Private Renters’ Ombudsman, who can decide if the rent increase is too high.
However, the one thing that will happen if these measures result in landlords selling their buy-to-let's, RENTS WILL INCREASE FURTHER. This is an economic fact if landlords continue to leave the private rental sector.
Although investing in property is still a good long-term strategy, the number of property owners choosing to withdraw is growing. The majority of landlords are not, in fact, wealthy, multi-property owing rogues as portrayed by many groups. In fact, just over 40% of landlords own just one buy-to-let property and these reforms, coupled with years of tax increases and additional regulatory requirements, is simply going to force many of them to sell up.
Supply decreases, demand remains the same, rents WILL rise.
The private rental market is already under massive pressure as tenants outstrip rental properties and there is no incentive for any new property investment.
Rent Reforms - Landlords
Not withstanding everything that has been said above, the overwhelming issue for landlords is the abolishment of Section 21. However, landlords should not be downbeat about the scrapping of Section 21 eviction powers as proposed in the rental reform White Paper.
Paul Shamplina, founder of Landlord Action and Chief Commercial Officer for the Hamilton Fraser Group states: “Whilst this will be unnerving for some landlords, the reality is that this has been a long-time coming and I believe those landlords who are committed to buy-to-let will remain".
“The changes offer tenants greater security as part of a plan to create longer tenancies. However, implementing more mandatory grounds of possession under Section 8 should also strike a chord with tenants, demonstrating that rent arrears, criminal and anti-social behaviour will not be tolerated. Previously, landlords have used Section 21 in these cases because trying to collate witness statements from co-tenants and neighbours has been challenging and often fruitless where the ground was discretionary. Knowing this procedure is mandatory will mean a judge has to grant possession as long as the requirements are met and evidence provided.”
He adds: “I welcome the new mandatory ground for repeated serious arrears to prevent tenants paying off a small amount of arrears to stay below the eviction threshold. However, I believe falling into series arrears twice in three years should be sufficient enough for mandatory eviction rather than the proposed three cases."
“It is positive news that the changes have not been rushed in and the transition will be in two stages with at least six months' notice of the dates that they will take effect, and at least 12 months between the two dates. With concerns surrounding the cost of living, rising interest rates and impending changes to EPCs, I do think it is likely we will see an initial spike of landlords using Section 21 before the changes come in, of which the unintended consequence will be that perfectly good tenants will be evicted".
“However, much of what had been announced was expected. It will take time for landlords to adapt and understand the new rules but as with everything, the market will adjust and find its new norm.”
Rent Reforms - The Private Rental Sector
The Government reforms CAN increase the possibility of a much more 'professional' Private Rental Sector, however, two recurring problems will rear their heads as they have done previously; lack of enforcement due to inadequate resources and funding and an overwhelmed court system despite an ongoing promise to streamline processes.
Section 21 will be abolished. However, there will be a strengthening of mandatory grounds for eviction under Section 8. This will result in evictions being dealt with through the courts under Section 8 with more predicted backlogs.
Also, it seems that the courts will also have to preside over certain rulings from the proposed Private Renters’ Ombudsman, which, again, will add to an already heavy court workload. There is also no clarification on who will fund this new Ombudsman - a landlord subscription or the local taxpayer maybe? Also, as the Private Renters' Ombudsman will also decide on whether rent increases are fair or not, they will undoubtedly be very busy.
Our Message to Worried Landlords
Increasing regulation in the Private Rental Sector is nothing new, but the potential volume and complexity of upcoming changes means that self managing landlords are going to be under increasing pressure to adhere to the legislation.
At Professional Properties, we CAN help landlords navigate the new landscape. Although it will become much less viable to manage your investment passively, we believe that the future is bright for the sector and buy-to-let investment will continue to be a sound investment which provides a regular income as well as capital growth.
We have the professional and managerial expertise to maximise the return from your investment, protect you from the penalties of non-compliance and ensure that tenants have a positive renting experience.