On 11 September 2024 the new Labour Government published the Renters' Rights Bill, its first piece of legislation to affect the property industry. A vast amount has been written about the subject of rental reform over the last 5 years. Readers will likely be very familiar with the proposed abolition of Section 21 "no fault" evictions, the right for tenants to request a pet, and the introduction of private rented sector database and landlord redress schemes.
This update sets out the key points and explains what's new in what the Government has billed as its "Landmark reforms to give greater security for 11 million renters".
There are undoubtedly several changes that will further benefit tenants, offering them greater security of tenure and better conditions, but there may be some areas of concern to responsible landlords.
Tenure - All tenancies will be periodic assured from commencement, with tenancy periods not to exceed 1 month. There will no longer be the two stage commencement provisions for new and existing tenancies. A tenancy will only retain its assured shorthold status where a section 21 notice has been served before the commencement date and remains live. This is in keeping with the manifesto promise to immediately abolish section 21 evictions for all tenancies. Given the Bill is likely to become law fairly swiftly, this could potentially see a short term increase in the use of section 21 by landlords considering exiting the rental market.
Notice to Quit by the tenant – a tenant will be able to give notice to terminate a tenancy from day one. The default notice period will be 2 months. The parties may agree a shorter notice period, but any contractual provision for a longer notice period will be deemed to be invalid. There is concern amongst landlords that some tenants may take advantage of these provisions, using properties as a cheaper form of short-let accommodation, particularly in city centres and tourist spots. The tenant's notice can be withdrawn only by consent.
Arrears grounds – all rent arrears grounds will now require a 4 week notice period (currently 2 weeks) and for the mandatory ground (Ground 8) there will now need to be at least 3 months' (currently 2 months') or 13 weeks' (currently 8 weeks') arrears, both at the date of service of the notice and the possession hearing. A tenant could therefore have accrued 4 months' arrears before a landlord can submit a claim to Court for issue. Given that there have not been any reforms to the overloaded Court system and there are very substantial delays in hearing possession claims and enforcing possession orders, this could result in considerable rental losses for landlords. The previously proposed additional ground for repeated arrears cases has been scrapped.
Notice periods – non-fault grounds will require a 4 month notice period (currently 2). This includes the existing grounds for redevelopment and sale by a mortgagee, as well as the new ground for sale by the landlord and the revised ground for occupation by the landlord or landlord's family (neither of which can be used in the first 12 months of the tenancy). Where these new grounds are used, the property cannot be advertised for rental or re-let for 12 months, with local authorities empowered to impose fines of up to £7,000 in the event of any breach.
Rent levels – as anticipated, the Bill is designed to put an end to "bidding wars" by providing that properties must be marketed for letting with an advertised rent level, with a prohibition on inviting or encouraging any person to pay, or accepting a higher sum. The local authority may impose a financial penalty for any breach. However, it is thought that this could create its own problem in terms of landlords advertising properties at a higher than market rent to see what the best rent they can achieve is.
Rent increases – all rent increases in the private sector will need to be by statutory process under section 13. Any contractual provisions for increasing the rent will be deemed invalid. The section 13 notice period will increase from 1 month to 2 months. If a tenant exercises their statutory right to refer the rent to the Tribunal for determination of a market rent, the new rent will be set at the lower of the rent proposed by the landlord and the determined open market rent. In other words, the rent can't be increased by this process, so the tenant has nothing to lose in challenging any rent increase. The new rent won't be payable until at least the date of determination (the Tribunal has discretion to postpone this for up to 2 months in cases of hardship). The Tribunal's jurisdiction will also be extended to deal with the validity of section 13 notices, as well as the determination of market rent, so Tribunals are perhaps likely to see an increase in workload.
The PRS Database – the concept of a database to capture information about landlords, agents and properties (but not tenants) is not a new one. Neither is the prohibition on marketing or letting a property prior to registration. However, the new Bill now bolsters the enforcement of this requirement by imposing a restriction on gaining possession where a landlord has failed to comply (with ASB cases being an exception to this). The database is expected to include information on regulatory requirements (such as EPCs and gas safety certificates) so this will effectively take the place of the current AST Regulations in terms of ensuring non-compliance is a bar to possession.
Rent Repayment Orders – these are already an effective tool in terms of punishing unscrupulous landlords, such as those who fail to ensure that their properties comply with health and safety requirements. The Bill contains provisions to extend the offences that will be covered by RROs to include misusing possession grounds, breaching restrictions on marketing and letting properties or continuous failures to register with a redress scheme or registration on the PRS database. It will also double the maximum period within which a tenant or council can apply to 2 years and double the maximum penalty. There are also provisions to make superior landlords and company directors of corporate landlords liable.
Awaab's Law - The Social Housing (Regulation) Act 2023 inserted new Section 10A into the Landlord and Tenant Act 1985, stating that there would be a new implied term in all qualifying leases that a social landlord must comply with "all prescribed requirements that are applicable to that lease". The Regulations, once enacted, were set to impose strict deadlines for social landlords to investigate, report on, commence and complete works where a hazard within a property poses a significant risk to the health and safety of the occupants. The proposals were that there would also be rules on decanting tenants where a property poses a risk, in respect of emergency repairs and on record keeping.
The Renters Rights Bill proposes to widen the scope of the upcoming Regulations so that Awaab's Law applies not just to social landlords but to the Private Rented Sector as well.
Breaches of Awaab's Law will entitle tenants to seek compensation from their landlords and many private landlords will be concerned over whether this will lead to an influx of claims against them.
Decent Homes Standard - Something else which the Bill proposes to extend into the Private Rented Sector is the Decent Homes Standard, which sets minimum standards for the condition of rented properties. The Bill amends the Housing Act 2004 to provide enforcement mechanisms where the Standard is breached, namely enforcement notices and fines of up to £7,000 (or up to £40,000 for breaches of previous enforcement action).
Conclusion
The Bill certainly appears to have stronger protection for tenants than its predecessor but in its current form does raise concerns for some. The absence of any meaningful proposals to date on Court reforms should be of concern to both landlords and tenants, as landlords' rights to evict and tenants' rights to pursue claims will only be effective if there is a functioning Court service to enforce them in a timely manner.
The Government has said the Bill will be enacted by the summer of 2025. The impact of the Bill upon the availability of housing and rent levels in the private sector is likely to be closely scrutinised in the years to come.
