The Renters (Reform) Bill has been talked about for many years. We have been provided small, periodic updates from the government as to what will be included. Starting with the initial headline grabbing title of abolishing section 21 notices and eventually following the release of the recent white paper, we knew what was likely to be included but the question many in the industry have been wondering is how will this all come into force. We now have our answer with the release of the Renters (Reform) Bill in full.
This blog will be an overview of some of the main talking points from the Bill. The Bill itself covers a multitude of other topics that many have varying degrees of applicability to property portfolios, and so a full review of the bill is recommended by anyone who is affected. Over subsequent weeks and months, we will go into detail on some of the topic areas to assess not just what the legislation says, but what effects this may have on the day to day managing of the rental market.
It is worth noting that for the time being this is just a bill. There are inevitably going to be changes and additions as it goes through the parliamentary process. Some sections are already highlighted as needing secondary legislation in the coming years. We will do our best to keep up with these while this process moves towards royal assent.
Grounds for Possession
With the abolition of ‘no fault’ section 21 notices, the options for recovery of possession by other means has increased. A number of new grounds have been added or existing grounds added to. Mandatory grounds for possession for when the landlord wants possession back for a family member to live in or when they want to sell the property are probably going to be the grounds substituted into the average landlord’s options in place of section 21. The result of this unfortunately is that these rounds will likely to be abused by some landlords looking for a simple alternative to no fault notices when there are no other suitable grounds available. Little in the way of proof is required and whilst there are serious financial penalties for improper use, oversight would probably require the exiting tenant to monitor because otherwise, who is to know that the property is let out again straight away afterwards.
The other ground that landlords will be happy to see is a new mandatory ground (ground 8A) for persistently late rent. The new ground states:
‘Within a three year period ending with the date of service of the notice under section 8—
(a) if rent is payable monthly, at least two months’ rent was unpaid for at least a day on at least three separate occasions,
(b) if rent is payable for a period shorter than a month, at least eight weeks’ rent was unpaid for at least a day on at least three separate occasions.’
So, if a tenant’s intent is to let the arrears get to the 2 months and pay off partial amounts every month to get the arrears below the 2 month limit thereby removing mandatory grounds for possession, this will no longer be a defence and possession will be required if court action is started.
Tenant’s Notice to Quit
Whilst the landlord is not entitled to serve a no fault notice seeking possession, tenants will still have the ability to do so by serving a notice to quit. This will require a minimum of 2 months notice to be provided. And can be served at any time. This gives tenants maximum flexibility.
Rent reviews cannot be included as a contractual provision in the lease. Therefore, the only way to increase the rent will be via service a section 13 notice. This is a process that will be known to many landlords and agents already as it is a staple of residential landlord and tenant law. However, there is one key practical difference here. The notice increasing rent can be challenged and referred to the property tribunal where market rent can be determined. So far, the same as before. However, at the moment this is rarely used by tenants because they will know that they risk the landlord simply serving notice seeking possession if they do not get the rent increase they are after. Now there is seemingly little incentive for the tenant to agree to a new rent and might as well try to ‘chance their arm’ at the tribunal. This, in theory, appears like a good thing. The landlord should be able to justify the rent they are proposing to charge. The issue comes in that very reasonable rent increases made by well-intentioned landlords will be subject to the same legal costs of tribunal proceedings that would come from a rogue landlord looking to double the rent chargeable without justification to force the tenant to just leave. This will certainly increase the workload for the tribunal and unless suitable funding goes to cover this issue (I am not going to hold my breath for that) then significant delays will be unavoidable.
The deposit protection laws will continue. There was debate that if assured shorthold tenancies were not long for the world, then this may mean the same for deposit protection. This is not the case. Deposit protection will now also be required for the assured tenancies created following the Renters (Reform) Bill coming into force. Given the structure of the Assured tenancies (periodic from the outset) that will be created, it will avoid the risk many landlords or agents face with multipliers of the deposit penalty when mistakes were made at the beginning and not corrected before extensions were entered into. For more detail on this, refer to our previous blog on the topic.
In addition to this, failure to register the deposit will now be a defence to a claim for any of the other ground for possession. Although this is with the caveat that time is not of the essence when protecting the deposit to then be able to serve a valid notice seeking possession. Therefore late protection would create a penalty amount as payable, but would not impact recovery of possession.
The Pets sections are a bit of a disappointment. Mainly in that, as I suspected would be the case, there were already protections against unreasonably refusing the keeping of a pet, we covered this in my past blog. All this Bill seems to do is re-confirm those same rules with the landlord still able to refuse on numerous grounds. One additional element is that landlords can request that the tenant take out insurance to cover damage from pets or alternatively reimburse the landlord for insurance of their own for the same purpose. This potentially creating less reason to reasonably refuse pets. This change will require an alteration to the Tenant Fees Act which in its current form would conflict with this entitlement.
Landlord Redress Scheme
Landlords will need to sign up to a redress scheme in the same way that letting agents do. The details of this part are limited and will be subject to secondary legislation which is to be understood at this stage. Nonetheless with initial penalties of £5,000 and £30,000 for subsequent repeat offenses, landlords would be well advised to monitor the developments.
As mentioned previously, the above is just a snapshot. The Bill as a whole is a significant change to the fabric of residential landlord and tenant relationships. There is plenty more to dig into which we will continue to do over the coming months. With the ever-increasing obligations being imposed on landlords and managing agents, if any guidance or advice is required, we would be happy to help. You can contact me at [email protected]
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.