The Renters’ Rights Bill – What now for Landlords and Managing Agents?

Richard Pulford, Senior Associate in the Dispute Resolution team, looks at the release of the Renters’ Rights Bill and what this will mean for the Private Rental Sector with the new Labour Government. 

The new Labour government have wasted no time in presenting their plan for the rental sector moving forward. In what has long been described as the biggest change since the Housing Act 1988, the new Renters’ Rights Bill does not disappoint in creating major headlines and given the provisions included, this is something that will need to be reviewed and understood by landlords and managing agents straight away. One thing that this bill makes clear is that there is no grace period or delays. This is happening and it is happening fast.

I refer you to by previous blog on the King’s speech for more information about the various areas covered by the bill. In this blog, I will instead focus on the main headline grabbing elements, and where else to start but the abolition of section 21 evictions.

Section 21 Notices

In a complete about-face from the stance of the last government who wanted to hold off the implementation until the court system was in a fit state to handle the types of claims that would inevitably come before it, the Labour government has instead chosen not to do this. Unlike past legislation which had a two-stage implementation process i.e. the Act applied from x date for new tenancies and x plus 1 year for all existing tenancies, the abolition of section 21 notices will apply straight away and apply for all tenancies whether they are currently in the middle of a fixed term, or not. By contrast, tenants will be able to serve 2 months notice at any time to end their tenancy.

New grounds for possession

With the above in mind, we were then promised strengthened grounds for Landlords to recover possession. Looking at the grounds proposed, I think landlords may have to rely on different grounds rather than strengthened:

• The mandatory grounds for possession for rent arrears has the threshold increased to 3 months outstanding (rather than 2) and the notice period extended to 4 weeks in place of the current 2 weeks.
• There are new grounds covering recovery of possession if the landlord is legitimately needing to move back in or sell the property. This will require proof and will need 4 months notice.
• There are interesting grounds added for recovery of possession when a superior lease ends (as long as the superior lease was for at least 21 years) which will be of relevance to, amongst others, mixed use commercial tenants who let out the flat above their commercial premises.
• There are also grounds for possession where the landlord is subject to enforcement action and needs to recover possession to become compliant.

Rent increases

With these rules, there is likely to an increased scrutiny on rent increases. As tenancies will be treated as periodic tenancies throughout, in order to increase the rent the landlord will need to follow the procedure as set out in Section 13 of the Housing Act 1988. This is subject to alterations as well, and given the theme of this Bill I suspect I do not need to tell you who these changes will favour.

A section 13 notice will now require 2 months notice rather than 1 and in the event of dispute, the tribunal will not be able to award an actual market rent if this is over what was demanded by the landlord. The amount asked for by the landlord is the maximum that can be awarded, even if this is below what the market rent would be. More crucial in my view is that the rent increase would be applicable from the tribunal’s decision date, not the date set out in the notice, even if the amount demanded by the landlord ended up being determined as reasonable. We have looked at the effect on timescales with the tribunal previously if there is nothing stopping or disincentivising a tenant challenging every rent increase even if the amount is not excessive. If there are inevitable delays to any rent increase determinations though the tribunal due to pure workload, this will also mean that there will be no rent increases (again, regardless of reasonableness) until the process has been completed which could increase significantly from the current estimated timeframes. The landlord would therefore need to plan significantly ahead.

We will of course go in to further detail in due course on the other relevant parts of the bill including the introduction of a new Private Rented Sector Landlord Ombudsman, creating a Private Rented Sector Database to help landlords understand their legal obligations and demonstrate compliance, giving tenants strengthened rights to request a pet in the property, applying the Decent Homes Standard to the private rented sector making it illegal for landlords and agents to discriminate against prospective tenants in receipt of benefits or with children, ending the practice of rental bidding by prohibiting landlords and agents from asking for or accepting offers above the advertised rent and strengthening rent repayment orders by extending them to superior landlords, doubling the maximum penalty and ensuring repeat offenders have to repay the maximum amount.

Conclusion

There is clearly plenty to unpack and quickly, with latest estimates that the government want this in place by next summer. It will remain to be seen if the protections built in to the bill will be enough to keep a nervous landlord in the market for much longer. 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.