Case Summary
The Renters’ Rights Bill (the “Bill”) introduced by the Labour Government on 11 September 2024, is intended to make substantial changes for the rental market. The Bill has been given its first reading in the House of Commons and now needs to be scrutinised and passed into law. The Second Reading, where MPs will debate the Bill, is scheduled for 9 October 2024. The impact of the legislation, once passed, will be felt far and wide and whilst undoubtably increasing rights of renters and ensuring improved conditions and certainty, will cause some landlords to evaluate the cost of these changes and how it impacts their investments.
Section 21 Evictions
Currently, Section 21 of the Housing Act 1988 (“HA 1988”) enables private landlords to terminate a tenancy agreement without having to provide any reason and/or establish fault on the part of the tenant, commonly known as ‘no-fault’ evictions. A Section 21 notice requires the landlord to provide the tenant with 2 months’ notice to leave the property and if the tenant does not leave, it is mandatory for the court to make a possession Order.
One of the main changes proposed in the Bill is the abolition of Section 21 Notices. Landlords will no longer be able to evict tenants from their properties at short notice and without a valid, legally defined reason. The tenancy will end only if the tenant chooses to leave the property by providing 2 months’ notice, or if the landlord has a valid reason, as defined by law under Ground 8, Schedule 2 of the HA 1988. Such grounds for terminating the tenancy are being expanded and will include the landlord wanting to sell the property, redevelop the property, landlord/family moving into the property and where the tenant is at fault, including where a tenant commits antisocial behaviour, has damaged the property or is in significant rent arrears. The grounds to evict a tenant for rent arrears are being widened and the tenant will have to have at least 3 months’ rent arrears, as opposed to 2 months, both at the time the notice is served and at the time of the possession hearing. Furthermore, the notice period for the rent arrears will be increased from 2 weeks to 4 weeks.
Rent Increases
Under the Bill, landlords can only increase the rent once a year, which must align with market rates by serving a ‘Section 13’ notice, setting out the new rent and giving at least 2 months’ notice of it taking effect. The Bill introduces a prohibition on landlords asking for, or accepting offers, above the advertised rent price which will ultimately stop rental bidding wars.
Tenants will be able to challenge unreasonable rent increases which exceed the market rate at the First-tier Tribunal, who will determine what the market rent should be. The government’s aim is essentially to prevent backdoor means of eviction, while ensuring that rents can be increased to reflect current market rates.
Tenant’s Pets, Families and Benefits
The Bill is intended to make the market fairer by preventing landlords from discriminating against tenants who have children or receive benefits. The Bill will ensure that terms in mortgages and superior leases, which restrict the letting to private tenants who do not have children or do not receive benefits, have no effect. As such, if tenants do have children or are in receipt of benefits, the lender or landlord cannot claim a breach of contract even if the contract expressly prohibits this.
In addition, tenants will have the right to request to keep pets in their homes, and landlords will need a good reason to refuse such request.
Awaab’s Law and the Decent Homes Standard
Awaab’s Law will now apply to private rentals whereby landlords must fix serious hazards in their properties, such as dampness or mould, within a set timeframe, otherwise landlords will risk certain penalties.
The Decent Homes Standard will also apply to private rentals, ensuring properties are safe and habitable. If a privately rented property fails to meet the requirements under the Decent Home Standard, the local authority will be able to take enforcement action, such as the issue of civil penalties of up to £7,000.
Leases over 7 Years
In accordance with the HA 1988, long leases can currently be deemed as Assured Tenancies in certain circumstances, as such, the Court would be mandated to grant a possession Order where there are significant arrears. The Renters’ Rights Bill proposes that any lease with a fixed term over 7 years can no longer be an Assured Tenancy. This will put an end to the issue of mandatory possession claims for rent arrears in long leases where ground rent is payable which exceeds certain limits.
The Private Rented Sector Database
What was previously called the ‘Property Portal’ will now be renamed as the ‘Private Rented Sector Database’. All landlords of assured and regulated tenancies will be legally required to register themselves and their properties on the database or face financial penalties and/or criminal prosecution.
Commentary
The Bill is expected to become law by the summer of 2025 and understandably, whilst tenants’ delight, landlords are concerned about how the proposed changes will affect their ability to manage and/or recover their properties. With the private rented sector becoming increasingly over-regulated, it is likely that many landlords will leave the market or turn to less regulated and more profitable sectors, such as Airbnb’s, which may impact the housing crisis further as there will be fewer properties being available for rent. In addition, whilst section 21 notices still exist, we may see an increase in possession actions in the short term.
For further information, please contact Kate Rigby or the Partner with whom you usually deal.
