Published on 16 September 2023
The Renters Reform Bill is set to introduce significant alterations to the rental market, and landlords need to be aware of the potential impacts.
While it may take some time for the Renters Reform Bill to become legislation, or it may not happen at all, it has the potential to introduce major changes that all landlords should be aware of.
The Bill includes proposals to abolish Section 21 'no fault' evictions, eliminate fixed-term tenancies, and several other key changes that may be overlooked upon initial review.
If you're not interested in sifting through legal terminology but want a clear understanding of the potential implications of the Renters Reform Bill, let's delve into what it could mean in practice.
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Abolition of Section 21 ‘no fault’ evictions
One of the key aspects of the Bill is the plan to eliminate Section 21, a provision that enables private landlords to reclaim their properties by serving a Section 21 notice to tenants.
This is commonly referred to as a 'no fault' eviction notice because landlords are not required to provide a reason for terminating the lease.
If the Renters Reform Bill is enacted, the only option for terminating rental agreements would be through the revised Section 8 grounds.
The objective of the Bill is to expand and modify the existing reasons listed in Section 8 of the Housing Act 1988, which are categorized into mandatory and discretionary grounds for possession.
Additionally, the Bill proposes new Section 8 grounds, such as allowing termination of the tenancy if the property is to be sold.
Termination of fixed-term tenancies
The Renters Reform Bill also aims to simplify the process of establishing tenancies by replacing Assured Shorthold Tenancies (ASTs) with a single system of periodic tenancies.
Currently, ASTs are the most prevalent type of rental agreement in the private rented sector. Tenants typically sign a contract for six or 12 months, and at the end of this period, a decision is made to either renew the contract or transition to a periodic tenancy, where payments are made on a regular basis, usually monthly.
The Bill, however, proposes that all rental properties should transition to a rolling monthly tenancy without a fixed termination date.
In this scenario, if a tenant decides to vacate the property, they would be required to provide two months' notice to allow the landlord sufficient time to find new tenants and minimize income loss.
Streamlining rent increases
The Bill also aims to abolish rent review clauses to prevent tenants from being subjected to automatic rent increases, among other issues. However, landlords would still be able to adjust the rent annually in line with market rates, as permitted by the existing Section 13 regulations.
To notify tenants of an impending rent increase, landlords would need to complete a new form, available on the government's official website, and then serve it to the tenants.
If tenants consent to the increase, they would begin paying the higher rent. However, if they deem the increase to be unreasonable, they have the option to challenge it through a First-tier Tribunal.
Enhanced rights for tenants to keep pets
The Renters Reform Bill also proposes granting tenants greater flexibility to keep pets, making it more difficult for landlords to deny such requests without valid justification.
If the Bill is enacted, landlords would be required to respond to pet requests within six weeks. However, landlords could request additional information, and once received, would have an additional seven days to make a decision.
If a landlord rejects a pet request and the tenant considers the decision to be unjust, they can escalate the matter to the Private Rented Sector Ombudsman or pursue legal action.
Since the Ombudsman service would be free for tenants, it is likely to become the preferred avenue for resolving pet-related disputes.
The Ombudsman (or the court) would then assess the evidence provided by both parties and determine whether the landlord should permit the pet.
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Introduction of a new property Ombudsman
The Renters Reform Bill may also mandate all landlords to join a government-approved Ombudsman scheme, irrespective of whether they use a letting agent.
This scheme would facilitate the lodging of complaints against landlords by current or former tenants, which would then be independently investigated.
The Ombudsman would have the authority to rectify issues for tenants, potentially requiring landlords to apologize, provide information, take corrective action, and/or pay compensation up to £25,000.
Landlords would be obligated to comply with the Ombudsman's decision if the tenant concurs with the final ruling.
Failure to adhere to a decision could result in a banning order for landlords, particularly for repeat or severe offenders.
Creation of a digital property portal for landlords and tenants
Another proposal in the Renters Reform Bill is the establishment of a digital property portal designed to assist landlords in understanding their legal responsibilities.
This portal would also address issues such as tenants discovering too late that they have rented a subpar property from landlords who deliberately disregard the rules.
Additionally, local councils would be better equipped to identify the responsible party when serious issues arise.
Conversely, this platform would enable responsible landlords to demonstrate their commitment to compliance, making them more appealing to prospective tenants.
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Initial draft of the Renters Reform Bill
It is important to note that the current version of the Renters Reform Bill is merely an initial draft, and it is likely to undergo modifications as it progresses through Parliament.
Presently, the Bill is at the 'second reading' stage in the House of Commons. However, this phase will not commence until after the summer recess concludes on Monday, September 4th.
Staying informed about these forthcoming changes is crucial for landlords striving to maintain a solid presence in the rental market while adhering to legal requirements.
By being well-prepared, landlords can ensure not only the seamless operation of their rental activities but also their continued success.
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