On 17 May 2023, the Renters (Reform) Bill (the Bill) was introduced to Parliament, seeking to legislate the proposals discussed in the Government's June 2022 white paper.
We have reviewed some of the substantive changes proposed to private renting by the Bill to consider whether this amounts to a radical revolution for renters and landlords.
What changes are proposed?
Abolition of assured shorthold tenancies (ASTs)
The most fundamental change is the abolition of ASTs; instead, tenancies will be assured shorthold tenancies continuing on a periodic basis, on a monthly rolling basis. It will no longer be possible for assured tenancies to be for a fixed term. If a tenant wants to move out, they will need to give their landlord at least two months' notice.
Abolition of no-fault evictions
Another significant change is the abolition of notices pursuant to section 21 of the Housing Act 1988 (the 1988 Act) ie section 21 notices which terminate ASTs on or after the expiry of the fixed term without any requirement of fault on the part of the tenant.
Expansion of possession grounds
To counterbalance the abolition of section 21 notices, the following non-exhaustive changes are proposed to grounds for obtaining possession pursuant to section 8 of the 1988 Act:
- New mandatory ground for repeated rent arrears. This makes eviction mandatory where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears balance at a possession hearing.
- Landlord selling property. This makes eviction mandatory where a tenant has been in a property for at least six months and the landlord intends to sell the property.
- Landlord/their family want to move in. This makes eviction mandatory where a tenant has been in a property for at least six months and either the landlord or its family require the property for use as their principal home. This broadens the existing ground which requires landlords to give tenants prior notice (usually in the body of a tenancy agreement itself) that it may rely on this ground; this has been dispensed with.
Rent review
Landlords will be required to give at least two months' notice of an intention to increase the rent and can only exercise this once a year. If the tenant wishes to challenge the increase on the basis that it is disproportionate, it can apply to the First-tier Tribunal for a determination. This function is broadly similar to the existing rights under section 13 of the 1988 Act.
Regulation
All private landlords will be required to join a Private Rented Sector Ombudsman scheme which will deal with disputes between landlords and tenants, with powers to award compensation and ban landlords from letting in serious circumstances.
Landlords will also be required to sign up to a Privately Rented Sector Database and will be unable to let properties until they have done so.
Pets
A term will be implied into every assured tenancy which entitles a tenant to keep a pet in the property, subject to landlord consent which cannot be unreasonably refused. Landlords can require tenants to pay their reasonable costs in maintaining insurance to cover the risk of pet damage or require the tenants to take out equivalent insurance cover themselves.
Our comments
Assuming that the Bill becomes an Act, it will certainly revolutionise the private rental sector by abolishing fixed term ASTs. However, removing no-fault evictions may result in a proportion of landlords no longer being willing to let properties due to a perception that they will find it more difficult to get possession of those properties back. Consequentially, this could push up rents by strangling an already limited supply of rental accommodation. Whilst the Bill does attempt to expand the grounds upon which possession can be obtained, landlords will be all too aware that the Court system can be time-consuming and expensive.
From the perspective of tenants, enhanced regulation and a relaxation towards allowing pets in rental accommodation is a positive step and the abolition of section 21 notices will be welcomed.
We will be closely watching the passage of the Bill through Parliament, which is likely to take a significant amount of time, before it becomes an Act. If you have any queries regarding the proposals in the Bill, please don't hesitate to get in touch.
