Over the course of the last few years, there has been much discussion and many mooted changes to the rights and obligations of landlords and tenants of residential properties, but little meaningful change has occurred. We previously wrote about the proposed reforms here.
However, following the introduction to Parliament of the Renters’ Rights Bill on 11 September 2024, an overhaul of the system now seems to be in sight. According to Deputy Prime Minister Angela Rayner, there will be “no more dither and delay” in scrapping so-called Section 21 “no-fault” evictions.
We have continued to closely track the progress of the proposed legislative changes and explain some of the key points regarding what’s new in the Government’s plans.
No fault evictions
The previous government’s bill had been amended to delay the proposed ban on Section 21 “no-fault” evictions until the court system had been reformed/improved. Substantial reform of the court system is yet to take place, and anecdotally, delays in the issue and resolution of claims are worsening. Despite this, the bill now proposes that section 21 “No fault” notices to evict tenants, will be banned from the date the bill comes into force. Landlords will then only be able to end tenancies in specific circumstances using a “section 8” ground for possession. Those grounds include where the tenant is at fault, or if the landlord needs to sell the property.
Landlords who are currently minded to exit the market will likely find it easier if they serve “no fault” s21 notices on their tenants before the new legislation comes into force.
Notice periods
The notice period required for a notice served on a non-fault ground (such as a landlord’s intention to sell) will increase to 4 months, apparently to reduce the risk of homelessness.
A tenant would need to have at least 3 months’ arrears before a landlord can apply to evict them for non-payment of rent. If delays in the court system persist, a tenant could be significantly in arrears before the landlord obtains possession of the property.
Landlord database
Landlords must already comply with a myriad of statutory requirements when renting properties, such as providing gas certificates, EPCs and ensuring deposits are registered. In addition, all landlords of assured and regulated tenancies would need to register themselves and their properties on a new database (and for which a fee will be payable).
Penalties could apply if a landlord markets or lets out a property without registering it on the database and providing the database with the required information. Landlords in breach of the duty to register on the database will only be able to get a possession order if relying on ground 7A or ground 14 (tenant anti-social behaviour).
Ombudsman
The previous government’s reform bill suggested that a new landlord redress scheme would be created. The new government has added further detail to that proposal. All private landlords of residential properties let on assured or regulated tenancies will also be required by law to join a new Private Rented Sector Landlord Ombudsman Service. Landlords will likely have to pay to join it. They will also have to comply with ombudsman rulings on their tenant’s complaints. While this is yet another requirement for a landlord to meet, hopefully, there will be some benefit as it could act to alleviate some pressure on the overburdened Court system.
Rent increases
We noted in our previous update that the proposed legislation intended to restrict landlords’ rent. increases This is important to this government too. Any contractual provisions for increasing the rent will be deemed invalid.
Landlords will be able to increase rents once a year to the market rate, by serving a “section 13” notice, giving details of the new rent and giving at least 2 months’ notice before it takes effect.
Tenants can apply to the First Tier Tribunal (Property Chamber) to challenge the landlord’s proposed rent increase if they think it is more than “market rate”. If the new rent is not agreed between the parties and an FTT determination is needed, the new rent won't be payable until at least the date the FTT has determined it.
Given the FTT cannot increase the rent beyond what the landlord proposes, if the tenant faces no adverse costs risks when making an application to the FTT, an application to the FTT, may in some cases seem like an attractive option to a litigious tenant. If there is an influx of such applications to the FTT and no reform/ additional resource in the Court system, awaiting a determination may also be time-consuming and substantially delay the date from which a higher rent is paid.
Tenure
Fixed term tenancies will be banned. All tenancies will be periodic tenancies from the date they are granted, and all existing tenancies will convert to periodic tenancies from the commencement date.
Penalties
Landlords who fail to comply with the new rules might face an array of penalties, including fines and rent repayment orders. Initial or minor non-compliance with the legislation could lead to a landlord incurring a penalty of up to £7,000, and serious, persistent, or repeat non-compliance could lead to a penalty of up to £40,000 (or a criminal prosecution with an unlimited fine).
Rent repayment orders with a maximum penalty of 2 years’ rent can also be imposed.
Further detail on the proposals is available here.
While these measures will undoubtedly help to protect tenants, particularly from rogue landlords, the changes outlined above will serve to substantially increase the red tape restricting the actions of residential landlords. Will that help the sector in the long term? Time will tell. The real risk, it seems, is that the amount of red tape and the cost of complying with it could serve to encourage existing residential landlords to sell up and exit the market. Potential new landlords may also well be put off from entering the rental market. Market forces would likely dictate that a lack of rental properties would result in price hikes. The difficulty is that that is not for the tenants’ benefit and further limits their ability to get onto the housing ladder.
