Why The Renters (Reform) Bill Is So Controversial
Latest analysis of the Renters (Reform) Bill has revealed a few flashes of light and hope at the end of the tunnel. But this impending legislation continues to send shockwaves through the private rented sector.
Landlords are quite rightly worried and aggrieved by the likely onslaught of tenant-centric legislation, and new procedures. Many are serving notice to regain possession of their properties before the imminent abolition of Section 21 ‘no fault’ evictions.
Meanwhile, the tenants – the very people whom this legislation is supposed to benefit – have also been hit hard by the evictions and rent rises triggered by landlords’ need to remain commercial in view of the current economy and likely changes in the law.
Citizens Advice reports a record number of enquiries about Section 21 evictions in the first five months of 2023 as landlords quit the sector. There were around 2,000 in May alone (up 25% year-on-year).
What Is Being Proposed In The Renters (Reform) Bill?
- Abolition of Section 21 no fault evictions – this is hugely controversial and has led to large numbers of landlords seeking to evicting tenants while this method still exists.
- More comprehensive possession grounds – “so landlords can still recover their property (including where they wish to sell their property or move in close family).” The government says it will make it easier for landlords to repossess properties for rent arrears or anti-social behaviour. (This is covered by Section 8 of the Housing Act 1988.)
- Stronger protection for tenants against so-called ‘backdoor evictions’ – such as excessive above-market rents designed to force them out. Tribunals will still be able to determine the actual market rent of a property.
- A new Private Rented Sector Ombudsman which is claimed will provide a “fair, impartial and binding resolution to many issues”. This is supposedly a “quicker, cheaper and less adversarial” alternative to litigation. But we have yet to be convinced – compromise can sometimes mean justice for neither party.
- A Privately Rented Property Portal “to help landlords understand their legal obligations and demonstrate compliance…giving good landlords confidence in their position.” It will also provide information to tenants.
- Tenants would get the right to request to keep a pet in the property. Landlords could not reasonably refuse – but they could require the tenants to take out pet insurance to cover any damage to the property.
Unintended Consequences Of The Renters (Reform) Bill
The government acknowledges that “a healthy private rented sector is a vital part of our housing market” – but so far, the proposed reforms have damaged the market by:
further denting landlords’ confidence in the government and the market
- prompting landlords to sell up and leave the sector
- reducing the supply of private rented property because landlords are selling up
- pushing up rents due to the sell-off of rented properties, increasing rent arrears
- prompting landlords to evict tenants who then:
- either can’t find another home to rent – or have to make do with a smaller and/or less desirable property
- end up paying higher rents because more people are now searching for fewer available rentable properties
- have to live further away from work, resulting in longer commutes, lower productivity and higher carbon emissions.
Sadly, the damage has already been done – regardless of how much of this Bill becomes law and when.
The government says that “some renters face a precarious lack of security as a result of Section 21 ‘no fault’ eviction notices”.
But now this impending legislation has made tenants’ position all the more precarious…because the government has precipitated the very thing it was trying to avoid!
Proposed Abolition of Section 21 Notices/Claims
Under the reforms, landlords would be able to gain possession of their properties only if there were valid grounds for them to do so. Evictions under Section 21 of the Housing Act 1988 would be abolished.
Section 8 evictions for rent arrears (of at least two months), anti-social behaviour or other tenancy breaches would be the only way to gain possession. However, the mandatory grounds for a Section 8 eviction would be strengthened:
- Ground 1 (amended) – the landlord or a qualifying member of their family needed the property as their principal residence.
- Ground 1 (added) – the landlord wanted to sell the property. This could not be within six months of the start of a tenancy (unless a compulsory purchase order were involved). The landlord would have to give the tenant at least two months’ notice.
- But legally, what would constitute ‘selling’ for the purpose of the legislation? Listing the property with an estate agent? An offer from a buyer? Could landlords circumvent the system by listing their property for sale at a ludicrously high price? (Knowing that it would never sell.) Or could they list it at a sensible price…then refuse any offers?
- Ground 2 (amended) – the mortgagee needed possession to sell. There would be no requirement for the mortgage to have been entered into before the tenancy started. (Unlike at present.)
- Ground 4 (remains) – accommodation previously let to a student by an educational establishment. Written notice that this might happen would have to have been served before the tenancy began.
- Ground 6 – redevelopment. This could now include any relevant landlord. The tenancy should have started at least six months before the date of the notice.
Abolition Of Fixed Tenancies and Rent Review Clauses
Under the new legislation, there would be no such thing as a fixed tenancy. Instead, all tenancies would be periodic (not more than one month) from the outset.
They would be rolling tenancies with no fixed end date. In some instances, landlords may be required to wait at least six months before starting eviction procedures.
But there would be exceptions:
- purpose-built student accommodation
- temporary accommodation
- supported housing.
Assured shorthold tenancies would instead become assured tenancies. The period would be determined by the frequency of payments (weekly, fortnightly).
Rent review clauses would be banned, replaced by a statutory regime comprising Assured (two months’ notice) and Relevant Low-Cost (one month’s notice) tenancies.
Rent could not be increased until 52 weeks after the start of the tenancy. Or 53 weeks if the last increase took effect more than six days before the anniversary of the date on which the first increase took place.
Tenants would be able to challenge rent reviews at tribunal.
Tenants’ Right To Have Pets
Tenants would have the implied right to keep a pet. The landlord would have the right to refuse on reasonable grounds…but the key word here is ‘reasonable’. That has yet to be determined or outlined in detail.
Pets are a highly divisive issue in the rented sector. Many landlords have a ‘no pets’ rule because of concerns about damage, hygiene and the safety of their tenants and neighbours.
Under the proposed new rules, landlords would have 42 days in which to consider a request for pets before replying. That gives them plenty of time to find an alternative tenant without a pet – not too difficult in a seller’s market.
If landlords did allow pets, they might recover the cost of the pet insurance policies from tenants. That might sound okay in theory, but real-world insurance premiums tend to rise if one ever dares to claim.
So, will landlords be enthusiastic about pet insurance as a solution to tenants’ wayward cats and dogs? Probably not.
Think about it. How much do you think a landlord’s (and therefore tenant’s) pet insurance premiums will cost after a few claims?
Pet insurance sounds like hassle in the short term. And it could be positively expensive in the long term.
The Private Rented Sector Ombudsman Scheme
All landlords who rent out property in England will have to join a government-approved redress scheme – regardless of whether or not they use an agent.
The Ombudsman’s decisions will be legally binding. They will be able to force landlords to take remedial action, apologise to tenants, provide information and/or pay tenants compensation up to £25,000.
Membership of the scheme will be mandatory for private landlords. Local authorities will have the power to take enforcement action against landlords who fail to join:
- civil penalties up to £5,000
- £30,000 fines
- criminal prosecutions
- banning orders for repeat offenders.
Joining the Ombudsman scheme will mean an added cost for landlords. They will almost certainly pass this cost on to tenants in the form of higher rents.
Tenants with complaints about their landlord/property will be able to seek redress from the Ombudsman for free. Landlords, however, will still be required to incur the cost of having to use the court system to seek compensation for damage to their properties.
And landlords may find their claims in court are frustrated by counterclaims for disrepair. This may cause their proceedings to be stayed while an Ombudsman considers a tenant’s claim.
Landlords worry that bad tenants would flood the Ombudsman with spurious and vexatious complaints to delay court proceedings (or out of sheer spite).
But HM Government likes the idea of an ombudsman scheme because it will reduce the number of cases going through the country’s overburdened courts.
However, it does not bode well. With landlords in the crosshairs, and no cost to tenants if they ‘try it on’, this Bill may tip the scales of justice too far in tenants’ favour.
Were this to happen, even more landlords may consider selling up and quitting the sector.
Contact our lawyers if you need to litigate or are planning to use the Ombudsman service when it goes live.
When Will The Renters (Reform) Bill Become Law?
At the time of writing this blog post, the Bill was still only at second reading in the Commons. It still has a long way to go.
The Bill is expected to receive the Royal Assent and become law in the summer of 2024.
View the passage of the Bill through the Commons, Lords and final stages.
Further Reading About Landlord And Tenant Law
- Soaring Heating Bills Lead To Mould In Rental Properties. Read more…
- Dealing With The Rise In Rent Arrears. Read more…
- What The Demise Of Section 21 Eviction Notices May Mean For Landlords. Read more…
Get Expert Legal Advice
Contact Coles Miller Debt Recovery Manager Eric Holt for specialist legal advice on evicting tenants and dealing with rent arrears.
