Renters Reform moves into the final phases: what landlords need to know

Legislation aimed at overhauling the UK’s private rented sector reaches the House of Lords this month as part of its protracted journey into UK law. 

MPs spent a year debating the Renters Reform Bill in the House of Commons, where more than 200 amendments were added to the original document. Peers in the House of Lords will now debate the bill, which we believe strikes a broad balance between the Bill’s stated aim of offering tenants better security of housing, without undermining the business model of professional landlords. 

Peers will no doubt suggest further amendments, however it’s likely that the Bill will move through the final phases largely unchanged. The bill has broad, cross-party support in its current form and, though we can’t be certain, it is likely to receive Royal Assent before an election likely to take place in the Autumn. 

A balancing act

The current legislation contains details that mark a big departure from the initial draft of the bill. At the outset, tenants were able to give two months’ notice to break their lease from the first day of their tenancy, for example. However, MPs adjusted that policy, like many others: tenants can now give two months’ notice only after living in a property for at least four months.  

That said, there remain reasons for caution – we can’t know exactly how the bill will be felt until it is up and running, and it’s going to be vital that the court system is properly funded (more on that in a moment).  

Landlords will inevitably face some extra costs, which come after a decade of onerous tax and regulatory changes. Taking possession via Section 8 is likely to incur relatively greater costs than the Section 21 process, for example. Exactly how these costs break down will only become clear in time, but the NRLA believes the proposed system is a reasonable one given the political appetite for reform:

“We are confident the bill as it stands delivers a balance for landlords and tenants and it is in the interests of both that the bill passes smoothly through these final stages,” the group’s policy director Chris Norris told Letting Agent Today on 3 May 2024. “The alternative is yet more uncertainty, and the prospect of another bill courtesy of the next government.”

Three elements to watch:

1. The removal of Section 21 notices

Landlords are currently able to evict tenants by serving a Section 21 notice and providing two months’ notice at the end of a fixed term contract or earlier when exercising a pre-agreed break clause. There is no requirement to give a reason, which is why this process came to be known as “no fault evictions”.

The bill abolishes Section 21 notices in favour of Section 8, which allows landlords to retake possession in reasonable circumstances once a tenant has been in situ for six months. The government has pledged to strengthen Section 8 to better protect landlords. Viable reasons for repossession include rent arrears, anti-social behaviour, or a desire to refurbish or sell a property. There is also a special treatment for student landlords, purpose-built student accommodation will continue to able to provide fixed-term tenancies, and other student landlords will in effect be able to serve notice at the start of a tenancy.

Section 8 notices can be challenged via the courts, which have a reputation for delays. However, the government pledged to undertake a review of the courts system before abolishing Section 21.

2. A new system for agreeing rents

The bill will end the use of fixed term Assured Shorthold Tenancies (AST) and replace them with periodic tenancies, which means tenants will need to give two months’ notice if they wish to exit a property. 

This transition will impact rent reviews – there will be no review clauses that you would often find in ASTs, and assuming tenants remain in place for many years, the lack of fixed term tenancies removes a common trigger to reassess rental levels.

As part of the Renters Reform Bill, Section 13 will be the only way to make changes to rents. Under this system, a landlord serves a form to a tenant outlining the new rent with a notice period of at least two months. Tenants will have the opportunity dispute the terms via the First-tier Tribunal.

3. The push for a more professional service

Key aspects of the bill seek to professionalise the sector, and many of these obligations are already second nature to professional landlords.

The bill pledges to apply and enforce the Decent Homes Standard, for example. That legislation gives Local Authorities enforcement powers requiring landlords to make properties “decent” or face banning orders or fines of up to £30,000.

The bill also commits the government to introducing a new property portal for landlords, in effect a landlord register, where tenants can access “necessary information in relation to their landlord’s identity and compliance with key legislative requirements.”

Timescales

This is a large bill and the policies explored here are only intended to provide a snapshot of what is to come.

If you are concerned about how the bill applies to you, it’s worth reiterating that many aspects will require further legislation before they can be implemented . Section 21 will be removed in stages (see above). Meanwhile, the new property portal, the redress scheme and the Decent Homes Standard will require further legislation to detail their implementation, according to the NRLA.

As Ian Fletcher at the British Property Federation summarises: “There is a lot in the Bill that will be seen as normal by professional landlords, from allowing tenants to keep pets, to an emphasis on a long-term relationship between landlord and tenant. Court reform is vital, it is what the BPF’s Tenure Reform Working Group has majored on, and we were therefore pleased to see the Government’s commitments.”

Rents have risen substantially during the past three years amid a squeeze in supply, and the government should be eager to avoid any clumsy implementation of legislation that might unnecessarily cause landlords to leave the sector and put more pressure on the supply of privately rented properties.

The information provided in this report is the sole property of Cluttons LLP and provides basic information and not legal advice. It must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Cluttons LLP. The information contained in this report has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. Cluttons LLP does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.