An Update on the Renters’ Rights Bill – What Landlords Need to Know

The Renters’ Rights Bill (“RRB”) is now in its final stages, having passed through the House of Commons and the House of Lords. Next month, it will return to the House of Lords for consideration of the final proposed amendments. Following that final stage, the RRB is expected to receive Royal Assent later this year. The government intends to roll the new measures out in stages after receiving Royal Assent, giving landlords time to ensure compliance with the new laws.

Although the House of Lords has pushed for some landlord-friendly amendments, most have been rejected by the House of Commons. With or without those changes, the RRB is heavily tenant-friendly and represents a major reform to the private rental sector. Landlords should use this time wisely to ensure their property portfolios are as prepared as possible ahead of the changes.

The Abolition of Section 21 “No Fault” Evictions

Perhaps the most significant change introduced by the RRB is the abolition of Section 21 “no fault” evictions.

Section 21 of the Housing Act 1988 gave landlords the power to evict residential tenants at the end of a fixed-term assured shorthold tenancy agreement (“AST”) by serving two months’ written notice.

Under the new legislation, landlords will no longer be able to terminate a tenancy on a “no fault” basis. Instead, they will need to rely on certain grounds to be able to evict a tenant.

Hand in hand with the abolition of Section 21, is the abolition of fixed-term ASTs. This change will have retrospective effect: not only will landlords be unable to grant new fixed-term ASTs, but all existing fixed-term ASTs will automatically covert to periodic rolling tenancies.

This means that once a landlord enters into a tenancy agreement, it will continue indefinitely unless they can rely on a specific ground to recover possession. Such grounds include, for example, rent arrears, a landlord selling the property (subject to conditions such as the tenancy having been in place for at least 12 months) and the tenant exhibiting “serious anti-social behaviour”.

If a landlord thinks they may wish to regain possession of a property in the future, it is crucial to make use of Section 21 whilst it is still available, particularly where there may not be sufficient grounds to evict under the specific grounds. Once the RRB comes into force, it will be far more difficult to evict a tenant.

Key changes under the RRB

Although the abolition of Section 21 is the change at the forefront of most landlords’ minds, there are several other reforms under the RRB that landlords need to be aware of, including:

Rent increases

Landlords will only be able to increase rent once a year by serving a Section 13 notice. Tenants will have the right to appeal the proposed increase, so landlords must ensure that any increase is reasonable and can be justified.

Bidding wars

The legislation bans bidding wars. Rental properties must be advertised at a fixed price and landlords cannot accept offers above the advertised rent.

Upfront rent

Any clause requiring a tenant to pay more than one months’ rent upfront will be unenforceable.

New database

It will be mandatory for landlords to join the “Private Rented Sector Database”. This digital database will allow tenants to check that their landlord is registered and to view any previous banning orders.

Landlord Ombudsman

A new Ombudsman service is proposed and it will be compulsory for landlords to join. The aim is to offer a neutral resolution service to settle disputes between landlords and tenants outside of court.

Decent Homes Standard

This new standard sets minimum requirements for repair, condition and safety, designed to combat common issues in rental properties such as damp and mould.

Tenant discrimination

It will be illegal for landlords to impose blanket bans on prospective tenants because they are in receipt of benefits or because they have children.

Conclusion

These reforms represent a significant change in the government’s approach to the private rental sector, moving to a far more tenant-friendly regime.

Landlords must take the new rules seriously, as non-compliance will have wide-reaching consequences. This includes fines of up to £7,000 for failing to join the digital database, banning orders for repeatedly breaching the Decent Homes Standard and compensation orders or Ombudsman findings against the landlord.   

With the increased transparency the database will provide, any enforcement action will also carry reputational risks, making it more difficult for landlords to let their properties.

In preparation for the new legislation, landlords should:

• Consider whether they require possession of the property and, if so, instruct solicitors to serve Section 21 notices and commence possession proceedings whilst this option remains available.
• Review tenancy agreements to ensure they are compliant in accordance with the new legislation (e.g. removing any clauses that impose a blanket ban on children living at the property).
• Inspect their properties and carry out any works to bring them in line with the Decent Homes Standard.
• Review their internal compliance and complaints-handling procedures.
• Budget for compulsory membership fees for the database and Ombudsman.