What is the renters reform bill? Key Headlines
Renters Reform Bill
On 17 May 2023, the Renters (Reform) Bill was introduced to Parliament, which aims to create “safer, fairer and higher quality homes” for renters in England. A summary of the key provisions is set out below but the Bill may change as it makes its way through Parliament.
Assured Shorthold Tenancies (ASTs) and Section 21 Notices
The Bill proposes to abolish ASTs. This means that once the Bill becomes law most new tenancies within the private rented sector will be assured tenancies. It will no longer be possible to create fixed terms tenancies and only monthly periodic assured tenancies can be created.
What this means:
Tenants will gain flexibility as they will no longer be tied into fixed term contracts spanning 6 months to several years. Importantly, the abolition of ASTs means that Section 21 Notices and, so called “no fault” evictions will also be removed. Tenants will need to give a landlord at least 2 months’ notice to vacate a property.
Landlord’s grounds for possession: changes and additions
Landlords will only be able to terminate an assured tenancy by establishing a ground for possession. The Bill extends some of the existing grounds for possession and introduces some new grounds for possession.
A landlord will be able to seek possession relying on one (or more) of the following grounds (this list does not detail all new or amended grounds but highlights the key changes):
- Ground 1 – This ground is widened so that notice can be given where the landlord or a member of its family (parent, grandparent, sibling, child or grandchild) intends to occupy the property. Previously, this ground only extended to the landlord’s spouse or civil partner. Where this ground is relied upon, the landlord cannot advertise or let the property for the next 3 months.
- Ground 1A (NEW) – The landlord intends to sell the property (at least 6 months after the start of the assured tenancy).
- Ground 2ZA (NEW) – The superior lease comes to an end, in which the landlord of the assured tenancy is the tenant.
- Ground 5A (NEW) – An agricultural worker seeks to occupy.
- Ground 6 – The landlord intends to redevelop the property. This ground is expanded, but can only be relied upon after 6 months of the start of the assured tenancy.
- Ground 6A (NEW) – The landlord or property is subject to certain enforcement action.
- Ground 8A (NEW) – The rent is unpaid for at least 1 day on at least 3 separate occasions in a period of 3 years.
- Ground 14 – The tenant is “capable of causing” anti-social behaviour. This slightly lowers the existing threshold from “likely to cause” anti-social behaviour, but does not amend the ground substantially.
What this means:
To an extent, the abolition of Section 21 Notices is counter-acted by the widened and additional grounds for possession. However, the amendments to the anti-social behaviour grounds are not substantial.
Section 13 Notice - Increasing rent?
Amendments to the existing procedure will now require that a notice of increase of rent (Section 13 Notice) must give at least 2 months’ notice of a rent increase to take effect at the beginning of a new period of the tenancy. A Section 13 Notice or a determination under Section 14 of the Housing Act 1988 by the First-Tier Tribunal (FTT) will be the only way the rent can be increased, and rent-review clauses in assured tenancies will be void. A tenant will remain able to challenge a notice of increase of rent in the FTT.
What this means:
The fact that contractual rent-review clauses will be void means that landlords will need to serve a Section 13 Notice to increase the rent.
Tenancy deposit scheme
Section 19 of the Bill amends Part 6 of the Housing Act 2004 to require that a tenancy deposit must be held in an authorised scheme (with the initial and prescribed requirements met) if an order for possession is to be made.
What this means:
Landlords should already be familiar with their obligations in relation to protection of deposits and these obligations will need to be met in any scenario in order to obtain an order for possession.
Renting with Pets
There is a new implied term into every assured tenancy that a tenant may keep a pet if the landlord consents, such consent not to be unreasonably withheld.
There is a specific procedure for giving or refusing consent which requires the landlord to respond within 42 days of the tenant’s request for consent.
There are prescribed circumstances in which a refusal of consent is deemed to be reasonable, which include where the landlord’s lease with a superior landlord includes a provision prohibiting pets without consent and the landlord has sought consent but it is refused.
If the tenant believes that their request has been unreasonably refused by the landlord, it can raise it with the Ombudsman (see below).
It is an implied term of the tenancy that the tenant is required to obtain insurance for pet damage to the property or common parts or that the tenant pays the landlord’s costs of maintaining insurance for pet damage. Pet insurance becomes a cost where the landlord can require the tenant to enter into an agreement with a third party under the Tenant Fees Act 2019.
What this means:
There is likely to be a significant increase in the number of requests for pets. However, the landlord can withhold consent provided that such withholding of consent is reasonable. Landlords will welcome the provision in the Bill to allow the costs of insuring the property against pet damage to be covered by the tenant.
Notice period for tenants
Notices to quit served by tenants must give a period of at least 2 months (or less if an agreement is reached with the landlord).
A tenant is given a new statutory right to withdraw a notice to quit if the landlord and tenant agree in writing to the withdrawal.
New private rented sector Ombudsman
A new Ombudsman for the private rented sector will be introduced, and landlords will be required to join the service. The Ombudsman will have legal authority to compel apologies, take remedial action and pay compensation.
What this means:
The introduction of the Ombudsman is said by the Government to provide quicker and cheaper resolutions to disputes. However, this is a significant change and only time will tell whether that outcome is achieved via the Ombudsman. Claims for possession will still be dealt with by the County Courts and disputes over increases of rent will remain within the jurisdiction of the FTT.
What is missing from the Bill?
The Government’s White Paper on the private rented sector published in June 2022 stated that the Government planned to introduce a Decent Homes Standard (as currently exists in the public sector) into the private rented sector. The Bill does not include any provisions about the Decent Homes Standard. It is understood from the explanatory notes to the Bill that the Decent Homes Standard will be introduced in the future and the Government will respond to a September 2022 consultation and set out next steps in due course.
Conclusion
The wait is over for the Renters (Reform) Bill which has been anticipated by landlords and tenants for some time. Whether the Government’s aim of bringing in “a better deal for renters” is achieved is yet to be determined but the Bill makes some significant changes such as the removal of Section 21 Notices and Assured Shorthold Tenancies so that only monthly periodic assured tenancies can be created. Landlords may well be disappointed by the insubstantial amendments proposed in relation to possession on the ground of anti-social behaviour (ground 14) which can be an area where disputes often arise. Whilst there are some new grounds and some existing grounds are to be widened, it may become more costly and lengthy to obtain possession of properties in the private rented sector, particularly if matters are disputed and proceed to the Courts.
Both tenants and landlords should be aware of the changes proposed by the Bill, whilst being mindful that further changes may made before it becomes law.
We are tracking developments on our Essential Residential hub and our timeline: Evolution of the private rented sector.
Please do not hesitate to contact Bella Stuart-Bourne or your usual Charles Russell Speechlys contact if you have any queries.
