Renters (Reform) Bill First Reading: what we know so far

After some delay – and much speculation – the first reading of the proposed Renters (Reform) Bill finally took place in Parliament last week. However, many Agents and Landlords have been left disappointed with the lack of clarity over key areas.

The proposed Bill has been in the works for several years and the details have been met with great anticipation. In this blog, we’ll summarise some of the key changes that have been proposed and the impact that they could have on Landlords with properties in Leeds.

It’s worth stating, for the sake of clarity, that this Bill is not final and just a next step in the proposal – none of this is yet law and there is a long way to go before the full details are debated and then finalized as it goes through the Houses.

 

What is the Renters Reform Bill?

The Renters Reform Bill is designed to improve renter’s rights, with the laudable goal of improving the system for both the 11 million private renters and 2.3 million landlords in England. It represents the biggest shake-up of the rental market since the introduction of the Housing Act in 1988.

What are the timelines for the Bill’s implementation?

There will be two stages to implementation – an application date and an extended application date. We will be given at least six months’ notice of the first application date, after which all new tenancies will be periodic and governed by the new rules. On the extended application date (at least 12 months after the first date) the same changes will apply to all existing tenancies also.

The Government has yet to set an application date for the law to come into effect, and there is a long way to go before the proposal itself is even finalized.  In short, there should be plenty of time to make any necessary preparations.

What are the key changes it proposes?

The main changes for Tenants, outlined within the 89-page document, are around rights to challenge rental increases that are above market rate, keeping a pet, and also simplifying tenancy structures by scrapping fixed-term tenancies. It also covers new grounds and processes for evictions and describes plans for a new Property Ombudsman and Property Portal that private Landlords will need to register to join.

What can we expect if the new Bill passes?

1. Abolition of Section 21 ‘no fault’ evictions.
2. All assured tenancies will be periodic instead of fixed-term, from day one of the tenancy.
3. Reform of possession grounds, so Landlords can still recover their property when required and repossess where Tenants are at fault.
4. Rent increases will be capped at once per year, with a compulsory two-month notification period, that Tenants have a right to appeal via a tribunal, who will evaluate the ‘fair market rent’.
5. Tenants will be given a right to have a pet within the property that a Landlord cannot unreasonably refuse. A Landlord can insist on insurance to cover damage.
6. A new Private Rented Sector Ombudsman will be created, to which every private Landlord will need to register.
7. All Landlords will also be legally required to register themselves and their properties on a new Digital Property Portal.

What will the removal of Section 21 mean for Landlords?

Last year’s white paper predicted the removal of Section 21, so there are no surprises to see this included within the Bill. The Government’s intention is to help Tenants feel more secure in their home, without the worry of ‘no fault’ eviction. However, this does not mean that Landlords can’t recover their property, or evict Tenants on reasonable grounds. Instead, a strengthened Section 8 offers Landlords a range of different reasons (or grounds) that can be utilised in such cases – and each reason comes with its own notice period, which have been outlined in the Bill.

For example, Ground 1 grants that Landlords can serve a Tenant if they, or one of their family members, want to move in to the property. While Ground 1A, offers a provision for Landlords who intend to sell the property.

Under the new proposal, Landlords still have the option to evict Tenants on the grounds of rent arrears or anti-social behaviour – although the notice period for rental arrears has been extended from 2 to 4 weeks, in an effort to account for late Universal Credit payments.

For the majority of Landlords, who would not evict a good Tenant without good reason anyway, the loss of Section 21 should not have too much of a direct impact.

AST’s (Assured Shorthold Tenancy) to become Periodic

We have had AST’s since 1996, but to give Tenants a greater sense of security, and flexibility, the Bill proposes to end fixed-term tenancies and move to periodic tenancies, which do not have an end date. This will enable the Tenants much more freedom to move properties as they need to, with the requirement of only giving 2 months’ notice.

What does this mean for the student market?

At present there is no exception in the Bill for students, which is –  in our opinion – one of the biggest gaps in the proposed Bill. There has been a lot of campaigning around this area, from bodies like PropertyMark, on specifically how the fixed-term contracts would impact the student market, but the matter has not been yet addressed. At this point in time, there is no clarification at all on this issue for student rental homes – apart from news that Purpose Built Student Accommodation (PBSA) will be exempt from the transition to periodic tenancies.

On a positive note, an article released yesterday in The Telegraph suggests that Gove is now is now considering an amendment of adding a specific clause for privately let student property, allowing Landlords to retain their yearly let business model. We will watch this development very with keen interest.

HOP’s Managing Director, Luke Gidney, was recently asked to comment for the Yorkshire Post and has this to say about the proposed Bill:

It’s positive that tenants will feel more secure and that they will have the legal right to request a pet in their hone, which the Landlord must not unreasonable refuse. However, the downside of some of these new measures are that Landlords could decide to sell up and leave the sector, which could reduce stock and lead to further demand and less supply – ultimately pushing rents up even further. We have already seen older Landlords cashing in on house price increases, selling up and returning – although there are some new investors entering the market too.

The biggest concern for us, and a number of our HMO Landlords, is the lack of clarity around the how the change from fixed to period tenancies could impact the student market. If students aren’t held to a 12-month tenancy in line with the academic year, it would mean a huge change for the current student cycle, which we hope will be addressed in the next stages of the bill’s progression.

How will the Bill be enforced?

Full specifics are not yet known, but one of the ways the Government will seek to enforce the new Bill is through a new Ombudsman. All private Landlords will be required to register with the new Ombudsman, even if they work with a Letting Agent. Letting Agents themselves will also be obliged to ensure that any Landlord that they work is sufficiently registered, before they market their property.

In addition, all private Landlords will need to register themselves and their properties on a new Digital Property Portal, which will help Landlords understand their legal obligations and demonstrate compliance. At this point in time there is little detail as to how this property portal might work and when it could come into effect.

Full details of the Bill can be found on Gov.uk.

What else can we expect?

There are a number of other things still on the table in terms of proposed new legislation for the housing sector, that have not been covered in this Bill. This includes things such as the Decent Homes Acts and a digitized court process to help speed up eviction cases.

How can HOP help?

With nearly 15 years of lettings experience under our belts, HOP will continue to support our Landlords to navigate this – and any other – legislation changes that are on the horizon. The market is currently experiencing heightened levels of demand, so if you do have a property to let, our award-winning Lettings Team is on hand to help.

If you are thinking of selling your investment property, our specialist investment sales service can help you sell your property on or off market, with your tenants in situ and minimal disruption.

 

While we support many of the admirable goals of the Bill, the risk is that by making things more difficult, and expensive, for Landlords – they may be driven to leave the market thus leaving fewer properties for rent and driving up demand and prices for renters. This is something we have tried to address with the government directly in our recent open letter to Mr Gove.

In the meantime, we will watch the development of the Bill’s progress with keen interest and will continue to keep our customers informed and aware of any necessary changes they will need to prepare for.

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