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What is the Renters Rights Bill?
The Renters Rights Bill (“RRB”) is the biggest change to the lettings sector in a generation. It will alter the balance of power between landlords and tenants.
The three main political parties all campaigned on a manifesto which included a commitment to pass RRB. Landlords may remember the previous government’s Renters Reform Bill that did not quite manage to pass into law; RRB has taken around 95% of what was in the old Bill, with some minor changes.
Why is RRB being introduced?
The stated aim of RRB is to improve security for tenants. This means removing ‘no-fault’ Section 21 eviction notices, increased regulation and oversight of rent increases, and removing fixed term contracts. The general idea is that as long as a tenant behaves normally they should expect to be able to live in a home for as long as they like.
When can we expect RRB to become law?
The Bill will likely pass through parliament in the next few months, but it will be brought into force on a date to be confirmed. The Housing Minister, Matthew Pennycook, has suggested that RRB will come into force in Summer 2025 but aims to give “as much notice as possible” to the sector, so it should not come as a surprise.
What RRB means for Landlords
No More Fixed-Term Tenancies
Landlords will be familiar with fixed term tenancies. Although it has always been possible to create purely periodic contracts, a lot of landlords – and tenants – prefer the security that comes with a fixed term as it means there is no scope for either party to serve notice.
In a purely periodic system a tenant will still be able to give notice to end the tenancy but, unless a landlord has a ground to rely upon (see below), they will have no way of ending the tenancy.
Contracts that are fixed term at the point the RRB comes into force will automatically become periodic.
Restrictions on Rent Increases
A landlord can currently include a rent increase clause in a contract that allows for a periodic adjustment of the rent. Rent increase clauses are banned under RRB and the only method of increase is for a Section 13 Notice to be served. Section 13 Notices already exist; they can be given in a periodic contract every year and the rent increase can be in line with ‘market rates’. The tenant can challenge a Section 13 Notice by applying to the Property Tribunal who will then set what they think is a market rate as well as set a deferred date on which the tenant must start to pay that increase. If a Section 13 Notice is challenged then the rent increase does not take effect until the date the tribunal set.
If a rent increase clause is in a contract then it will be of no effect once RRB comes into force.
No Bidding Wars
A property must be marketed with a clear rent. A landlord will not be able to accept a bid from a tenant above that rate. Essentially, the rent is capped at whatever the landlord markets the property at. Some landlords may want to set a rate higher than they expect to receive as it allows them scope to accept the highest bid.
It is worth mentioning that if there are multiple bids at the same (capped) rent then it makes the risk of a discrimination claim all the more likely. In the past, if a tenant could offer the most money then there is no need to justify a decision to choose them. However, if everyone is offering the same amount then there must be a reason to choose (or not choose) a specific tenant, which does not amount to discrimination on the grounds of a protected characteristic.
Enhanced Eviction Grounds
Whilst RRB removes Section 21 notices, it does provide for new Section 8 ‘grounds for possession’ which means, if the circumstances apply, a landlord can still recover possession. The two key grounds that landlords are interested in is Ground 1 (which already exists, but has been amended) and Ground 1A, which is entirely new.
Ground 1 is where a landlord, or a member of their family, wants to move back into the property. Ground 1 as currently written requires a landlord to have given notice to the tenant before they moved into the property that the landlord might want to move back in. The amended Ground 1 removed the pre-notice requirement so the landlord has greater flexibility should their circumstances change in an un-anticipated way.
Ground 1A is where a landlord intends to sell the property. This is an entirely new ground and the sale of the property is likely a major reason why Section 21 notices are currently served. A landlord does not need to have the property on the market for sale, nor does there need to be a buyer; there simply has to be an intention to sell.
Both Ground 1 and Ground 1A come with a ‘prohibition period’ in that if the landlord re-lets the property within 12 months of the notice expiring then the tenants and local authority can claim/fine them. See Strengthen Rent Repayment Orders below.
Beyond the above, Ground 4A is a new ground for possession exclusive to students. There are many restrictions on its use however:
The tenant must be a student; and,
The property must contain more than two households;
Before the tenancy is entered into, the landlord must give ‘pre-notice’ that they intend to re-let the property to students in the next academic year.
The Ground 4A notice must expire between 1st June and 30th September and has a four month minimum notice period so there is a practical deadline to consider when serving these. That said, as the four month notice is just the minimum there is nothing to stop a landlord from giving more notice than the minimum.
For contracts entered into before RRB comes into force the ‘pre-notice’ requirement must be done within 30 days of the RRB coming into force.
Lastly, Ground 6A allows a landlord to recover possession in the following circumstances:
The landlord has received a banning order or prohibition order;
The landlord has been given an improvement notice and the property is overcrowded;
The landlord has had their HMO licence either refused or revoked; and,
The landlord has an HMO licence, but the property contains more people than the licence permits.
This is an unusual ground because it is more much more than a ‘no fault’ notice; it is essentially a landlord-fault notice. The landlord must be in breach a legal requirement to use it. On one hand this makes sense because the landlord must have some way to not be in breach i.e. to stop being a landlord. That said, it does seem to fly in the face of the logic of RRB that tenants should be protected. An amendment to RRB is being suggested to expressly allow a tenant to claim compensation should a landlord use this ground to obtain a possession order, but if a tenant is already living in, say, an unlicensed HMO or a property in disrepair then they already have the ability to make a claim.
Landlord Register
Landlords will need to join a register to provide information about themselves and the properties they intend to rent out.
Why is a landlord register important?
The intention is that it will provide greater transparency into the quality and quantity of housing stock available in an area, as well as making enforcement of rogue landlords easier for local authorities.
Strengthen Rent Repayment Orders
Rent Repayment Orders (RROs) are a mechanism whereby a tenant can claim back up to 12 months’ rent from a landlord who has committed a housing offence. Some examples of current offences are failure to apply for a housing licence and unlawful eviction. The offences for RROs will be expanded to include relying on Ground 1 and 1A to evict a tenant and then re-letting the property within the prohibition period and failure to join the landlord register or ombudsman.
In addition, the time that a tenant has to make a claim will be increased from 12 months from the last rent payment to 24 months from the last rent payment, and the amount that can be claimed is going to increase from 12 months’ rent to 24 months’ rent.
Pets in Properties
There will be a process for tenants to request that they are allowed pets in a property. A landlord will need to respond within a few weeks and, unless they have a very good reason to refuse, permission must be granted. A tenant must provide the request in writing and describe the pet.
The timescales are as follows:
If a tenant requests consent a landlord must reply within 28 days of the request, unless:
- further information is requested by the landlord in which case they must reply within 7 days of when the further information is provided. If the information is not provided the landlord does not need to consent;
- the landlord needs third party permission in which case they must reply within 7 days of when they receive that permission; or,
- the landlord and tenant agree an extension to the 28 days
The only reason set out in RRB for a landlord to refuse permission for a pet is if the landlord has a lease with a superior landlord (as if often the case in a block of flats) and the superior landlord does not grant consent.
Pet is defined in RRB as:
an animal kept by a person mainly for—
(a) personal interest,
(b) companionship,
(c) ornamental purposes, or
(d) any combination of paragraphs (a) to (c);
What RRB means for Tenants
Section 21 ‘no fault’ evictions abolished
Section 21 notices allowed for two months’ notice to be given to end a tenancy outside of its fixed term. This meant that tenants had a perpetual threat of eviction and there was nothing they could do about it.
Fairer possession grounds
With Section 21 notices a thing of the past, a Section 8 Notice will be the only way to recover possession of Assured Tenancies. A Section 8 Notice must provide a ground and this means the tenant will be given a reason – even if it a reason that the tenant does not like – for the eviction. Currently a landlord has no obligation to explain why a Section 21 Notice is served.
That said, Ground 1 and Ground 1A are both fulfilled in circumstances that are unrelated to the tenant’s behaviour so there will still be some ‘no fault’ evictions. However there are recourses if those grounds are abused which do not currently exist because Section 21 notices do not require a reason.
How will scrapping section 21 reform renting?
The intention is that tenancies will last longer simply because it will be harder to evict a tenant. In reality, a Section 21 Notice was usually served for a reason even if a reason did not need to be provided. For example if a landlord wants to sell, or if a tenant is being problematic but the landlord does not want to rely on discretionary possession grounds, Section 21 could be utilised. In a post-Section 21 environment specific grounds will need to be provided and so it will at least reflect why an eviction is taking place. However, unless the root causes as to why a landlord might serve notice change then there is no reason to think that evictions will decrease.
Protect against backdoor eviction via rent rises
With additional oversight on rent increases it is hoped that a landlord could not increase the rent to a level that the tenant cannot afford. In practice, the ‘market rate’ may well be unaffordable for a tenant particularly given the increase in rents compared to the average wage over recent years.
It can be speculated that by handing over control of what is the ‘market’ rate to the ombudsman it will have a throttling effect on rent increases in any area because it does not matter what tenants are willing to pay, it matters what the ombudsman think is fair. Agents will follow ombudsman guidance on market rate in an area and so after a while the ombudsman will be marking their own homework, so to speak.
Introduce a new Private Rented Sector Landlord Ombudsman
Letting agents currently have to be a member of several government approved ombudsman to ensure that if a complaint is not adequately dealt with then the complainant has recourse. This principle is being applied to landlords, particularly those who self-manage.
Further protection from discrimination
Currently a landlord cannot discriminate against someone who has a ‘protected characteristic’ such as disability, sexuality or gender. The list of protected characteristics is being expanded to those in receipt of government benefits and tenants with children. It has not been advisable to overtly market a property as ‘no benefits, no children’ for some time, on the basis that this may indirectly discriminate against women, but new legislation will make it a specific offence in its own right.
It is still possible to refuse to let to someone in receipt of benefits if they do not meet affordability criteria, but if they can either pay the rent outright or can provide a guarantor then it would be difficult to refuse an applicant without being seen as discriminatory.
Improved housing standards
RRB will introduce a ‘Decent Homes Standard’ but this has not yet been fully fleshed out. This is new in that most existing obligations on landlords are to do with property maintenance and repair. However, the proposed new standards include a requirement to update facilities simply owing to their age. Watch this space…
Awaab’s Law
Awaab’s Law requires specific timescales between disrepair being reported, an investigation taking place and work starting. Currently the requirement is for works to take place in a ‘reasonable’ period of time.
The exact periods underwent consultation and it suggested 14 days to investigate and 7 days to start work. The requirement is for works to start within 7 days, not for works to be completed. Emergency repairs must take place within 24 hours. The consultation has not yet been converted into law so these timeframes have not been finalised, but there is no reason to expect that the government will deviate massively from the consultation proposals.
Private rent reforms timeline
RRB is currently in the committee stage which means that a cross-party group of MPs will scrutinise the legislation and propose amendments. They have already spoken with key stakeholders to take evidence on the issues with RRB as it stands and have quizzed the Housing Minister. Whilst amendments can be proposed by anyone, there is no obligation on the government to accept those amendments and generally only the amendments proposed by the government will make it into the amended RRB. RRB will then head towards a Third Reading when those amendments will be voted on and incorporated into an updated bill. The Third Reading is likely to take place before the end of the year.
It then has to go through the House of Lords. Labour does not have a majority in the House of Lords but it is a convention that legislation based on a manifesto commitment (which RRB is) will not be opposed. This could mean that RRB could move quite quickly. We expect it receive Royal Assent (i.e. become the Renters’ Rights Act 2025) in the Spring. At this point we will know exactly what needs to be done under the Act but we will not necessarily know when it comes into force.
The Act will come into force on a date to be set by the Secretary of State, Angela Rayner, but the date will not necessarily be set straight away. The Housing Minister, Matthew Pennycook, has suggested that the Act will come into force in ‘Summer 2025’.
Additional support landlords will require
Landlords will benefit from keeping updated on the progress of RRB and the practical implications for managing properties and tenancies. The rollout timescales, once we have them, will dictate what actions need to be taken and by when.
How can we help?
We keep our ear to the ground on all matters relating to RRB, and advise landlords accordingly. Whilst no one can predict the future, we can be fairly sure that the new legislation will require changes to existing processes and a comprehensive understanding of new rights and obligations for landlords. Our recommendation for any existing matters would be to seek legal advice as soon as possible, so you have a trusted source of legal support on hand to guide you.
We have over 30 years’ experience of Lettings Law. For advice on an existing matter, or to discuss your options, please call us or email newclaims@duttongregory.co.uk
