Rental interest

At the time of writing, the Renters’ Rights Bill (the bill) was at committee stage and, given the representations made by various interested parties on behalf of landlords, tenants and on the operational side, will no doubt be subject to changes as it progresses through parliament. Here, I discuss the proposed changes based on the bill as currently drafted.

Many private landlords have expressed concerns about the removal of the ‘no-fault’ mechanism for obtaining possession under section 21 of the Housing Act 1988, as well as increased regulation and control over the clauses they can include within their tenancy agreements. But there are significant implications for registered providers of social housing too, as everything from their supported accommodation to their shared ownership products will be affected by the removal of fixed terms and the abolition of assured shorthold tenancies. Landlords from both sectors will require support from landlord and tenant specialist lawyers to help them navigate the numerous proposed changes.

Abolishing assured shorthold tenancies

One of the election promises of both the current and previous governments is the abolition of the right of a landlord to serve a section 21 notice to end a tenancy without giving a reason. Assured shorthold tenancies will no longer exist. This is headline-grabbing and although it can be a concern for any private landlord who has previously used it by default to get possession of a property, any landlord and tenant lawyer will know that relying on a section 21 notice and using it to follow an ‘accelerated route’ is not always straightforward.

Unlike in the previous Renters (Reform) Bill, there will be no transitional period. So when the Renters’ Rights Act (the act) commences, any claims or section 21 notices that have been served but where no proceedings have started, will no longer be viable. Any claims already underway in the county courts will be allowed to continue, and these tenancies will be treated as assured shorthold tenancies until the possession claims are concluded.

To try and address landlord concerns about the removal of section 21, a significant number of new possession grounds, mainly mandatory, have been introduced to Schedule 1 of the Housing Act 1988.

Some of the proposed grounds will require a statement within the tenancy agreement as to the fact that the landlord can rely on that ground to be given before the tenancy is issued, the so-called ‘prior notice ground’.

Abolishing fixed terms

Fixed terms for all assured tenancies will be abolished, meaning that any existing tenancy will effectively be automatically converted into a periodic tenancy, and if the tenancy has a weekly or monthly rent period then the period will align with that rent period. For any tenancy where the rent period is over one month, there is a formula within Part 1, Chapter 1 of the act that will serve to convert that tenancy to the new period.

Concerns have been expressed about the removal of fixed terms by both private and social landlords. For private landlords, they will be removing the certainty attached to knowing that the tenant will be there for, say, one year or longer, and for social landlords certain products will fall away, including longer fixed-term tenancies. Shared ownership leases will no longer be treated as assured shorthold tenancies, which will have an impact on the way that enforcement action can be taken against those residents if they refuse to pay rent or breach their lease in other ways.

Rent increase notices

If the bill is enacted as proposed, private landlords will not be able to rely on any rent increase clauses within their existing tenancy agreements, so increases will be limited to no more than once a year. Landlords will have to follow the procedure under section 13 of the Housing Act 1988, which will be amended to require that two months’ notice is given and rent increases cannot be applied until the outcome of any challenge to the First-tier tribunal (FTT) is known.

Additionally, there may be more challenges to unfair rent increases in the FTT, which will ensure that no rent increases go beyond the market rent for that type of property.

Statement of terms

Landlords will have a duty to give tenants a written statement of terms and conditions before the tenancy commences. A landlord must include within the statement of terms any ‘prior notice’ grounds for possession, such as:

• where a tenancy is subject to a superior lease that will end
• where a property is to be sold under a rent-to-buy scheme
• student accommodation
• stepping stone accommodation, or
• supported accommodation where a tenant is refusing to engage with support.

For existing tenancies, wording will be issued via regulations before the commencement of the act to ensure that those ‘prior notice’ grounds can be relied upon.

Pets and other matters

Tenants will have the right to request to have a pet on the premises and landlords will have a corresponding right to require the tenant to obtain, or to pay, for pet insurance should they do so.

Tenants will also be required to give two months’ notice to quit if the tenancy is silent under the tenancy terms and conditions. Clauses that are deemed to be discriminatory, such as those that may discriminate against people on benefits or families, will be prohibited.

Landlord redress scheme

Something that has had less press attention but will have significant implications for private landlords and their advisers is the introduction of the landlord redress scheme, essentially an ombudsman for the private rented sector.

Membership of the landlord redress scheme will be compulsory for private landlords and will likely be paid for by its members. The ombudsman will have the power to arbitrate disputes between parties and hopefully avoid claims being issued in the county court. The ombudsman will have powers to compel landlords to apologise and to pay fines or compensation to tenants.

Private rented sector database

A private rented sector database will be established to ensure that there is a full database of all rented properties and all landlords. This will create greater transparency in the sector and tenants looking to rent will be able to view entries both for the landlord and the property to see if either has previously been subject to adverse findings or enforcement action for breach of legislation.

Before any property can be marketed, landlords will need to ensure they have entries on the database for both the landlord’s identity and the dwelling house. Not doing so will be a breach of the regulations and the landlord can be fined.

Decent Homes Standard and Awaab’s Law

Social landlords have been subject to the Decent Homes Standard for many years and the regime will be extended to private sector landlords under the bill. The Decent Homes Standard itself hasn’t been looked at for 20 years and will be subject to consultation first.

The obligations under Awaab’s Law will also be extended to private landlords. They will need to ensure they can respond within shorter, set time-frames to reports of conditions such as damp and mould, and to treat those hazards before they become more serious.

Enhanced enforcement powers

All these duties and obligations will be backed up by enhanced enforcement powers that will be given to local housing authorities (LHAs). LHAs already have powers to:

• investigate and issue enforcement action against landlords who are found to have properties with health and safety hazards
• administer licensing schemes for houses in multiple occupation, and
• deal with breaches of those licensing obligations.

These powers will be enhanced to ensure any potential breach by a landlord of landlord and tenant legislation, such as not giving a statement of terms, not being a member of the landlord redress scheme or having a valid entry into the database, would be enforced and prosecuted by the appropriate LHA. Any fines applied by the LHA would be enforceable as if they were county court orders and may be anything up to £7k for a first breach and up to £40k for repeated or serious breaches.

In addition, tenants will be given enhanced rights to apply for rent repayment orders that are enforceable against superior landlords. The penalties will be doubled, and repeat offenders may be ordered to pay maximum amounts.

Challenges for landlords

Landlords may need legal support in navigating the changes imposed by the new act, both before and after it comes into force. Tenancy agreements will need to be checked to ensure that the clauses included are compliant with the new rules.

Registered providers of social housing will also need to consider which tenure policies will need amending, given that fixed-term tenancies are to be abolished. Starter or probationary tenancies and demoted tenancies will also no longer be possible.

Landlords will also need guidance as to whether they are complying with the new regulations both in terms of the form of tenancy agreements and information that they give to tenants. They will further need guidance in terms of their obligations under the Decent Homes Standard and Awaab’s Law, and the obligations to be members of the landlord redress scheme and (when it’s operational) the private rented sector database.

Finally, at the point that landlords do need to recover their properties, they may require support in following the section 8 procedure and the grounds that they will be able to rely upon.

Impact on the courts

One difficulty that the bill does not address is the current lack of resources in the county courts and the amount of time taken for even straightforward possession claims to be processed and decided (not to mention the then inevitable delay in getting bailiffs to attend).

During the committee stage, a suggestion was put forward that mandatory claims should be dealt with via the paper route rather than through hearings, to mirror the current accelerated route for section 21 notices. However, if taken up, the complexity of proving some of the new grounds as opposed to checking the validity of a section 21 notice, will inevitably impact the judicial time required to decide these cases. It does not appear that the government has the financial resources or political will to support any large-scale changes at present. As a result, it appears likely that the scheduled changes will have a negative impact on the timescales for landlords in pursuing possession claims.