With the Renters (Reform) Bill introduced to Parliament, letting agents have plenty of questions about what the Renters (Reform) Bill will mean for them - so here's part 2 of our Q&A write up. Ryan Heaven, Solicitor at Dutton Gregory, and Oli Sherlock, Goodlord's Director of Insurance, share more expert thoughts on the bill - and you can find more of your questions answered in part one.
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Ryan Heaven: With section 21 being abolished, accelerated claims will go away too. What that means is that all notices that are served will need to go through some form of hearing, and that will probably cause pressure on the court system.
But I suspect something that might mitigate it slightly is that if you take away section 21, there might be fewer claims in total. So, it might well offset itself.
Ultimately, I think the timescales are only going to decrease if there is more funding put in place rather than the changes that are proposed in the white paper and in the bill.
RH: Yes, there are no fundamental changes to the way that an eviction will happen. All of this is underpinned by the protection from eviction act, which says, essentially, you can't unlawfully evict someone and that basically means that you need to first of all serve them the notice.
You need to first of all go to court on that notice to obtain a possession order, and only then can a county court or a high court bailiff evict the tenant from the property. So all that structure is still in place.
RH: In the white paper, they made a broad allusion to the fact that there was going to be some form of mediation to avoid court entirely, and there was going to be better investment in the courts.
I don't think it's been fleshed out in any meaningful way in the bill. It is essentially a treasury or a Ministry of Justice decision as to how well-funded the courts are.
We are just collateral damage really, in a sense of the courts being underfunded for a sustained period of time. I think a likely solution is I would expect court fees to go up.
We haven't had an increase in the court fee to issue a possession claim - which is £355 - for, I think, about five or six years. The idea is that the cost of running the court should be paid for by the people using it.
So I suspect, rather than there being an increase in funding from the treasury, it's far more likely you just see court fees increasing - bearing in mind the rate of inflation as well. £355 is almost a relative bargain these days compared to how you have the same cost of the same thing five or six years ago.
Oli Sherlock: The view from a referencing perspective on affordability is a snapshot in time. It's looking at whether the tenant can afford that amount of rent, not whether the tenant can afford that amount of rent for the next two, three, four years for example. So I don't think, fundamentally, anything within the referencing process particularly changes.
There is a question around guarantors as now there'll be no fixed-term contracts. How can you hold somebody to a contract in perpetuity? And I think that's a very interesting question, one that we don't quite have an answer for yet and we're looking for support on as well.
Because for any contract to be enforceable, my understanding is that you need a determined range. It needs to be clear what they're signing up for, what they're liable for. And at the moment, if you read the bill, the rent will last one month.
RH: What you currently have when you take rent in advance is you are putting the rent account in credit. Not in all cases, but what tends to happen is, say, for a 12-month fixed term, they pay six months of that upfront and then they pay the remaining six months every month thereafter.
Practically speaking, that's different to it being 12 lots of one month - they simply happen to have paid all six months in advance. There's no law against being in credit for your rent account. Now, the bill as written prevents rental periods from being over one month. So you're not going to be able to ask for a year's rent upfront, but why wouldn't you be able to ask for 12 lots of one upfront?
If a tenant pays it, all they've done is put the account in credit. You haven't demanded anything more than one month's rent, albeit you've demanded several lots of one month's rent in advance. Now, I'm going to go ahead and say, I think that particular interpretation is not long for this world.
I think that is almost certainly going to get clamped down on - it certainly isn't the spirit of the legislation. It's quite clear what Parliament's intending to do, but the law as written just prevents the rental period for being longer. It doesn't prevent you from demanding multiple rental periods at the same time.
RH: Yes, because you can currently create an assured tenancy, you can currently create periodic contracts. So it's not at all difficult to imagine what that might look like. You would just remove fixed terms.
I think the biggest tweaks are going to be related to section 13, because they're doing away with rent increased clauses. So there are going to need to be some things removed from the agreement. I suspect that it will result in a slimmer overall agreement, which to be honest is no bad thing. It's quite a bulky document at the moment.
RH: I don't think this is any different. There is a bit in the Renters (Reform) Bill about tenants giving notice. There is a prescribed period of notice that they need to give. The legislation talks about a tenant, so not the tenancy or anything like that. And it is currently the position that joint tenants can sever their individual liability in a periodic contract by giving their own notice to quit.
So in that sense, I don't think there's any change. It's possible for a tenant to give a notice to quit to end their tenancy - or rather just end their portion of the tenancy - once it's in a periodic contract. All tenancies are going to move to a periodic contract.
It's entirely possible for you to sign up two tenants, get affordability and assurance based on two tenants. And then the second tenant to waltz off into the sunset, leaving the first tenant who can't afford it. So nothing's changed, I suppose is the short answer for tenants being able to give their notice and joint tenancies.
RH: You've got this nebulous term "market rate", so there isn't a cap. You can make extraordinary increases in rent if the market justifies that increase. But, like I said, there could be a downward pressure on the market rent because it's the tribunal who are going to be setting that market rent.
So, I think it might just be to watch this space and see what happens. Your valuation as a letting agent might be a property is worth X, but if the tribunal set it at a lower rate, then effectively the market rate is not X. It is whatever the tribunal will set it at. Like I said, that's rent controls via the backdoor, really.
This article is intended as a guide only and does not constitute legal advice. Visit gov.uk for more information.