Now that the Renters (Reform) Bill has been announced, it’s on its way through the parliamentary process to be debated and eventually become law. In a recent Goodlord webinar, Ryan Heaven, solicitor at Dutton Gregory, answered letting agents' top questions about the Bill, which we've summarised below.
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Sign up for part two of "Lettings legislation update, A Renters (Reform) Bill special on Wednesday 14 June 2023 to ask your questions to Ryan live.
Ryan Heaven: From the perspective of Section 21 being banned, there's actually not much to talk about. They told us they were going to ban them [and] they have banned them.
The more interesting thing for me, at least, is the new grounds that are coming in to certify section 8, because we only had broad intentions about what those grounds might be [before the bill came out]. They've been fleshed out a little bit more here.
Then we also were promised things which haven't really come to fruition yet, such as the landlords register. Then we've also got things which never made it at all.
RH: We're going back to assured (periodic) tendencies rather than assured shorthold tenancies (ASTs). We've had a fair old time to be familiar with ASTs, but assured tenancies are what we had [in the 1980s]. In many ways, we are going back to that but there are differences between now and then.
The main difference would be all of the extra regulation that's come in since the Housing Act was implemented in 1988. This includes registering deposits and the schemes, Electrical Installation Condition Reports and HMO regulations. That continues to apply and that was something you simply didn't have to worry about in the 90s.
RH: Probably the least relevant date is when the law actually passes through parliament. The bill provides for two dates in terms of the law coming into effect. This will be familiar to people who remember the tenant fee act coming into force.
You have an application date, what that means is parliament or rather the Secretary of State will set a date at which the act will come into force. That's obviously to be determined.
New tenancies created after that date will be assured tenancies by default and all of these new rules will apply to those tenancies.
You then have the extended application date and that is the transitional provision that covers all tenancies that existed before the application date came into force.
For the Tenant Fees Act, there was a year of transition. For the Deregulation Act, there was a three-year transition. We may be many years away from all tenancies being converted into assured tenancies. We can only have only estimate at this stage.
Read our guide to the new system of periodic tenancies here.
RH: In terms of the information you're going to have to provide to the tenants about the transition, the bill doesn't suggest any. Though I dare say there's going to be some equivalent. The amount of work and man-hours that have gone into producing How to Rent guides over the years, I dare say they're not going to throw that away.
They'll probably adapt it and say: "This is something you have to provide in the future." I'm speculating slightly here. The general mantra of law in this country is that anyone who's going to be affected by these rules - to tell them what's going to change.
RH: Most agents will probably be familiar with Section 8 in the context of grounds 8, 10 and 11. Currently, that's a two-week notice period but it is going to go up to a four-week notice period, at least.
Ground 8 is also going to shift slightly. Ground 8 currently requires there to be two months for rent arrears at the time you serve for notice and at the date of the eventual possession hearing. As long as those two things are satisfied, then you'll get an order of possession. It's been tweaked slightly to account for late payments of universal credit.
Ground 1 is the biggest change. [Ground 1 allows a landlord to evict a tenant if they wish to sell the property, or they wish for a family member to move in].
A lot of agents just stick Ground 1 notices on the tenancy agreements and just don't think about it. In theory, that's what you're meant to do. That has been done away with here.
I was surprised at how cavalier the wording is [in the bill]. It is generally as simple as the landlord intends to sell the property. It doesn't need to be on the market. It doesn't need to have a for sale sign outside of it. It just needs to be an intention to sell.
They haven't put any of that structure in place here. Now, either that's because they don't want to or they just simply haven't thought that it's open to abuse, but that seems naive and extreme. This one is going to get abused.
RH: Agents will be familiar with the fact that you can't serve a section 21 notice in the first four months of an AST, currently. This therefore means a notice can't expire until month six. This has been expanded upon slightly.
Ground 1 and Ground 1A [of Section 8] are no fault evictions. They are section 21s through a different name, as far as I'm concerned.
Because it doesn't relate to intense behaviours, it relates to a landlord's intentions. It's not the tenant's fault if a landlord wants to sell the property. I mean, it may be, in certain circumstances but it's not necessarily the case.
Section 8 includes a mandatory ground for tenants who have been in at least two months’ rent arrears three times in three years.
RH: There is a way of penalising tenants who are tiptoeing around [arrears] for a long period of time. Not to mention, these [must happen over] three separate occasions over three years. That's a really big window.
That's probably one of the biggest surprises I thought from this. A lot can happen in three years. Some people live quite chaotic and unpredictable lives.
Let's say through no fault of their own, they may find themselves tipping over into two months' rent arrears on three occasions over those three years. Once you're in that space, it really is a checkmate that I think you use the expression of accelerated possession.
RH: [Under the Renters (Reform) Bill] the tenant can only consent to a rent increase after a section 13 notice has been served. Even then, the amount consented to can only be less than the amount on the section 13 notice.
That does mean for most purposes you're going to have a section 13 notice being served and a tenant can, as they currently can, apply to the Property Tribunal for them to assess a fair rent. Then the Tribunal will set the rent for the property.
The market rent has varied wildly, well in an upwards trajectory, over the last few years. With more landlords maybe leaving the market as a result of legislation like this, you can see supply going down, therefore, rent is going higher.
I don't see any reason for a landlord to undersell the value of the property on a Section 13 notice.
Let's say the market rent for a property is £1,500. If a landlord serves a section 13 notice at £1,800, the worst-case scenario there is that the Tribunal is going to set the rent at £1,500, which is what it's truly worth.
I can see plenty of tenants being completely unaware of their rights in regards to this. I would expect many landlords to be proposing rent increases to tenants and they just agree to it. Tenant knowledge is going to be really important here in terms of making sure that the system isn't abused or circumnavigated.
RH: There's nothing wrong with a tenant being in credit. I think with some clever wording it could be got around in its current state. Some agents take two months, which then gets allocated towards the last two months' rent on the property. That could still work here because the tenants know this is going to be two months.
When a tenant serves a notice to quit, essentially, the rent that they've already paid gets allocated to the last two months' rent. That could work too. Because again, there is no problem with a tenant being in credit, which is effectively what they are.
RH: The property portal is one of those things where we don't have any idea of what it's going to look like. [The government hasn’t] been able to flesh it out in this bit of legislation. If I'm sceptical or cynical about it, it's because they don't want it scrutinised in the same way that this bill will be. The technical expression for it is the Henry VIII power.
In terms of what we know about it, not that much. We have the database. When the landlord registers, they'll be given a code. When the property is uploaded, that'll be given a code. Then on property marketing websites, both those codes will be there.
I do wonder how they're going to do that from a GDPR point of view. Because I don't think many landlords were particularly happy with their details being [made public] when the property's being marketed.
Read our property portal guide for landlords.
RH: Most student bodies tend to not want students to be treated any differently to anyone else. As far as I could see on my reading, there wasn't any exceptions for students.
There is presently a [Section 8] ground for student accommodation. That would only apply if you were an educational establishment, such as a university. A landlord letting to students wouldn't be able to use that ground.
[Currently] Once a fixed term comes to end, the students can just leave. How many students with the best will in the world are going to remember to give two months' notice?
Read our article to learn more about why student lets are controversial.
This article is intended as a guide only and does not constitute legal advice. Visit gov.uk for more information.