The government is now back from its summer recess, which means that the second reading for the Renters (Reform) Bill may be imminent.
The government introduced the Renters’ (Reform) Bill to parliament on 17 May 2023. MPs will have the opportunity to consider and debate the bill at a second reading - which may soon take place now the government has returned from its summer recess.
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This guide to the Renters (Reform) Bill covers:
- What is the Renters (Reform) Bill?
- Why is the Renters (Reform) Bill being introduced?
- How do letting agents and landlords feel about the changes to come?
- When will the second reading of the Renters (Reform) Bill take place?
- What's included in the Renters (Reform) Bill?
- Future proposed changes for the private rented sector
What is the Renters (Reform) Bill?
The Renters (Reform) Bill sets out the government's plans to fundamentally reform the private rented sector (PRS) and level up housing quality.
The proposed reforms commit to "bring in a better deal for renters" and marks "the biggest shake-up of the private rented sector in 30 years”.
The government first published the full extent of its plans in a white paper - A Fairer Private Rented Sector in June 2022.
Most of the measures proposed in the white paper were included in the bill, published 2023, with a few exceptions that will be considered as "further improvements" - you can read more in section 6 of this guide.
The bill, introduced to parliament on 17 May 2023, will need to pass through parliament before becoming law. Housing Secretary Michael Gove told BBC Newsbeat he hoped to see the bill in place "as quickly as possible."
Why is the Renters (Reform) Bill being introduced?
The private rented sector is a vital part of the UK housing market. More than four million properties are privately rented, with numbers having doubled since 2004.
The government says that under current legislation, some renters face "a precarious lack of security" - especially in terms of Section 21 "no fault" evictions. Meanwhile, responsible landlords are facing issues by being "undercut by a minority of criminal landlords".
While the government has set out plans in its bill, it has further ambitions for the sector - highlighting that nearly a quarter of private rented homes "do not meet basic decency standards". In the future it aims to apply a Decent Homes Standard to the private rented sector.
How do letting agents and landlords feel about the changes to come?
The Renters (Reform) Bill continues to divide opinion, according to research conducted in Goodlord and Vouch's State of the Lettings Industry Report 2023.
Landlords are overall feeling pessimistic about the introduction of the new rules - with 25% of those surveyed feeling “very” pessimistic and 29% feeling “somewhat pessimistic”. Only 14% feel optimistic.
On the other hand, 29% of letting agents feel optimistic about the changes.
When will the second reading of the Renters (Reform) Bill take place?
Although the government is now back from its summer recess, David Smith, Head of Property Litigation at JMW Solicitors, has shared his view on what progress the industry can expect to see in the coming months.
“In principle, this could involve a second reading when Parliament returns in September but in practice Parliament is only back for a short time before immediately going back into recess for party conferences," he says.
"After that we also need to have a budget and [probably] a King’s speech before December so there is not actually a huge amount of time to do this before Christmas."
What's included in the Renters (Reform) Bill?
1. Section 21 "no fault" evictions to be abolished
The bill confirms plans to abolish Section 21 - a process that enables private landlords to repossess their properties. Instead, landlords will only be able to evict a tenant under reasonable circumstances.
The 2022 government white paper states that "Removing Section 21 will level the playing field between landlord and tenant - empowering tenants to challenge poor practice and unjustified rent increases, as well as incentivising landlords to engage and resolve issues."
Michael Gove further reiterated the government's view that no fault evictions can be "cruel and heartless".
How have plans to abolish Section 21 already changed the lettings sector? Find out in this blog.
How will section 8 grounds change?
In place of section 21, the bill outlines proposals to strengthen section 8. This allows a landlord to end a tenancy agreement early if they have a legal reason to do so.
This includes the introduction of a new mandatory ground for repeated rent arrears. This makes eviction mandatory where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears balance at hearing.
There is also a new ground that means landlords can apply section 8 to a tenancy if they wish to sell a property, or if they wish to allow their family members to move into a rental property. This can apply after a tenant has been in a property for at least six months.
Read more about the changes on our dedicated section 8 blog.
How will court processes change?
The government has committed to work in partnership with the Ministry of Justice (MOJ) and HM Courts and Tribunals Service (HMCTS).
In the A fairer rental sector white paper, the government stated its intention to introduce a package of "wide-ranging court reforms that will target the areas that particularly frustrate and hold up possession proceedings".
Download a free guide to share with your landlords on the changes to sections 21 and 8.
2. A single system of periodic tenancies
The bill confirms the government's ambition to simplify existing tenancy structures, by moving all Assured Shorthold Tenancies onto a single system of periodic tenancies.
Assured Shorthold Tenancies are currently the most standard type of rental agreement in the private rented sector. It is a common process for tenants to enter into a contract of six or 12 months. After this time has elapsed, a decision would be made to either renew the contract or switch to a periodic (e.g. month by month) payment.
Instead, the Renters (Reform) Bill proposes that all rental properties will be under a periodic tenancy - rolling by every month without having a specified end date.
The proposals outline that tenants would then need to provide two months’ notice when leaving a tenancy, to "ensure landlords can recoup the costs of finding a tenant and avoid lengthy void periods".
In addition, landlords would only be able to evict a tenant under "reasonable" circumstances.
Read your full guide to the new system of periodic tenancies on our blog or download our free e-book guide.
3. Notice periods for rent increases to be doubled
Rent increases will be limited to once per year and the minimum notice landlords must provide of any change in rent will be increased to two months.
Will landlords be able to review rents?
The Renters’ (Reform) Bill white paper outlines plans to end the use of rent review clauses, "preventing tenants being locked into automatic rent increases that are vague or may not reflect changes in the market price" and says that "any attempts to evict tenants through unjustifiable rent increases are unacceptable".
However, landlords and agents will be able to raise rents once a year in line with the market rates - similar to the current section 13 rules - with two months' notice of any increase shared with tenants.
The government will publish a new form that would need to be served to tenants to let them know that you plan to increase their rents. If the tenant agrees, they'll simply pay the increased rent.
If the tenant feels that the increase is disproportionate, the government will "make sure that tenants have the confidence to challenge unjustified rent increases through the First-tier Tribunal.
However, it's also expected that the courts will be able to choose to increase rents for tenants, helping to make tenants to do their own research before challenging an increase.
It will also "prevent the Tribunal increasing rent beyond the amount landlords initially asked for when they proposed a rent increase".
4. Tenants given more rights to keep pets in properties
The Renters (Reform) Bill outlines that tenants can request permission to pet in their home and that landlords cannot unreasonably withhold consent.
A landlord must accept or refuse consent by the 42nd day after the date of the request. This can be extended by a week if a landlord asks for further information.
How will landlords be protected if they accept a tenant with pets?
The bill is slightly stricter than the white paper. It indicates that a tenant must provide in writing confirmation that they have acquired insurance for their pet, or that they are willing to pay the landlord reasonable costs to cover the landlord's insurance in case of pet damage.
5. A new ombudsman covering all private landlords
Landlords "may" be required to join a government-approved ombudsman covering all private landlords who rent out property in England - regardless of whether they use a letting agent.
A landlord redress scheme would enable a former or current tenant to be able to make a complaint against a landlord, which would then be independently investigated.
The bill outlines its conditions for what the redress scheme should include, but more details are needed on when the scheme would be set up.
What powers would the ombudsman have?
The ombudsman would have powers to "put things right for tenants", including compelling landlords to issue an apology, provide information, take remedial action, and/or pay compensation of up to £25,000.
The government also intends for the ombudsman to be able to require landlords to reimburse rent to tenants where the "service or standard of property they provide falls short of the mark".
The ombudsman’s decision will be binding on landlords, should the complainant accept the final determination and failure to comply with a decision may result in repeat or serious offenders being liable for a Banning Order.
Will joining the ombudsman be mandatory for landlords?
In all cases, it seems that membership will be mandatory. The white paper says that "making membership of an ombudsman scheme mandatory for landlords who use managing agents will mitigate the situation where a good agent is trying to remedy a complaint but is reliant on a landlord who is refusing to engage".
It will also ensure that tenants have access to redress services in "any given situation, and that landlords remain accountable for their own conduct and legal responsibilities".
Read this guide to find out more details about the new private renters' ombudsman.
6. New Property Portal for private landlords and tenants
A new digital property portal will be introduced to "provide a single ‘front door’ to help landlords understand, and demonstrate compliance with their legal requirements."
The government says that "too often tenants find out too late that they are renting a substandard property from landlords who wilfully fail to comply, and councils don’t know who to track down when serious issues arise."
It notes that the portal will also "support good landlords to demonstrate regulatory compliance and to attract prospective tenants."
How will the new property portal for landlords work?
The nature of the portal is yet to be determined, with the government to "conduct extensive testing of potential solutions for the portal, underpinned by user research and engagement with representative groups, to make sure the system works for tenants, landlords and local councils."
The portal should be flexible enough to support future policy developments, "supporting efforts to raise standards in the sector and reduce the number of non-decent rented homes by 50% by 2030." This could include a system where landlords and agents must meet minimum standards before properties can be let.
Will it be mandatory to register properties on the portal?
The portal aims to provide a solution to these issues, with landlords legally required to register their property on the portal and local councils empowered to take enforcement action against private landlords that fail to join the portal.
The portal will "dramatically increase local councils’ ability to enforce against criminal landlords". The government plans to incorporate some of the functionality of the existing Database of Rogue Landlords and Property Agents.
Read this guide to find out more details about the new property portal.
Future proposed changes for the private rented sector
1. Applying the Decent Home Standard to the private rented sector
The white paper - A fairer private rented sector - published in 2022, suggested that there would be the introduction of minimum housing standards requirements that would "require privately rented homes to meet the Decent Homes Standard for the first time".
The Decent Homes Standard - as it stands - currently only applies to the social housing sector. It outlines that homes must be free from serious health and safety hazards and landlords must keep homes in a good state of repair so renters have clean, appropriate and useable facilities.
On publishing the Renters (Reform) Bill in May 2023, the government stated it remained committed to this course of action. However, it needed to continue its ongoing consultation on the sector and would therefore set out its next steps in "due course".
Read our full blog on the Decent Homes standard to find out more.
2. Bans on renting to families with children or those on benefits to be outlawed
The government has indicated that it plans to bring forward legislation "at the earliest opportunity" to further protect people with children or people on benefits. This does not form part of the proposed Renters' Reform Bill at this stage.
However, the BBC has reported that the Scottish and UK governments are planning to work together to implement a law on this topic, to make sure that landlords can't exclude tenants with children or on benefits from renting homes.
However, a spokesperson for the Scottish government has said that the talks "must include a close examination of the UK government's decision to freeze Local Housing Allowance rates at 2020 levels for the third year running", as affordability is "the far more significant barrier to accessing a privately rented home".
This article is intended as a guide only and does not constitute legal advice. Visit gov.uk for more information.
