Renters' Rights Bill

The Government has introduced the Renters' Rights Bill; the first reading occurred in parliament on 11 September 2024.

As the initial draft is now released, you will likely have seen and heard many things and, as a result, questions about how it will impact your property investment.
 
After reviewing the draft bill, it appears the proposals will bring change, but it is predominantly centred around removing rogue landlord practices and providing security for tenants.
 
From our review, the significant changes are as below:

We have elaborated on the points above to help you understand the changes.

Section 21 Notice banned immediately and Grounds for possession

The abolition of Section 21 no-fault evictions has been an aim of the previous and current Government. The abolition will apply to both new and existing tenancies, providing immediate protection to private renters. There is some concern within the industry, as it will mean changes to managing evictions within the private rental sector. However, the main concern is whether the courts will have the resources to handle the expected increase in cases in the event landlords decide to leave the market. So far, there has yet to be any mention of reforms to the judicial system to address this issue.

There will be a new ground for landlords that wish to sell or move into a property, although this cannot be exercised within the first 12 months of the tenancy commencing, and a four-month notice period will be required for these grounds.

If the tenant is at fault, using a relevant ground under Section 8 Notice can still be issued. The rules have tightened slightly - if a tenant falls into arrears, currently, you can serve a Section 8 Notice with a mandatory ground if the total of arrears is 2 months or over. However, this has increased to 3 months and over, and the notice period has increased from 2 weeks to 4 weeks. Discretionary grounds will remain available for lesser arrears and persistent late payment.

Periodic Tenancies

UK Government believe that removing fixed term assured shorthold tenancies and instead allowing tenants to end a tenancy with two months' notice will give renters more flexibility to move if their circumstances change.

Currently, fixed-term tenancies benefit both parties, as they offer security of tenure for the tenant and a guarantee of rent payments for the landlord. For tenants with low income or poor credit history, the fixed term allows a guarantor to be confident about the length of time they are signing up to support them. Propertymark is strongly challenging this abolition of fixed-term tenancies as they believe the tenancy agreement offers more flexibility than the proposed periodic tenancy.

Strengthening Tenants Rights

The Government wants to give tenants more power, enabling them to challenge rent increases and end rental bidding wars. Landlords and letting agents will be legally required to publish an asking rent and will be banned from accepting offers above this price. There will be detailed guidance on the process for advertising and documenting rental negotiations.

With regards to rental increases, landlords will be able to increase rents once a year up to the market rate by issuing a Section 13 Notice, although currently, only one-month notice has to be given for this; the Bill will see this change to two months. Tenants can challenge increases they believe are above the market rate through the First-Tier Tribunal. The Tribunal will also gain the power to defer increases for a further two months in cases of significant hardship.

Pets in Lets

Renters' Rights Bill will give tenants the right to request a pet both before and during a tenancy. This will ensure landlords must consider and cannot unreasonably refuse a tenant's request for a pet. Although, with this, the landlords and letting agents can request insurance to cover potential damage from pets if needed.

Decent Home Standard and Awaab's Law

These pieces of legislation are already used within the social housing sector. Decent Homes Standard and Awaab's Law will be introduced to the private sector to ensure all homes are safe and hazard-free, addressing the high number of substandard homes. Landlords who fail to address these hazards can be fined up to £7,000 by local councils and may face prosecution for non-compliance. 

Digital private rented sector database and property ombudsman

A new digital database will provide tenants with crucial information about landlords to make informed decisions when entering new tenancies. It will also help landlords and agents comply with Health and Safety legislation.

The Bill also introduces a new Property Ombudsman that will be mandatory for all landlords to become members. They will be offering a fair and impartial resolution service to settle disputes without the need for court involvement. Agents who advertise properties where the landlord is not registered could face enforcement action from local councils, ranging from civil penalties of up to £7,000 to criminal prosecution or fines of as much as £40,000 for repeated breaches. Propertymark have been campaigning for local licensing schemes to be removed once the Database is up and running.

It will be illegal for landlords to discriminate against tenants who receive benefits. The Bill will outlaw blanket bans on tenants with children or those receiving benefits, ensuring fair access to housing. It has been a key priority for Labour "to ensure fair access to housing for all". 

Next steps

The Bill has many hurdles to clear first. However, the legislation could go through as quickly as next spring, with the reforms being implemented by late summer 2025. The Second Reading is taking place on 9 October, and we will be provided updates every step of the way.

If you have any questions or concerns about the proposed Bill, please get in touch with our Strettons Residential Team, and we will try to answer them as best as we can.