Private rented sector reforms – a fair deal for landlords of residential properties?
The Government recently published a White Paper titled ‘A Fairer Private Rented Sector’ outlining its proposals for reform of the private rented sector. These reforms are heralded as a ‘new deal’ for private renters as they are intended to improve and standardise the quality of housing stock and provide stability for tenants who rent within the sector in England.
The White Paper sets out aspirational reforms to improve living conditions, but very little detail has been provided of how these reforms will operate in practice. The reforms could have a significant impact on landlords. For example, landlords might need to carry out expensive and substantial works to older properties to meet the Decent Home Standard (the paper envisages that for a home to be ‘decent’, kitchens and bathrooms must be located correctly). The current Standard is under review with the results being published later this year at which point landlords will have a better understanding as to what works might be necessary.
Also, whilst the reforms are clearly targeted at rogue landlords, the end of no-fault evictions (‘Section 21’ evictions) will make it more difficult for responsible landlords to manage their properties and free themselves of problem tenants.
We summarise below the key changes that will impact landlords and tenants:
- Landlords must ensure that all homes are ‘decent’. All landlords will have a statutory duty to comply with the Decent Homes Standard that already operates within the social housing sector. The intention is that homes are not just safe, but also provide a decent quality environment to live in;
- Section 21 ‘No-fault’ evictions will be abolished. This is intended to target landlords evicting tenants who complain about rent increases or disrepair;
- Fixed term tenancies will be abolished. To simplify tenancies and give tenants greater security, fixed term tenancies (including assured and assured shorthold tenancies) will be converted to periodic tenancies. These changes will be introduced in two phases: (1) all new tenancies will be periodic; (2) all existing tenancies will be converted to periodic tenancies and section 21 notices cannot be used after this date. Landlords will have at least six months and 18 months’ notice respectively before these two phases come into force;
- The existing grounds for possession will be revised. In addition to removing the Section 21 no-fault eviction ground, landlords will only be permitted to evict tenants where the tenant is in breach of tenancy or where reasonable circumstances exist. In addition to the current grounds, new mandatory grounds for possession will be introduced permitting landlords to take possession if: (a) they want to sell the property or re-occupy it with their family; or (b) the tenant is in repeated serious rent arrears (where the tenant has been in two months’ arrears at least three times in the previous three years). The notice period to evict based on the mandatory ground of criminal or serious anti-social behaviour will also be shortened to deal with problem tenants. Tenants will be required to give at least 2 months’ notice to the landlord to quit the tenancy;
- Rent review clauses will be prohibited and rent increases will be restricted to once per year. Little detail about the new rent increase mechanism is given in the paper, but landlords will be required to give at least 2 months’ notice of any rent increase and will be restricted on the amount of rent in advance that can be taken at the start of the tenancy. Tenants will also be given ‘improved’ rights to challenge ‘disproportionate’ rent increases in the First-Tier Tribunal. There is no guidance on what amounts to a ‘disproportionate’ rent, but the paper suggests that this would capture rents that are not in line with the market;
- All landlords will be required to be a member of a new mandatory Ombudsman service which will cover all private landlords and agents. This will provide an alternative to court for tenants to resolve disputes concerning rent and disrepair. Ombudsman decisions will be binding on landlords if the tenant accepts the decision, but there is little detail on how this new scheme will operate alongside the courts;
- A new property portal will be introduced to provide information to landlords, tenants and local authorities about their rights and obligations. Landlords will be required to register on the new property portal so tenants can identify who is responsible for the property;
- It will be illegal for landlords to discriminate against tenants on benefits or tenants that have families.
- Tenants will have the right to request that a pet can live with them in the property – landlords must consider and not unreasonably withhold consent to such a request. Landlords can reasonably require tenants to obtain pet insurance cover as a condition of such consent; and
- Landlords will be obliged to produce written tenancy agreements.
The Government stated in the White Paper that the draft Renters Reform Bill will be introduced by next spring. It remains to be seen whether the Government will prioritise this bill when the new prime minister is in post from the autumn.