The Renters' Rights Bill was published on 11 September and received its second reading in Parliament on 9 October. It marks a significant shift in housing policy and will make good on Labour's manifesto promise to abolish Section 21 "no fault" evictions on day 1 of the legislation coming into force.
So what are the key changes?
Abolition of Section 21 "no fault" evictions
The Bill will abolish Section 21 of the Housing Act 1988, which allows landlords to evict tenants without providing a reason. This change aims to provide tenants with greater security and stability. Instead, landlords will have to rely on strengthened statutory grounds for possession, which they will have to prove in court.
The British Property Federation is largely supportive of the proposed reform, but it remains concerned by the ability of the courts to deal with the increased workload that will be generated by the abolition of "no fault" evictions.
Open-ended tenancies
Tenancies will no longer have a fixed end date. Fixed term assured and assured shorthold tenancies will be replaced by open-ended, periodic assured tenancies that can only be terminated by the tenant on two months' notice or on specific grounds by the landlord. The rationale for this is to give tenants more flexibility to end tenancies when they need to, including where landlords are failing to meet their repair obligations. On the date the Bill comes into force, all existing assured tenancies will become periodic assured tenancies.
Rent increase restrictions
It will no longer be possible to rely on contractual rent increase clauses. Landlords will only be able to increase the rent once a year using the statutory mechanism under section 13 of the Housing Act 1988, which tenants will be able to challenge via the First Tier Tribunal if they believe it exceeds the rent achievable on the open market.
Extension of the Decent Homes Standard and Awaab's Law
The Government is looking to improve accommodation standards and make them safer with the imposition of a Decent Homes Standard and with Awaab's Law being extended to the private rented sector. Landlords will be required to investigate and fix reported health standards within prescribed timescales (still yet to be determined).
New ombudsman service and landlord database
All landlords will be required to join a new ombudsman service and comply with its decisions. Landlords will also need to provide their information to an online database and failure to do so could prevent them from obtaining possession.
Given the anticipated rapid passage of the Bill, both investors and lenders should proactively assess its potential impact on rental income. The effect of tenants being able to terminate tenancies on just two months' notice and challenge proposed rent increases will need to be evaluated to ensure the private rented sector can continue to flourish, provide much needed housing and offer a stable investment return against an evolving legislative landscape.
This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.