The rental reform proposals have garnered significant media and industry attention, but it's important to note that the draft Bill has only recently been introduced in Parliament.
Typically, it takes about a year or longer for Bills to become laws, during which time their contents can undergo significant changes.
The Act usually comes into force approximately six months after that.
Moreover, the implementation of rental market reforms often follows a phased approach, with new tenancies being subject to the new laws first, and existing tenancies being affected later, typically a year or so down the line.
Therefore, it's expected to be at least 18 months before any of the proposed reforms come into effect, and the proposals may undergo numerous amendments in the meantime.
Let's examine the current proposals and highlight the aspects that landlords need to be concerned about and those that are unlikely to have a significant impact in practice.
Scrapping Section 21 notices:
While some landlords have expressed concerns about losing the ability to regain possession of their properties with a two-month notice and without providing a reason, it's important to note that most landlords have legitimate reasons for evicting tenants, whether they use Section 21 or Section 8 notices.
Section 21 is often chosen because it facilitates the possession claim process if the tenant refuses to vacate, or because the tenant has requested it in order to apply for local authority housing.
The reality is that landlords generally do not evict tenants without valid reasons.
Under the proposed reforms, landlords will still be able to regain possession of their property if necessary by using Section 8, especially in cases where the tenant is in rent arrears, has caused disturbances or property damage, broken the law, or been involved in domestic violence.
They will also be able to reclaim their property if they want to sell it or move themselves or close family members into it.
The government has also assured landlords that it will make it easier to repossess properties when tenants are at fault.
It's worth noting that the rules regarding the issuance of prescribed information to tenants, such as the Energy Performance Certificate (EPC), gas safety certificate, and deposit protection information, will have to change.
Currently, this information must be provided for a Section 21 notice to be valid, but it's unclear what requirements will be in place for these documents (if any) once Section 21 is eliminated.
Making all tenancies periodic and introducing two-month notice periods for tenants:
The proposal to abolish Assured Shorthold Tenancies (ASTs) and implement universal two-month notice periods primarily affects landlords of student properties.
Currently, landlords can offer tenancy agreements for a 12-month fixed term, ensuring that the property remains occupied throughout the entire calendar year, not just the academic year.
However, if students can give notice at any time, they will be able to terminate their tenancy before the summer holidays or potentially after only a few months, such as if they drop out of their courses or have conflicts with their housemates.
This change raises concerns among landlords due to the challenges of finding students requiring accommodation in the middle of the academic year and the additional administrative work and referencing required for new tenants.
Given the existing imbalance between student rental demand and supply in many university towns and cities, this aspect of the proposal is likely to be reviewed.
Landlords of single-let properties, on the other hand, should not be overly concerned, as tenants in such properties typically do not move without a valid reason. In fact, tenants may face more difficulties in moving if they wish or need to, as they will have to provide two months' notice instead of the current one month. However, this change provides landlords with more time to secure new tenants, which can be seen as a positive development.
Additionally, rental periods will be limited to either one month or 28 days, but the majority of landlords already charge rent on a monthly basis, so this change will have minimal impact.
Introducing landlord registration:
The proposed landlord registration consists of two elements: the Privately Rented Property Portal and the Private Rented Sector Ombudsman.
The Privately Rented Property Portal will be a publicly-accessible database containing information about landlords and their properties. It will also provide guidance to help landlords understand and comply with their legal obligations. All private landlords will be required to register themselves and their properties on the portal and join the Ombudsman scheme.
Although fees will apply, the proposals state that they will be proportionate and good value. The government intends to link the two schemes, allowing landlords to enter their information once.
Similar registration schemes have already been in place in Scotland, Wales, and Northern Ireland for several years without causing significant issues for landlords.
Penalties for non-compliance include fines of up to £30,000 by local authorities if landlords advertise or let a property without registration or fail to join the Ombudsman scheme. Repeat offences can lead to criminal charges and a Banning Order. Law-abiding landlords who approach property rental professionally shouldn't be concerned about these changes.
Tightening up the rules around rent increases:
Landlords will be restricted from increasing rent more than once within a 12-month period and must provide tenants with two months' notice through a Section 13 notice. While this change is unlikely to have a major impact on most landlords, it may result in an increase in the number of tenants challenging rent increases. The proposal aims to digitise the first-tier property tribunal process, making it easier for tenants to access the system.
Other proposed changes with minimal impact:
The Bill grants local authorities additional powers to fine criminal landlords. However, this overlooks the issue of resource limitations. Councils already have the authority to fine landlords up to £30,000 without court involvement, but the lack of funding and personnel hinders their ability to conduct thorough checks to identify bad landlords. Addressing this funding problem should be a priority for the government.
The Bill also prohibits blanket refusals to accept tenants receiving Universal Credit or housing support. Landlords are encouraged to make decisions on a case-by-case basis. However, the reality is that tenants on benefits often struggle to afford private rents due to the capped local housing authority rates.
Finally, landlords will no longer be able to reject a tenant's written request to keep a pet without a valid reason.
Many landlords already allow suitable and well-behaved pets.
Moreover, pet insurance will be categorised as a 'permitted payment' under the Tenant Fees Act, enabling landlords to require tenants to obtain insurance to cover the cost of any potential property damage. However, it's important to note that landlords still have the discretion to refuse pets.
Overall, the majority of proposed changes in this Bill are unlikely to significantly affect law-abiding landlords and agents who operate within the legal and safe parameters of property rental.
Strengthened Section 8 grounds for eviction may actually make it easier for landlords to regain possession of their properties in cases of non-payment of rent or anti-social behaviour.
The introduction of the Ombudsman may facilitate quicker dispute resolution at a potentially lower cost compared to going to court. Additionally, the property portal is expected to be a valuable resource that helps self-managing landlords and agents stay updated on legal changes.
However, if you currently self-manage and feel the need for assistance in navigating these upcoming changes, it may be worth considering working with a qualified letting and managing agent. To explore this further, refer to our How to identify a great letting agent
