Renters are set to receive new rights to challenge landlords on rent hikes and substandard homes, under new plans announced this week by the Government.
The new measures will form part of the Renters Reform Bill, announced in the Queen’s Speech, and will be introduced into Parliament later this year.
The Government labelled the proposals as the biggest shake up of the private rental sector in 30 years’ marking a generational shift that will ‘redress the balance between landlords and the 4.4million tenants living within it.’
Section 21 enables private landlords to repossess their properties from assured shorthold tenants (ASTs) without having to establish fault on the part of the tenant.
The proposals are primarily aimed at clamping down on landlords who provide unfit homes, which the Government estimates to make up roughly one fifth of the sector.
To do this, social housing standards will be extended to private rentals to stop people living in damp, unsafe or cold homes.
A Private Renters’ Ombudsman will be appointed to settle disputes between renters and landlords, and tenants will be able to seek repayment of rent if the standard of their homes is deemed unacceptable.
The reforms are also aimed at easing the cost of living pressures facing renters, saving them from unnecessarily moving from one privately rented home to another causing hundreds of pounds in moving costs.
Levelling Up and Housing Secretary Michael Gove said: ‘For too long many private renters have been at the mercy of unscrupulous landlords who fail to repair homes and let families live in damp, unsafe and cold properties, with the threat of unfair ‘no fault’ evictions orders hanging over them.
‘Our new deal for renters will help to end this injustice by improving the rights and conditions for millions of renters as we level up across the country and deliver on the people’s priorities.’
What is planned?
Section 21 to be banned
The so-called ‘no fault’ Section 21 evictions that allow landlords to terminate tenancies without giving any reason will soon be outlawed.
More than a fifth of private renters who moved in 2019 and 2020 did not end their tenancy by choice, according to the Government, including 8 per cent who were asked to leave by their landlord.
This will leave landlords relying on section 8 notices in order to evict tenants.
This means a landlord will soon require a valid reason to evict any tenant.
A valid reason would include if the tenant is in rent arrears, they have caused damage to the property or if they are causing a nuisance to neighbors.
However, tenants can challenge section 8 notices to evict which can result in lengthy waits for landlords as they await a court hearing.
Nathan Emerson, chief executive of Propertymark said: ‘The removal of Section 21 comes as no surprise. However, investors shouldn’t be spooked by this.
‘It looks like mandatory grounds will remain for if a landlord wants to sell or live in their property the Government have laid out new possession plans, and this legislation is still to be debated on, we are still looking for assurance that grounds are sufficiently robust, particularly for anti-social behaviour, damage, and arrears as the reforms progress.’
Landlords will soon need a valid reason to evict such as if the tenant fails to pay the rent.
There are concerns that with section 21 being abolished, landlords may be discouraged from entering into longer term fixed tenancies, whilst some may sell up and abandon the sector altogether.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘In our opinion, it can’t be right for long-term, well-behaved tenants to be asked to leave.
‘However, it’s not reasonable either for landlords having to spend thousands evicting a tenant not paying their rent or exhibiting anti-social behaviour.
‘Therefore, the alternative Section 8 eviction route must allow landlords to regain possession of their properties if required for their own use or required for future tenants. Otherwise, overall supply will fall and rents will rise.’
No fault evictions had already become so difficult to use they were ineffective, according to a senior property lawyer.
However, others claim that it will make little difference due to no fault evictions having gradually become so difficult to use over the years they were ineffective.
Scott Goldstein, partner at law firm Payne Hicks Beach said: ‘Over the past 25 years, successive governments have introduced a raft of preconditions that landlords must satisfy before they can serve a Section 21 Notice (‘no fault’ eviction).
‘A mass of case law has been generated in the courts surrounding these preconditions, making no fault evictions a maze of red tape, far from easy for landlords to use as an unambiguous route to recover their properties.’
All renters to have a right to have pets
In 2020, only 7 per cent of landlords advertised their property as suitable for pets, according to government analysis.
Despite this, between 25 and 35 per cent of tenants looking for rental properties are pet owners, according to the estate agent Chestertons.
Although the Government’s model tenancy agreement allows for renters to keep pets by default, at present landlords can still stipulate against this.
The new proposal will mean tenants have a right to request a pet in the property, and landlords will not be able to unreasonably refuse them.
Homeward Bound Between 25 and 35 per cent of tenants looking for rental properties are pet owners, according to the estate agent Chestertons.
Leaf adds: ‘Landlords must not unreasonably withhold properties from tenants with pets whereas, on the other hand, tenants should have a legal duty to cover the cost of any damage made by their pets.
‘The change should improve letting activity in theory bearing in mind we find the single biggest reason why private tenants move is to find pet-friendly properties.
‘This trend became more popular during the pandemic as tenants spent increased time working from home but has continued now lockdown restrictions have eased.
‘Landlords who could be reluctant to embrace the new arrangement will probably find – as we do – that tenants with pets tend to stay longer and keep properties in better condition.
‘Provision should also be made for the difficult cases when excess damage is caused so that landlords get the chance to re-let without penalty.’
No more arbitrary rent reviews
For the first time, the Government plans to end the use of arbitrary rent review clauses within tenancy agreements, and improve tenants’ ability to challenge excessive rent increases through the first tier tribunal.
This will restrict landlords from imposing unjustifiable rent hikes and enable tenants to be repaid rent for homes deemed unfit for letting purposes.
This also means tenants will be able to take their landlord to court to seek repayment of rent if the rental home is of an unacceptable standard.
An unacceptable standard might include a serious damp problem and ongoing issues with heating or leaks for example.
Propertymark’s Emerson said: ‘Rent review clauses were generally put into longer-term tenancies and were often linked to inflation (RPI).
‘It’s worth pointing out that there is already a long standing mechanism within consumer rights protection to challenge unfair clauses.’
It will soon be illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.
Families with children and those on benefits cannot be excluded
It will become illegal for landlords to have blanket bans on renting to families with children or those in receipt of benefits.
Emerson said: ‘It is only right that families with children or those in receipt of benefits are not discriminated against, but we believe that the benefits system needs to be better aligned with the sector to help those on lower incomes entering the private rented sector.
‘The way in which benefits are paid can work against the setup of a private tenancy agreement so it is good to see that landlords can now ask for rent arrears to be paid off in instalments directly from Universal Credit and can also request that funds can be paid directly to landlords.’
A new Private renters Ombudsman
A new Private Renters’ Ombudsman will be created to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.
This will ensure landlords can gain possession of their properties efficiently from anti-social tenants and can sell their properties when they need to.
The white paper states: ‘We will introduce a new ground for landlords who wish to sell their property and allow landlords and their close family members to move into a rental property.
‘We will introduce a new mandatory ground for repeated serious arrears.
‘Eviction will be 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.’
All renters to be moved onto periodic tenancies
The Government white paper states: ‘We will make all tenancies periodic, giving private tenants the right to move whenever they need to, or where the landlord is not fulfilling their basic responsibilities.
‘Tenants will need to provide two months’ notice when leaving a tenancy, ensuring landlords can recoup the costs of finding a tenant and avoid lengthy void periods.’
A periodic tenancy is often referred to as a rolling tenancy with no fixed end date.
Most renters currently will be on something called an assured shorthold tenancy (AST) which becomes periodic when the fixed term comes to an end, unless another fixed term is agreed upon.
The Government is planning for all tenants to be moved onto a single system of periodic tenancies.
The government white paper states: ‘We will make all tenancies periodic, giving private tenants the right to move whenever they need to, or where the landlord is not fulfilling their basic responsibilities
This will mean renters can leave sub-par housing without being held liable for the rent.
Equally they will be able to move more easily if and when their circumstances change.
In effect, a tenancy will only end if a renter decides to end it. A landlord on the other hand will have to have a valid reason.
Emerson said: ‘The announcement on periodic tenancies will cause a significant shift and will have practical implications for agents and landlords.
‘In principle this could create additional flexibility, however for anybody looking for a long term tenancy this doesn’t appear to offer any additional security.’
Doubling notice periods for rent increases
The Government will also double the notice periods for rent increases and give tenants stronger powers to challenge them if unjustified.
At present a landlord must give a tenant one month notice before increasing the rent if the tenant is paying on a weekly or monthly basis.
A tenancy agreement should typically include how and when the rent will be reviewed.
If on a rolling tenancy, a landlord cannot normally increase the rent more than once a year without a tenant’s agreement.
Emerson said: ‘Most landlords do not increase rent annually; the main catalyst is a new tenancy which would include a market review with an agent.
‘Therefore it’s not anticipated that the extension from one month’s notice to two month’s notice will provide an issue for letting agents or landlords.’
Local councils to have stronger powers
The Government also plans to give council more power to tackle rouge landlords backed by enforcement pilots, and increasing fines for serious offences.
At present, the majority of rogue landlords are going unpunished for letting out unsafe properties.
Compliance: Any gas-fuelled property that is rented out needs to have a gas safety check every 12 months
More than two thirds of councils across England failed to make a single prosecution over the past three years according to a recent Freedom of Information request carried out by the National Residential Landlords Association (NRLA).
It also found that a further 10 per cent of English councils had secured just one successful prosecution during that time.
The government will be hoping to ensure landlords who fail to keep up with regulations will be soon exposed and punished more effectively.
For example, those who own gas fueled homes and fail to provide a valid gas safety certificate each year or those who fail to provide a valid report on the safety of the electrics in their properties every five years.
Will this be positive for the sector?
The concern of organisations within the sector is whether the rebalancing of power will result in more landlords exiting the sector.
The number of properties available to rent through letting agents halved in the month of March between 2019 and 2022, according to Propertymark.
During the same four-year period, 94 per cent of landlords who removed their property from the rental market did so to sell it.
With there already deemed to be a shortage of rental homes, there is also a fear that this could lead to further rent hikes adding financial strain on tenants at a time when all other living costs are soaring.
The average rent in the UK reached another record high this month of £1,103 per month, according to the HomeLet Rental Index, up 10.6 per cent year-on-year.
Slim pickings: Estate agents are warning of reduced number of rental properties and soaring demand.
While the new proposals are welcomed, many are warning the Government to be careful to not discientivising property investors and landlords.
Ben Beadle, chief executive of the National Residential Landlords Association said: ‘We will be analysing the Government’s plans carefully to ensure they meet this test.
‘A failure to do so will exacerbate the housing crisis at a time when renters are struggling to find the homes they need.
‘The eventual legislation needs to recognise that government actions have led to a shortage of supply in the sector at a time of record demand.
‘It is causing landlords to leave the sector and driving up rents when people can least afford it.’
The graph shows how the private rented sector has shrunk in recent past years.
Nathan Emerson, chief executive of Propertymark said, ‘The private rental market is already under huge strain with renters outstripping available properties.
‘This increased demand comes as more owners of homes for rent are choosing to sell them.
‘Our letting agent members tell us this is the result of a decade of tax and regulatory burden that simply does not incentivise investment, especially from single property landlords who make up 43 per cent of the market.’
The majority of estate agents has seen a rise in the number of landlords leaving the market.
Eddie Hooker, of the Hamilton Fraser Group, which operate industry schemes such as Total Landlord Insurance said: ‘Giving more power to the tenant, for example by restricting the rights of landlords to determine when a tenant should actually have to vacate at the end of a tenancy and to force landlords to accept renters that are on benefits, no matter how temporary, could send a signal that investing in the private rental sector is an uncertain and undesirable endeavour.
‘It’s vital that the eventual legislation doesn’t deter landlords from the sector as this will cause more landlords to exit, exacerbating an existing shortage of rental homes and driving up rents at a time when interest rates are rising faster than they have done in decades, and when people can least afford it.
‘While landlords are frequently portrayed as fat-cat institutions that have no regard for tenants, the truth is that most are decent people with just one or two investment homes which form part or all of their income or retirement plans and to continue to squeeze them would be counter-productive.’