Readers may remember our rather gloomy blog on Mr. Gove’s Renters’ Reform Bill.  Our view then was that landlords didn’t need to panic – yet.  Unfortunately, with the Renters’ Rights Bill, it may be time for landlords to start feeling distinctly anxious.  The headline change in the Renters’ Reform Bill was to abolish so-called “no-fault eviction”.  In the end, Mr. Gove’s reforms foundered on the Conservative bank benches –  there would be no abolition of no fault evictions until the county court system sorted itself out and waiting times for hearings cut. 

There is no such reticence with the Government’s Renters’ Rights Bill (the “Bill“), and it has a majority eager to back the Bill.  It was introduced into Parliament on Wednesday 11 September 2024 by Angela Rayner who promised “no more dither and delay“.  The Ministry of Housing, Communities and Local Government has also introduced Guidance to the Renters’ Rights Bill.

No transitionary provisions

A notable difference in the Bill from its predecessor is that there will be no transitionary provisions allowing landlords time to plan for its implementation.  When passed into law the Bill will take effect immediately. 

Even more concerning is that there will be no more fixed term tenancies.  Residential tenants will all have periodic tenancies, which they may walk away from at any time on two months’ notice.  This will, of course, mean that landlords cannot, as they do now, grant successor tenancies of the same premises only in return for a tenant’s “agreement” to an increase in rent.  The periodic tenancy will continue indefinitely and only come to an end if and when the landlord can prove one of the statutory grounds for termination. 

Annual Rent Increases only

Under the Bill landlords will only be able to raise rents once a year to market rates, by serving a section 13 notice.  The section 13 notice, and the right to challenge excessive rent increases at the First-tier Tribunal, are not new; they have always been in the Housing Act 1988.  However, the section 13 right was effectively toothless because in practice landlords would only grant assured shorthold tenancies, rather than the fully protected assured tenancies.  If an assured shorthold tenant took such action against their landlord, then it risked being evicted soon after. 

This is bad news for landlords, as they will not be able to raise the rent without the risk of the tenant taking the matter to the First-Tier Tribunal

Private Rented Sector Landlord Ombudsman

Many of the other provisions of the Bill are familiar from the Renters’ Reform Bill.  There will be a Private Rented Sector Landlord Ombudsman established “as soon as possible” after Royal Assent is granted.  A database of all assured and regulated tenancies will be established and landlords will be required to register themselves and pay a registration fee.  Local councils will be able to take enforcement action against private landlords that fail to join the PRS Database. If a landlord lets or advertises a property without it first being registered on the database, they can be issued with a civil penalty of up to £7,000 by the local council. If a landlord repeatedly breaches the requirement, or if they commit a serious offence such as providing fraudulent information to the database, they may be issued with a civil penalty of up to £40,000 or could face criminal prosecution.

Abolition of Rental Bidding

The Bill will, according to the Guidance, “end the unfair practice of pitting renters against each other in bidding wars“. The Bill will require landlords and letting agents to publish an asking rent for their property and prohibit them from asking for, encouraging, or accepting any bids above this price.  However, according to the Guidance this is a slightly longer term project, , which will allow time for a smooth transition to the new system.  Landlords who indulge in such activity will receive civil penalties of up to £7,000. 

Other reforms

Mr Gove’s other reforms such a right for renters to keep pets, no discrimination against tenants on benefits or tenants with children remain.  Awaab’s Law will be extended to the private rented section to the private rented sector, setting clear legal expectations for landlords to address serious hazards like damp and mould within specified timeframes

Conclusion

Should the Bill become law, which seems likely, there will be significant disruption in the private rental sector, and investors should take stock of their position now.  This is not back to the bad old days of the sitting tenant.  Not quite.  Landlords can still charge a market rent provided that they go through the appropriate hoops and the First-tier Tribunal agrees with their assessment of what is market.  However rent control has been mooted, at least in London, by the Mayor, Sadiq Khan, so there is no room for complacency.

Landlords can still evict a delinquent tenant when they finally get a hearing in front of a county court judge and prove that they are within the statutory grounds.  Another problematic shift is that landlords do not have the security of a fixed term tenancy.  A tenant can walk away on two months’ notice at any time, if they so chose. 

Although the Government denies that its measures will result in the mass exodus of landlords from the residential sector, there is clearly a risk that these reforms may lead to ‘good quality’ landlords  deciding that the game is no longer worth the candle and it is time to leave this sector to others. 

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