The Renters' Rights Bill: Explained

The Renters' Rights Bill has been a well-publicised topic for a number of years and was a manifesto commitment from the Government prior to their election last year. They are committed to enacting the legislation. This is likely within the next 6-12 months and will impact all involved in the private rented sector.

The issue of tenants’ rights and the lack of any security of tenure within the assured shorthold tenancy market have long been discussed and documented. However, the Government is pushing through the Renters' Rights Bill and the associated reforms that they promised in their manifesto to increase the rights of tenants, scrap Section 21 evictions (often referred to as “no fault” evictions) and limit the grounds upon which a landlord can bring a tenancy to an end.

There are also several other important changes affecting rent payment and rent increases. The full detail is set out in the Government Guide, but should also be understood by owners, occupiers, and developers.

Key Parts of the Renters (Reform) Bill

Existing tenancies

When enacted, the legislation will apply to all tenancies whether they be entered into prior to the legislation coming into effect or not. With this, all ASTs will in effect become Periodic Tenancies immediately. The Bill will discourage and allow people to move away from fixed-term tenancies. Fixed-term tenancies have helped landlords to plan for the future as they know how long the tenancies last. However, fixed-term tenancies have also allowed landlords increase rents through rent reviews. As energy costs and mortgage rates increase, landlords have been seen to increase rents ‘unreasonably’.

End of lease changes

A tenant will be able to give 2 months’ notice (to end on the last day of a rent period) to terminate their tenancy minimum fixed term.

Additionally, as part of the abolition of Section 21 evictions, landlords will only be able to terminate a tenancy on certain grounds (there are 8 in total), which are set out in the guide.

Restrictions on rent

Rent is an integral part of leases and tenancies. As part of the Bill, payments in advance will be banned, except for those for a rent period, i.e., monthly rent. It will therefore not be possible to collect rent six months in advance as additional security, something that has been widely criticised by charities and legal teams alike.

A landlord will only be able to contract at the rent level they have advertised, i.e. if a party makes a rent offer more than the asking rent a landlord will not be able to accept it. They will only be able to accept the rent they have requested at the outset. We believe this will lead to landlords advertising rents higher than they would otherwise accept to cover this off, potentially leading to rent increases.

Landlords will only be able to seek a rent increase once a year and that increase can only be to the market level. To enact a rent increase, the landlord will need to serve notice in a prescribed form on the tenant. This will set out the requested rent and the date upon which it is to take effect (at least 2 months from the service of the notice).

Disputes

If the tenant does not agree to the increase they can refer the matter to the first tier tribunal who will decide what the market rent should be. The concern is that this will present an opportunity for a tenant to take a proposed rent increase to the tribunal simply as a delaying tactic. We suspect that we will see a significant number of referrals on this basis, the ombudsman will then not be able to keep up with the volume and we will see longer delays for hearings as the result. This will then further incentivise the tactic to delay thus putting even greater pressure on the system and the tribunal which will create further delays.

The tribunal will only be able to award a rent up to the level in the landlord’s notice, currently tenants face the risk that they could determine the market rent at a level higher than that asked for. This could result in more landlords building a ‘margin of error’ into their notice in the first instance.

The tribunal will also have the power to defer rent increases by up to a further 2 months in cases of ‘undue hardship’. How they will define that is yet to be determined.