Renters Reform Bill: where are we now?
The Renters (Reform) Bill has finally made its way into the House of Lords from the Commons, after nearly a year in Parliament. The protracted passage saw a number of new amendments added to the Bill and it now seems likely that it will become law before the election. But what do these changes mean?
What does the Bill do?
The Bill plans to make substantial changes to the way tenancies operate in England, though most of it will take some time to fully implement.
These include:
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Ending fixed term assured shorthold tenancies and replacing them with periodic assured tenancies;
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Removing section 21 notices and replacing them with more grounds on which a landlord can serve a section 8 notice;
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Introducing a new property portal (effectively a mandatory register for all landlords)
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Creating a new landlord redress scheme to resolve tenant complaints;
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Banning discrimination against tenants with pets, those in receipt of benefits, and families;
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Introducing the Decent Homes Standard to the private rented sector;
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Bringing in mandatory written tenancy agreements with some required clauses.
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Banning rent review clauses, meaning landlords must only use section 13 notices to increase rents.
When will the Bill apply from?
This is an ambitious programme of reform and at least some of it is likely to take a couple of years before it applies to the sector. The new property portal, redress scheme and the Decent Homes Standard in particular need further legislation to detail their implementation.
However, Part 1 of the Bill, which covers periodic tenancies, rent increases, considering pets, removing section 21 notices and mandatory written tenancy agreements is likely to apply quite a bit sooner for new tenancies.
One big change made in the Commons was a new amendment that requires the Government to review the operation of the courts before setting a date to transition existing tenancies onto the new system.
It has been suggested that this means an indefinitely delay to the removal of section 21, but it’s a bit more complicated than that.
The Bill has always intended to remove section 21 and fixed terms in stages and the date for this can only be set after the Bill becomes law. The amendment doesn’t change this but adds an additional step before it can apply to some tenancies.
As things stand, after the Bill becomes law, tenancies will transition over in stages:
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The Government announces a ‘commencement date’ – when the changes come into force. This is expected to be six months after the Bill becomes law.
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From the commencement date, new fixed term assured shorthold tenancies cannot be created. Landlords must use periodic assured tenancies instead and lose the right to serve section 21. This includes any renewals of existing tenancies.
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After the commencement date, when a pre-existing fixed term AST ends, it will automatically convert over to a periodic assured tenancy, losing the right to serve section 21 notices.
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Within 18 months of the commencement date, the Government must publish a review of the operation of the courts.
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Once this review has been published, the Government can set a date on which any remaining ASTs convert to the new periodic assured tenancies (the extended commencement date).
As most fixed term tenancies are six to twelve months long, after the commencement date a number of ASTs will transition to periodic assured tenancies as their fixed terms come to an end or when a new tenant moves in.
But where the tenancy is periodic – both statutory and contractual – on the commencement date, landlords will retain section 21 notices until after the court review completes.
Moratorium on tenant’s notice
The loss of fixed terms has been controversial. As it was drafted originally, the Bill allowed tenants to serve two months’ notice to end a tenancy at any point after they moved into the property.
This drew criticism from landlords and agents over the risks of repeated void periods, increased mortgage costs and insurance premiums, and a growth in short term lets in holiday hotspots.
Recognising this, the Government introduced a new amendment which prevents tenants serving a notice to quit in the first four months of the tenancy unless the landlord agrees to it; essentially, meaning that tenants and landlords will agree to a minimum initial six-month period.
It should be noted that this amendment is the most likely to see change during its passage through the Lords. The Government has made it clear they are looking to add potential exceptions in certain circumstances, to allow tenants to end the tenancy earlier where the property is unsafe or in cases of domestic abuse.
The new student ground
The Government also took the time to make substantial changes to the new student tenancy ground. Previously this ground was only available where the dwelling was a house in multiple occupation (HMO) let exclusively to students. There was also some concern that it might not apply where the landlord let individual rooms.
This ground has now been substantially altered and effectively applies wherever the property is let exclusively to full-time students, or the landlord reasonably believed that they would become students during the tenancy.
However, complicating matters, landlords will only be able to use the ground where they have given prior notice that they can seek possession because:
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At the beginning of the tenancy, each tenant was either a full-time student or the landlord reasonably believed that the tenant would become a full-time student during the tenancy
and
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The landlord intends to let to people who are full-time students or the landlord reasonably believes they will become full-time students during the tenancy.
As student landlords typically agree tenancies well in advance, they should probably consider providing this notice when they agree their next set of tenancies, even ahead of commencement of the Bill.
Selective licensing review
Separately, the Government has committed to reviewing selective and additional licensing. It has expressly said it doesn’t intend to remove discretionary licensing, but wants to ensure that burdens are not duplicated when a landlord has to also sign up to a property portal or a redress scheme.
What comes next?
The Bill still needs to make its way through the Lords, but passage is expected to be relatively smooth. The first opportunity for peers to debate the Bill is scheduled for 15th May.
Once the Bill does become law, the Government will still have quite a lot to do. Guidance, prescribed forms and the mandatory elements of the new written tenancy agreements will all need to be in place before the commencement date, so much of the detail will still need to be published.
We are pushing the Government to confirm these as soon as possible so that landlords can move forward with certainty regarding the contents of their tenancy agreements and the rules they have to follow.
The NRLA will regularly update members on progress, as well as starting to publish new resources to help members affected by the Renters (Refom) Bill. Keep an eye out in our enewsletters and on our campaign hub for all the latest news and guidance.
