Questions still to be answered; Renters Reform Bill

Introduction

On 17 May, the Government introduced the Renters (Reform) Bill to Parliament. The Bill follows the White Paper, “A Fairer Private Rented Sector”, which was released last June. The proposed legislation is aimed at delivering the Government’s 2019 manifesto promise of abolishing section 21 “no fault” evictions and seeks to empower tenants to challenge poor practices by landlords without the fear of losing their homes. The Bill also aims to make it easier for landlords to recover their property when they need to.  This article considers the key proposals in the current draft of the Bill and analyses whether, if the Bill becomes law, it will achieve these aims.

Key proposals

1. Assured shorthold tenancies and fixed terms will be abolished

Rather than tenants entering into a fixed term assured shorthold tenancy, the Bill provides for a single system of periodic tenancies. The periods of the tenancy will be the same as those for which rent is payable, which cannot exceed one month. A tenancy will only end if the tenant ends it or if the landlord has a valid ground for possession. Tenants may give two months’ notice to quit unless the landlord agrees to a shorter period.

2. Amended grounds for possession

Under the proposed legislation, ground 1 is amended to allow a landlord to recover possession to allow them or their close family members to move into the rental property. The requirement to serve a notice that this ground may be relied on prior to the start of the tenancy has been removed. The Bill prescribes “close family members”; cousins, nieces and nephews are not included. A new ground 1A is introduced for landlords who wish to sell their property. However, these grounds will not be permitted during the first six months of the tenancy.

A new mandatory ground for repeated serious arrears is also being introduced (ground 8A). The new mandatory ground will be made out where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears at the date of the hearing.

3. New notice periods

The Bill amends the current notice periods that must be given before a landlord can commence proceedings. Notably, the notice period for the existing rent arrears eviction ground will be increased from two weeks to four weeks.

4. Statement of terms

Landlords will be required to provide tenants with a statement of terms and further information, which will be prescribed by regulations. If a landlord fails to comply with this requirement, they may be subject to a fine from the Local Authority of up to £5,000.

5. Right to request permission to keep a pet

Under the proposed legislation, it will be an implied term of every assured tenancy that tenants have the right to request to keep a pet in the property, which landlords must not unreasonably refuse. Pet insurance will become a permitted payment under the Tenant Fees Act 2019, enabling landlords to require pet insurance to cover any damage to property.

6. Rent increases

Rent increases will only be allowed once per year, the minimum notice period for increasing rent will change to two months and rent review clauses will no longer be permitted.

7. Methods of enforcement

The Bill introduces a number of financial penalties and offences. For example, if a landlord relies on the amended ground 1 (property required for the landlord or family member), the landlord cannot let or advertise the property for three months. If the landlord does let the property within this period, they may be subject to a fine by the Local Authority of up to £5,000 or prosecuted. Similarly, if a landlord fails to comply with the requirement to provide a written statement of terms, they may be subject to a fine from the Local Authority of up to £5,000.

Section 215 of the Housing Act 2004 will be amended to provide that, where a tenancy deposit has been paid, the court may only make a possession order if the deposit is being held in accordance with an authorised scheme, the initial requirements of the scheme has been complied with and the prescribed information has been provided. If any of these requirements have not been complied with, the court cannot make a possession order, unless the deposit has been returned in full or with agreed deductions or if an application under section 214 has been determined, withdrawn, or settled.

Comment

Whilst the Bill abolished assured shorthold tenancies in one fell swoop by revoking Chapter 2 of Part 1 of the Housing Act 1988, it is not entirely accurate to say that the Bill will remove all “no fault” evictions. For example, landlords can recover possession of the property where the property is to be occupied by the landlord or their family (ground 1), if the landlord wishes to sell the property (new ground 1A) or to allow compliance with an enforcement notice (new ground 6A). None of these grounds require any fault on the part of the tenant. Further, it is arguable that ground 1 may be open to abuse by landlords because the Bill does not require any evidence of intention. This undermines the protection afforded to tenants.

As to the aim of challenging poor practice, the amendments to section 215 of the Housing Act 2004 will inevitably lead to more deposits being returned before a notice is served. However, it is unclear whether any of the other current requirements for serving a section 21 notice will apply, such as the requirement to provide an EPC, “How to Rent” guide and gas safety certificates. Moreover, the effectiveness of the possibility of a fine or offence as a method of preventing abuse by landlords is doubtful. For example, in relation to an abuse of grounds 1 and 1A, it relies on the form tenant becoming aware and reporting this to the Local Authority, which seems unlikely.

The Bill will no doubt be subject to amendments as it progresses through Parliament and it yet to be seen how the promises of a Decent Home Standard and preventing blanket bans on renting to families with children or those in receipt of benefits set out the in the White Paper will be made into law.