Introduction of the decent homes standard
Private rented properties are currently only required to be “fit for human habitation”, to have smoke and carbon monoxide detectors and to have an EPC rating of E (rising to a C rating by 2030).
The bill proposes extending the decent homes standard – which currently only applies to social housing – to the private rented sector. Landlords would be required to ensure homes are free from serious health and safety hazards (such as fall and fire risks), are warm and dry, have “decent” noise insulation, “adequate” kitchens and bathrooms and do not fall into “disrepair”.
Tenants will be able to require repayment of rent where their homes don’t meet that standard.
Reform of leases
The Government proposals promise to “simplify tenancy structures” by abolishing assured tenancies and assured shorthold tenancies (ASTs) and moving to a “single system of periodic tenancies”.
That is a major change to the market, with AST being the market standard for short-term tenancies of less than 21 years since the 1980s.
Abolition of “no fault” evictions
One of the key features of an AST is the landlord’s ability to terminate the tenancy on two months’ notice at the end of the term. Converting all tenancies to periodic tenancies would remove that right.
The proposals instead give tenants the right to terminate on two months’ notice, with only limited termination rights for landlords wanting to sell or move into their property, or where there are prolonged rent arrears.
The aim of this scheme is to give tenants longer-term security, while retaining flexibility, and to give tenants the ability to complain to their landlords about the level of rent, or condition of their property without the fear of being evicted because they have complained.
Landlord termination rights – Prolonged rent arrears
Landlords can currently serve notice to evict tenants who are in arrears amounting to two months’ rent. Under the new proposals, landlords would only be able to evict tenants who hit that threshold three times within three years - regardless of the amount outstanding at the date of the hearing.
The idea behind the “three strikes and you’re out” requirement is to give tenants protection from eviction arising from “one-off financial shocks that occur years apart”, while closing an existing loophole that can help tenants to avoid eviction by paying a small amount of the arrears such that, whilst still owing money to their landlord, they never hit the minimum level of arrears.
These changes impose a fairly high threshold and potentially require landlords to shoulder significant rent arrears over a prolonged period before they can remove tenants. However, as it is a mandatory ground, it will at least guarantee landlords that an eviction order will be granted once that threshold has been reached.
Rent review reforms
The draft proposals don’t fix rent levels at the start of a lease. Instead, they limit landlords’ ability to demand rent in advance, or to increase rent more than once per year and prohibit rent review clauses which are “vague”, or impose an arbitrary increase without regard to market value.
Landlords will also be required to give tenants at least two months’ notice of any change and repay overpayments where the lease ends earlier than the period tenants have paid for.
Tenants would also have the right to challenge “unjustifiable rent increases” through the First-tier Tribunal.
Dispute resolution and enforcement reforms
The current proposals envisage a new ombudsman for private landlords (including those using agents) to deal with tenant complaints about their landlord, the standard of the property, or outstanding repairs. The aim is to resolve disputes swiftly without resorting to court proceedings.
The ombudsman would have the power to make a final decision which would be binding on the landlord (if accepted by the tenant), requiring the landlord to issue an apology, provide information, take remedial action, and/or pay compensation up to £25,000 (including reimbursement for rent payments), but could not be enforced in court.
Swifter court proceedings
The Government has ruled out introducing a new housing court, but has proposed court reforms aiming to streamline the process by prioritising urgent cases, increasing county court bailiff capacity (through the introduction of new payment option for tenant to avoid the need for doorstep visits), digitising court processes, and increasing the advice available about court and tribunal cases.
This proposed reform sits alongside ongoing trials to use the First-tier Tribunal (property chamber) to deal with specialist property cases, or to require landlords and tenants to mediate before going to court which the government could consider making mandatory.
New property portal
The White Paper requires tenancy agreements to be written, setting out each party’s obligations, and introduces a new property portal, containing information for tenants about their landlord’s identity and compliance with key legislative requirements. In the future, it may also set out the minimum standards required to let a property.
Changes for renters
- Law against blanket rental bans
The Renters Reform Bill is expected to make it illegal for landlords to refuse to allow people on benefits or with children from renting their properties, alongside new insurance products to protect landlords in those circumstances.
- Right to request permission to keep a pet
The Bill is also expected to introduce legislation preventing landlords from “unreasonably withholding consent” to tenants’ requests for pets in their homes, as long as the tenants have insurance in place to cover any damage. This could also extend to tenant’s requests to redecorate, or make other changes to the property.
The reforms proposed in the White Paper are far ranging and varied. From limiting landlords’ ability to recover possession and giving tenants longer-term security, to regulating rogue landlords and unfit properties, the changes (if all enacted) would represent a sea change in the private rented sector in England and Wales.
We will have to wait and see how many, if any, of these proposals become law. When they do, landlords and tenants will have to make major adjustments, which may not just affect the landlord and tenant relationship but also the size and scale of the private rented sector in the UK, at a time when housing stock remains in short supply.
An earlier version of this article appeared in the Landlord and Tenant Review on 13 April 2023.
Authored by Tim Reid, Megan Stewart and Lucy Redman.