One of the key features of the white paper is the abolition of “no-fault” evictions and what is described as the simplification of tenancy structures. The government will sweep away assured shorthold tenancies in favour of a single system of periodic tenancies. What the paper describes as “no-fault” evictions” is a landlord’s right under section 21 of the Housing Act 1988 to seek possession of property let on an assured shorthold tenancy on two months’ notice, either on a contractual break date or on or after expiry of the contractual term, without needing any underlying reason (other than that the fixed term has come to an end). Landlords have always stated that they need to be able legitimately and swiftly to end tenancies to reclaim property in certain circumstances, but the government perceives that this has led to poor practice and unfair rent increases. The government wants to provide greater security and better quality accommodation across the private rented sector and believes that tenants’ rights to stay in property on a longer term basis rather than a year to year basis may form part of the solution.
Under the new system, tenants will be able to end a tenancy by providing two months' notice but a landlord will only be able to end the tenancy in reasonable circumstances as defined by law. The government will implement the system in two stages, providing at least six months' notice of the first implementation date after which all new tenancies will be periodic. Timing will depend on when royal assent is secured. All existing tenancies will transition to the new system on a second implementation date. The government will allow at least 12 months between the two implementation dates.
Tenancies granted to students in purpose-built student accommodation will be exempt from these changes.
Separately, the government recognises the need for responsible landlords to be able to regain possession in certain circumstances so the white paper proposes to strengthen the existing grounds for possession where the tenant has breached the terms of the tenancy agreement, including persistent rent arrears and anti-social behaviour. The reforms also promise to introduce new grounds for possession for landlords who wish to sell their property or move into it. The latter will also be available for close family members.
As for rent, the government will only allow increases once per year. The use of rent review clauses will be abolished and the tenant's ability to challenge excessive rent increases through the First Tier Tribunal will be improved. Landlords will have to give two months' notice of any change in rent and the Tribunal will not be able to increase the rent beyond the amount landlords initially propose.
The Bill will also introduce a “Decent Homes Standard” into the private rented sector, an Ombudsman to resolve disputes and a property portal to provide information to assist all parties. The Decent Homes Standard will be carried over from the social rented sector and will be legally binding. A consultation will be launched on how to deliver this.
The government's stated objective of supporting the need for safe and decent homes for tenants is a laudable one. However, whilst the abolition of so-called no-fault evictions is likely to prove popular in principle, it could adversely affect and derail PRS as an investment class. This growth sector is currently favoured by institutional and overseas investors, but may become less attractive if landlords cannot rely upon quick and effective means of regaining control of their properties in appropriate circumstances. Whether the mandatory grounds for possession will answer landlords calls for certainty remains to be seen. If the result is fewer properties coming onto the market then that will not be the best outcome for the rental market.
Many will be dismayed by the news that they can no longer take back possession of property when a fixed term ends, unless the tenant has actually breached the terms of the agreement. It may even lead to landlords cracking down on tenant breaches as they rely increasingly on such breaches to take back property.
The real detail will be contained in the Renters’ Reform Bill which is yet to be published. In the meantime, the white paper takes another step up on the levelling-up ladder and further confirms a commitment to helping Generation Rent.
Authored by Jane Dockeray, Ingrid Stables, and Tim Reid.