Proposals which made it into the Bill
Reform of leases
The Bill lived up to its headline promise to abolish assured tenancies and assured shorthold tenancies (ASTs), replacing them with monthly periodic tenancies. In broad terms, this will mean an end to short fixed term tenancies of (typically) 12 or 24 months and the introduction of a regime under which tenants will, subject to certain termination rights for landlords, have the option to stay in their property for a longer period.
The changes proposed in the Bill do not apply to leases of over 7 years, or to leases with an annual rent of over £100,000, or under £750 (£1,000 in London).
End of no fault evictions
Abolition of ASTs and replacement with the periodic tenancy regime means that the flagship policy of abolishing so-called “no-fault” evictions at the end of a fixed term tenancy (under section 21 of the Housing Act 1988) made it into the Bill.
Landlord termination rights - arrears
In addition to the existing, and continuing, right for landlords to serve notice to evict tenants who are in arrears amounting to two months’ rent, landlords will also have the right 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 this new process is to give tenants protection from eviction for one-off defaults, while also helping landlords by closing an existing loophole which currently enables tenants to avoid eviction by paying a small amount of the arrears so that they never hit the minimum level of arrears that is necessary to support a successful claim for possession.
The Bill also prevent tenants from being evicted where they cannot pay their rent due to delays in benefit payments.
Landlord termination rights - Antisocial behaviour
Under the Bill, landlords can also evict tenants for antisocial behaviour – which is now worded more broadly to include behaviour “capable” of causing a nuisance, rather than “likely” to cause a nuisance – on two weeks’ notice.
Other landlord termination rights
The Bill also allows Landlords to terminate leases where they either want to sell the property, move into the property (or allow members of their family to do so) or redevelop the property, with that right not being exercisable before expiry of 6 months, and on two months’ notice.
Rent review reforms
As expected, the Bill requires that landlords can only increase the rent once a year, and must give tenants two months’ notice of any rent increase. Tenants will then have the right to challenge the rent – or rent increases - through the First-tier Tribunal.
The Bill introduces the idea of a “landlord redress scheme” or ombudsman with the aim of creating a forum to resolve disputes swiftly outside court.
The details of that scheme – and the powers of the ombudsman – will need to be set out in subsequent regulations, but the Bill envisages that a decision made under such a scheme will be enforceable as if it were a court order.
New property portal
The Bill envisages the creation of a private rented sector database, containing information for tenants about their landlord’s identity and compliance with key legislative requirements – including any banning orders made against them. It is also intended to be a helpful resource for landlords, to outline their obligations.
The specifics of the workings of the database will be the subject of further regulations, but this shows the direction of travel and is in line with the move towards increasing digitisation, and accountability for landlords.
Right to request permission to keep a pet
The Bill introduces a right, which will be implied into all residential leases, for tenants to request permission to keep a pet. Landlords must respond to those requests within 42 days, and cannot unreasonably refuse consent. In order to provide some protection to landlords, they will have the right to require tenants to get pet insurance to cover any damage to the property.
Landlords are entitled to refuse consent if it would either put them in breach of a superior lease, or if the superior landlord has refused consent.
What didn’t make it into the Bill
Introduction of the decent homes standard and law against blanket bans
The white paper that outlined the government’s plans had suggested:
- introducing to the private rented sector a “decent homes standard”, which currently only applies to social housing;
- making it illegal for landlords to refuse to rent to people on benefits or with children, alongside new insurance products to protect landlords in those circumstances; and
- stronger local council enforcement action against not compliant landlords.
None of these proposals made it into the Bill. The government has indicated that it is planning “how to implement” these policies, and suggested further legislation may follow, but time is running short to bring in any more large-scale changes as part of this suite of legislation.
What does this mean for landlords and tenants?
Some landlords have argued that the proposed changes, particularly the end of no-fault evictions, will make residential property less attractive as an investment, and may drive landlords out of the sector, exacerbating the current housing shortage at a time when government should be promoting housebuilding and investment in the sector.
Others (particularly charities and groups representing residential tenants) argue this provides welcome protection for private sector renters, but doesn’t go far enough. They say that the new landlord termination rights for selling, moving into, or redeveloping properties on two months’ notice could be prone to abuse and still leave tenants vulnerable. There is similar disappointment amongst tenant representatives at the failure to include a decent homes standard, and powers for local councils, in the draft legislation.
The Bill is still going through parliament, which is likely to take some time, so its effects won’t be seen for a while. However, whatever your perspective, it seems largescale change is coming to the private rented sector, and landlords and investors will have to adjust to a new landscape.
Authored by Tim Reid and Lucy Redman.