Renters (Reform) Bill
The first draft of the Renters (Reform) Bill has now been published and the full text of the draft legislation can be found via this link: Renters (Reform) Bill (parliament.uk).
The key proposals are:
The end of “no fault evictions” – for landlords this will mean the abolition of “assured shorthold tenancies” and removal of the procedure to terminate tenancies, which is currently set out under section 21 of the Housing Act 1988. In practice, this will mean that tenants will have the right to remain at the property indefinitely, subject to the more restricted grounds for possession available to the landlord, which are described below.
There will be new grounds for possession, and changes to the existing grounds, which will include the following:
if the landlord wishes to sell the property;
if a member of the landlord’s family wishes to occupy the property;
following antisocial behaviour by the tenant; and
following repeated rent arrears (although the mandatory grounds for eviction will only apply to rent arrears within 3 years of service of the notice under section 8).
Landlords will only be able to increase rent once a year, using a statutory process, and tenants will have the right to apply to the tribunal to challenge any proposed increase.
There are further provisions for landlords who will not be able to “unreasonably” refuse the tenant keeping pets at the property.
There is a range of financial, and ultimately criminal sanctions proposed to apply to residential landlords who fail to comply with a number of the new requirements.
Assured Shorthold Tenancies
At the top of the list of those changes, is the abolition of all assured shorthold tenancies, as well as the abolition of the section 21 ‘no fault’ eviction procedure. For the Housing Act 1988 (HA 1988), there will now only be periodic assured tenancies, with periods not exceeding 1 month. This also means that if a landlord wants to obtain possession against a tenant unilaterally, they must be able to rely on one of the grounds set out in Schedule 2 of the HA 1988 and follow the section 8 procedure.
Rent Arrears
There are also significant changes to the section 8 procedure. A new mandatory ground has been introduced, ground ‘8A’, which can be relied on where rent of more than 2 months/8 weeks (depending on when rent is paid) remains unpaid on at least three separate occasions (a gap between an occasion must be at least a day) within a period of 3 years. The period of 3 years and the mandatory nature makes this a potentially very strong ground to rely on for landlords.
Family Occupation
There are also changes to ground 1, which can be relied on where the property is required for a landlord or family member to live in as their principal or only home. Under the current provisions, a landlord needs to serve notice on the tenant before the start of the tenancy that this ground may be relied on, however, under the reforms, this requirement will be removed. If a landlord chooses to rely on this ground, they will be prevented from re-letting for a period of 3 months, and if they do, then the local authority may fine them up to £5,000 or prosecute for a criminal offence. The same sanction applies to the new ground 1A, which can be relied on where the landlord intends to sell the property. It will be interesting to see how effectively these provisions are enforced following the reforms, and whether they end up being ‘no fault’ evictions, but ‘through the backdoor’.
Anti-Social Behaviour
In addition, there is a proposed change to discretionary ground 14 which would allow the ground to be relied on where a tenant has acted in a way that is “capable of causing a nuisance or annoyance” as opposed to the previous ground which was only where they have acted in a way that was “likely to cause a nuisance or annoyance”. What the practical effect of this change will be, only time will tell. However, the benefit to this ground is that proceedings can be brought immediately after serving the notice, although a possession order cannot be made until 14 days have passed from service of the notice.
Notice Requirements
The notice periods have also changed, with the notable change being to grounds 8, 10, and 11, commonly referred to as the ‘rent arrears’ grounds, which have all been extended from 2 weeks’ notice to 4 weeks’ notice. In addition, a court will now only make a possession order under the section 8 procedure, where the landlord has ensured that the tenant’s deposit is held in accordance with an authorised scheme, except where grounds 7A (convicted of certain offences) and 14 (anti-social behaviour) are relied on. This requirement was also found under the section 21 procedure, although it is currently unclear whether, under the reforms, late compliance with the deposit protection requirements will prevent a possession order being made, as it did under the section 21 procedure. Under the new section 8 procedure, there are no equivalent provisions to the other requirements for service of a valid section 21 notice, such as the energy performance certificate, the gas safety certificate and the ‘how to rent booklet’.
Rent Review Procedure
In addition to the possession procedure, the rent review process has also received an overhaul. Under the reforms, all rent reviews (except those which come under a ‘relevant low-cost tenancy’) will operate under the statutory procedure. All existing rent review clauses that are not in line with the new statutory provisions will be abolished. The landlord may only increase rent every 12 months, which will require 2 months’ notice. The tenant will then have the choice of either accepting the rent increase or applying to the tribunal for a determination on it. The tribunal will also be unable to fix the rent at a higher level than the landlord’s proposal, offering greater security for tenants in applying to the tribunal. How the already overworked and underfunded tribunal will deal with the inevitable increase in applications from tenants is unclear.
Pets
There are also additional reforms proposed, such as an implied term in all assured tenancies that provide a right for a tenant to request consent from the landlord to keep a pet, and that such consent may not be unreasonably refused.
Timeframe
The reforms will be introduced in two stages:
Phase 1 – the Government has indicated it will provide at least 6 months’ notice of the first implementation date, after which, all new tenancies will be governed by the new rules.
Phase 2 – all existing tenancies will then transition to the new system on a second implementation date.
However, for all existing section 21 notices served before the ‘extended application date’, the tenancy will remain an assured shorthold tenancy until proceedings are either concluded or time barred.
Final Thoughts
This is a significant change to the current system of assured shorthold tenancies, following a series of statutory interventions, which have been targeted at landlords. A number of concerns have already been raised regarding the feasibility of the tribunal system dealing with rental increases, which are likely to be challenged routinely by tenants. Crucially, the legislation will mean that landlords, who were previously able to terminate the tenancy at the end of the contractual term, are now being put in a position where tenants will have an indefinite right to remain at the property. Accordingly, any landlord wishing to rely on the current rules, and particularly section 21 of the Housing Act 1988, should consider acting quickly to terminate the tenancy prior to the new rules taking effect.
If you have any questions arising from any of the above points, or residential tenancies generally, please contact Robert Clark on Robert.clark@laytons.com or +44 (0)20 7842 8066.