The government’s introduction of the Renters’ Rights Bill marks a significant shift for the private rented sector. Designed to protect tenants and rebalance the relationship between renters and landlords, the Bill introduces new regulations that will profoundly affect the way rental properties are managed.
For private residential landlords already grappling with recent tax changes and increased regulatory scrutiny, this new legislative framework could be a deciding factor in whether they stay or leave the sector. The change is expected to be pivotal for those with one or two properties under ownership, or so-called ‘accidental landlords’ renting out their home while away for work or other reasons.
One of the most impactful changes is the proposed ban on ‘no-fault’ evictions as presently allowed under Section 21 of the Housing Act 1988. Currently, landlords may evict tenants with two months' notice without providing a reason and the ban is intended to give tenants more security.
Litigation Executive, Michael Parker of Banner Jones Solicitors said “Removal of this route to repossession has been under warning for some time and was expected to be implemented during the last government. In the event, they held back having decided the courts would be under too much pressure if the move was done too soon, too fast.
“This reform could particularly affect landlords who would otherwise rely on Section 21 notices to regain possession of properties for personal or financial reasons. Once implemented, the proposed change will mean tenants benefit from a 12-month protected period at the beginning of a tenancy, during which time a landlord will not be able to evict them to move in or sell the property.
“After the 12-month protection ends, there will have to be four months’ notice for any landlord looking to use these grounds, instead of the current two months under Section 21. This is to give tenants a more reasonable amount of time to find and move to a new home.”
Another significant reform is the extension of ‘Awaab’s Law’ into the private rented sector. Named after a toddler who died in a mould-blighted social housing property, the law will require landlords to investigate hazards within 14 days and complete necessary repairs within a further seven days. For emergency repairs, landlords will have 24 hours to act. With 21% of private rentals classified as “non-decent” by the government, landlords will face tighter timelines and scrutiny in maintaining their properties.
Michael explains, “This change could prove a challenge too far for some landlords, particularly those managing older properties that require frequent maintenance. But non-compliance could lead to penalties, so the erosion of profitability of such rental portfolios looks likely.”
The Bill also proposes tighter controls on rent increases, limiting landlords to one increase per year at the market rate and preventing mid-tenancy hikes. This will put an end to the flexibility that landlords have traditionally enjoyed in adjusting rents to reflect market conditions.
It also sets out more freedom for tenants regarding pet ownership, ending blanket bans unless landlords have a compelling reason to refuse.
And, in an effort to tackle housing affordability, the Renters' Rights Bill also targets so-called bidding wars on rental properties. In future, landlords and letting agents will have to publish the rent of a property upfront and asking, or accepting, bids above the listed price will be prohibited.
“For private landlords, these changes arrive at a challenging time. Over the past few years, they have faced a succession of regulatory reforms, including higher stamp duty for second and further property purchases, reductions in mortgage interest tax relief, and the imposition of higher energy efficiency standards. The introduction of this new Bill may prompt some landlords to reconsider their positions in the market.
“For those who are committed to maintaining high standards, the reforms may offer a level playing field by eliminating some of the unfair competition from sub-standard rentals. But for those landlords already contemplating an exit strategy, such as those operating with tighter margins or in areas where rental yields are lower, this may be the tipping point.
“The problem here is the further reduction in the overall supply of rental properties, which is already falling short of demand.”
