Last month the Government introduced the long-awaited Renters Reform Bill, in a move which they describe as a ‘once-in-a-generation overhaul of housing law’. As this bill makes its way through Parliament what will this mean for both landlords and tenants in practice?
The end of Assured Shorthold Tenancies
One of the fundamental changes is the abolishment of Assured Shorthold Tenancies (‘AST’), this means that once the Bill passes as an Act of Parliament, all tenancies will revert to the old position of Assured Tenancies. The Bill also introduces the removal of fixed terms in excess of one month. This means all tenancies will be periodic tenancies, with tenants only having to give one-month’s notice to the landlord to bring the tenancy to an end.
ASTs were introduced by the Housing Act 1988, which required enabled landlords to serve a notice on tenants stating they would be getting an AST rather than assured tenancy. The Housing Act 1996 changed this position so that from 28th February 1997 all tenancies were automatically an AST. ASTs are now the most common form of tenancies, which indicates the scale of the change being proposed.
Concerns for Landlords
Landlords’ will lose their power to evict using the Section 21 Housing Act 1988 – ‘no fault eviction’ notice. Landlords will no longer be able to get the tenants out without proving fault on the tenants’ part. This is likely to be a big blow for landlords who have for years relied on the Section 21 ‘no fault evictions’ to get their property back and remove tenants.
Furthermore, landlords are also facing a lack of guaranteed rental income and the risk that the rental income might simply disappear if a tenant chooses to leave at short notice. The shift towards monthly periodic tenancies may create uncertainty in the rental market. The private rental market is difficult for tenants to navigate at present, a low stock of available properties has resulted in high rents (rents in the UK rose by 4.8% in the 12 months to April 2023, up from 4.7% in the 12 months to March 2023) and this is unlikely to improve if landlords are put off by these changes and decide to sell.
The Bill provides for a transitional period, requiring Landlords to notify tenants of the changes, and landlords, particularly those who do not have managing agents overseeing compliance issues, may not be aware of the changes and the consequences for not complying.
Tenant Wins
Tenants on the other hand will be pleased that the Government has finally agreed to abolish ASTs, eradicating the fear of not knowing when they would receive a Section 21 ‘no-fault eviction’ notice will be welcomed by some tenants. Generally, as long as tenants continue to pay their rent on time and do not display any anti-social behaviour, the tenant can feel secure in their occupation of the property. The proposed legislation does introduce some new grounds, which enables the landlord to regain possession including to allow a member of their family to occupy the property or they wish to sell the property.
The Bill will look to create a new ombudsman for tenants to take their complaints to against landlords without having to endure going to court first.
Tenants will have the right to keep a pet at the property if the tenant asks the landlord to do so and such consent is not to be unreasonably refused.
Effect on the Private Rental Market
It is difficult to anticipate the effect the introduction of the legislation will have on the market, but the market is already showing a trend towards landlords selling up. In February, the Guardian reported that landlords sold 35,000 more properties that they bought across 2022, consistent with a seven-year trend. Ultimately this leads to a low stock of properties available for renting and, in turn, higher rents. Although the renter’s reform legislation may feel as if it has little affect on the day to day living and owning of rental properties, it may be the last straw for landlords who have been gradually exiting the market over the last decade. If so, it may be that tenants have traded security from evictions for high rents and less choice in the market. Ultimately, we will need to wait a period after the legislation is brought in to assess the full consequences on the marketplace.
In Conclusion…
The Bill has only had its first reading and will be subject to many amendments before becoming legislation, but the draft does propose the radical headline-grabbing changes the
Government promised. However, there may be long-term consequences with many landlords feeling it is time to exit and putting their properties up for sale. As the private rental market shrinks, tenants faced with higher rents and less choice may come to think renter reform, tipping of the balance in favour of tenants, may be unsustainable in the longer term.
Angela Paul is a Senior Associate Solicitor in the Residential Property Team at Irwin Mitchell
