The Renters (Reform) Bill – How Will it Affect Landlords?

By Kate | July 6, 2023

Introduced to Parliament on 17^th May 2023, the Renters (Reform) Bill proposes a new set of measures for the private rental property market – from abolishing Section 21 evictions to ending fixed-term tenancies. Though the bill hasn’t yet become law, it’s essential for landlords to identify what elements may be of concern so that they can prepare for the coming months. Contact our landlord accountants to find out how the Renters Reform Bill may affect you, or carry on reading for more information.

Table of Contents

What is the Renters Reform Bill?

Housing Secretary Michael Gove designed the Renters Reform Bill to improve the private rented sector for tenants and landlords, with the following prospective measures:

Abolish Section 21 ‘no fault’ evictions: to transition towards a simplified tenancy structure where all assured tenancies become periodic
More comprehensive possession grounds: landlords will retain the ability to reclaim their property under valid circumstances, and the repossession processes will be streamlined in cases where tenants are at fault
Private Rented Sector Ombudsman: a new impartial and binding resolution platform to address any issues, designed to be quicker, more cost-effective, and less adversarial than the court system
Privately Rented Property Portal: landlords, tenants and councils will gain access to a user-friendly platform with various resources, including legal obligations, tenancy information, and areas of potential enforcement
Protection against backdoor eviction: tenants can appeal excessive rent hikes, but landlords can still increase rents with review from an independent tribunal
Right to request a pet: landlords must consider and reasonably evaluate tenant requests to have pets in the property but can request pet insurance to cover potential damages.

When Will the Bill Become Law?

Though introduced on 17^th May 2023, the Renters Reform Bill will likely take at least 18 months from that date before any proposed reforms come into effect (potentially September 2024). Why? The legislative process for Bills typically spans over 12 months or longer, during which the contents will likely undergo significant changes. Then, the Act generally takes effect around six months after it becomes law.

It’s also more of a priority for landlords accepting new tenancies over existing ones – as in the realm of the rental market, a phased approach is often employed, wherein new tenancies are subject to the new laws first. Existing tenancies may experience the changes a year or so later. However, it’s important to understand the impacts early to sufficiently prepare – get in touch with us to find out how we can help.

Impact of Measures on Private Landlords

So, what elements of the current proposals should landlords be concerned about? Or will the measures really make much difference in practice? Overall, most landlords who comply with legal and safety standards shouldn’t see a negative impact from the proposed changes, and some elements, such as strengthened Section 8 eviction grounds, as well as the introduction of an Ombudsman and portal, could even benefit them.

Abolishing Section 21 Notices

One of the most impactful changes for landlords proposed by the Renters Reform Bill is the scrapping of Section 21 ‘no-fault’ evictions. This means that landlords will no longer have the ability to evict tenants without providing:

A justifiable reason (those which are outlined, and have been expanded under, Section 8 of the Housing Act) with supporting evidence,
And a two-month notice.

However, the reality is that landlords don’t typically evict tenants without cause. Section 21 provided ease of transition to a possession claim, but under the proposed reforms, landlords will still have the option to regain possession of their property through Section 8 – which the government ensures will be streamlined. Right to repossession will include scenarios where the tenant:

Is in rent arrears,
Has caused property damage or nuisance,
Has violated the law,
Or has been involved in domestic violence.

Landlords will also have the right to reclaim their property if they intend to sell it or if they or their close family members wish to occupy it. The potential concern for landlords lies in the event that the court system remains unchanged and experiences an overwhelming influx of possession claims, as each claim challenged by the tenant will require a court hearing.

It’s also important to note that the rules surrounding the issuance of prescribed information to tenants, such as the Energy Performance Certificate (EPC), gas safety certificate, and deposit protection information, will undergo changes. Currently, these documents must be provided for a Section 21 notice to be valid. However, it remains uncertain what regulations will replace them (if any) once Section 21 is eliminated.

Moving from Fixed-Term to Periodic Tenancies

The Renters Reform Bill is proposing an end to Assured Shorthold Tenancies (ASTs), replaced by uniform two-month notice periods. This primarily impacts landlords of student properties, where presently, landlords can issue 12-month fixed-term tenancy agreements to ensure property occupancy for the entire calendar year, rather than just the academic year.

However, if students gain the flexibility to give notice at any time, they could potentially leave before the summer break or after only a few months, for reasons such as course discontinuation or conflicts with housemates. Landlords could have valid concerns due to the challenges of finding new student tenants mid-academic year, along with the additional costs associated with referencing and admin tasks for replacements.

This particular proposal is likely to undergo thorough review, as the existing demand for student rentals in many university towns and cities is too high, so the industry cannot afford for too many landlords to leave.

For landlords of “single let” properties, the concern is lower, as tenants don’t usually switch rentals without a valid reason. The elimination of ASTs could actually foster healthier landlord-tenant relationships throughout the tenancy period, shifting the focus away from the end of the tenancy. Landlords who maintain regular communication with tenants and promptly address repairs are less likely to face tenant turnover unless necessary, even with the potential for tenants to give notice at any time. The extension of the notice period from one month to two months could also benefit landlords by providing them with more time to secure new tenants.

Limiting Rental Periods

Another change to note considers rental periods being limited to either one month or 28 days. However, since the majority of landlords already charge rent on a monthly basis, this alteration is unlikely to have a significant impact.

Landlord Registration – Property Portal and Ombudsman Scheme

There are two proposed elements for landlord registration from the Renters Reform Bill. However, landlords who already take a professional approach to property letting shouldn’t be concerned by these measures, like many in the Bill. Landlords must register to the:

Privately Rented Property Portal: This publicly accessible database will feature information about landlords and their properties. Its purpose is to assist landlords in understanding and complying with their legal obligations.
Private Rented Sector Ombudsman: As a government-approved scheme, the Ombudsman will provide a platform for tenants to seek advice if they have complaints about their landlords.

Registering to the portal and joining the Ombudsman scheme are both compulsory, and fees will apply (proposed to be reasonable).

The government also intends to streamline the process by linking the two schemes, so landlords will only need to enter their information once. Similar registration schemes have already been implemented successfully in Scotland, Wales, and Northern Ireland, without posing any issues or obstacles for landlords.

If landlords don’t comply, they may face fines of up to £30,000, imposed by the local authority. In cases of repeated offences, criminal charges and Banning Orders could be applied.

Tightening of Rent Increase Rules

Under the Renters Reform Bill, landlords will be restricted from raising the rent more than once within a 12-month period. They will be required to provide tenants with a two-month notice through a Section 13 notice.

Although this change may not significantly impact most landlords, there could be an uptick in tenants challenging rent increases. The Bill aims to streamline the first-tier property tribunal process by digitising it, making it more accessible for tenants.

More Power to Fine Landlords

Local authorities are being granted additional powers to impose fines on landlords. However, the effectiveness of these measures is limited by resource constraints. Despite already having the ability to fine landlords up to £30,000 without court involvement, local councils often lack the necessary funds and personnel to conduct thorough inspections and identify non-compliant landlords.

Landlords Can’t Refuse Low-Income Tenants

The Renters Reform Bill also aims to outlaw blanket refusals of tenants receiving Universal Credit or housing support. Landlords are encouraged to make decisions on a case-by-case basis. However, the reality is that capped local housing authority rates make it challenging for benefit recipients to afford private rents in many areas.

Tighter Rules for Tenant Pet Requests

Landlords will be unable to reject a written request from a tenant to keep a pet without a valid reason. While many landlords already allow well-behaved pets, it is important to note that pet insurance will become a permitted payment under the Tenant Fees Act. Landlords can require tenants to obtain insurance to cover potential property damages. However, landlords still retain the right to refuse pets under certain circumstances.

How Landlords Can Prepare

Landlords should begin preparing for the forthcoming changes introduced by the Renters Reform Bill. This could involve a thorough review of their tenancy agreements to ensure compliance with the updated regulations regarding maintenance and repairs.

Seeking guidance from reputable organisations like the National Residential Landlords Association or consulting with property experts can also provide valuable assistance to private landlords in adhering to the new requirements. Effective communication with tenants is crucial during this transition period too – landlords should take the initiative to educate their tenants about the new measures and ensure they are well-informed about their rights under the revised legislation.

Need Help Preparing for the Renters Reform Bill?

The Renters Reform Bill is set to bring a range of changes to the UK’s private rented sector. Landlords should make necessary preparations and familiarise themselves with their legal responsibilities outlined in the new legislation – if you need professional advice, you can message us through our online form, call 01743 562430, or email hello@mercianaccountants.co.uk.