Rental Reform White Paper: Your questions answered
The government has released its long-awaited “Renters Reform” white paper. The 86 page document, available here, set out plans for fundamental changes for the lettings industry over the next few years.
57% of landlords tell us their biggest concern is increasing compliance requirements, so it’s vital you understand these proposed changes to best support them.
We know you’re short on time, so our Legal and Compliance Director David Cox, one of the lettings industry’s top legal experts, has gone through the white paper and supporting documents for you.
In this article we’ve outlined the key announcements. We’ve also included David’s responses to common questions posed by agents and developers on his recent webinar (watch the replay here).
Creating indefinite tenancies
Key announcements:
- Section 21, known as “no fault” eviction, will be abolished
- Fixed term contacts will be outlawed and replaced with a single system of periodic tenancies, effectively introducing the notion of indefinite tenancies
- Tenants will be able to end a tenancy by giving 2 months’ notice at any time
Your questions answered:
Q: “Does this apply to non-housing act tenancies?”
David: “No. It is only relevant to Assured & Assured Shorthold Tenancies governed by the Housing Act 1988”.
Q: “Does this apply to student properties?”
David: “Yes. The government is not making any exceptions for student properties, apart from purpose built student accommodation, e.g. halls of residence. All other student properties are included”.
Q: “Does this mean agents will no longer be able to earn money for tenancy renewals?”
David: “I’m afraid so. You’ll need to plan for how you adjust your business model to account for this loss of income.”
Q: “Will landlords now be responsible for the council tax, given all tenancies will be periodic?”
David: “The Leeds Council vs. Broadley case (2016) ruled that if the contract is a statutory periodic, then the landlord is technically liable for the council tax. So, in theory, yes. There’s nothing in the white paper around this, though, so it needs clarifying by the government.”
Restrictions on rent increases
Key announcements:
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- Rent increases will only be allowed once per year
- You’ll need to give tenants 2 months’ notice of any increase, rather than 1
- You’ll no longer be able to include rent review clauses in contracts
- Tenants can appeal to First-tier Tribunal if they feel a proposed rent increase is unfair
Your questions answered:
Q: “Will the tribunal be able to increase as well as decrease rents?”
David: “No. The judges will not be able to suggest a rent higher than what the landlord has proposed. They will only be given powers to reduce the proposed rent increase if they deem it to be excessive.”
Written tenancy agreements
Key announcements:
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- Written tenancy agreements will be mandatory
- Special Terms will be allowed
- Tenants must keep property in good condition and allow access for repairs and maintenance
- Landlords can get injunctions to allow access to a property if a tenant refuses
Your questions answered:
Q: “Will the landlord have to pay for the injunction themselves?”
David: “It’s to be confirmed. Based on the way it’s drafted, I would assume that the landlord will have to take the injunction and the agent will be able to claim that from the tenant’s deposit, so long as it’s written into the contract that the tenant needs to indemnify the landlord.”
Reform of grounds for possession
Key announcements:
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- All the 14 day notice periods for using grounds for possession will double to 1 month
- 2 months’ notice will be required where circumstances are beyond the control of the tenant
- New mandatory grounds introduced for landlords wishing to sell or for “immediate family members” (yet to be defined) moving in
- New mandatory ground for repeated serious arrears, where the tenant has been in at least 2 months’ arrears at least 3 times in the previous 3 years
- Holiday Let ground abolished – effectively banning the practice of landlords in holiday destinations offering short term lets over the summer followed by a longer term tenant over the winter
- Notice period for anti-social behaviour and rioting lowered to 2 weeks
- Deregulation Act requirements abolished except Tenancy Deposit Protection
- Several specific new grounds for things like agricultural tenancies, shared ownership and sheltered accommodation
Your questions answered:
Q: “What’s to stop landlords using the new ground for selling the property to get around the Section 21 ban and evict the tenant only to replace them with another?”
David: “Like with Section 21, you won’t be able to use it for 6 months. The government has also put in place some restrictions to stop it being used for nefarious reasons. Once the tenant has left, you won’t be able to re-market the property for at least 3 months. Something similar has been in place in Scotland for some time, where you will need to demonstrate that the property is genuinely on the market for sale.”
Ban on “No DSS” and “No families / children”
Key announcements:
- Blanket bans on benefit recipients or children/families are not allowed
- Decisions must be based on individual circumstances
Your questions answered:
Q: “What if it’s a condition of the landlord’s buy-to-let mortgage that they can’t rent to someone on benefits?”
David: “If it’s going to be banned, then it wouldn’t be enforceable for a mortgage company to still include an illegal clause in their contract. They’d be in reach of the Consumer Protection Regulations and Consumer Rights Act. More than 90% of lenders have already dropped their “No DSS” clauses. Others are saying that even though the clause remains, they won’t enforce it. If your landlord has such a clause in their contract, it’s a good idea to contact the mortgage company and ask them to write a letter to say they aren’t going to hold the landlord to the “no DSS” rule because it’ll be against the law.”
A tenant’s right to pets
Key announcements:
- Landlords will not be able to unreasonably withhold consent for a tenant to have a pet
- Tenant can challenge decision
- Pet insurance strongly encouraged and will be added as a “Permitted Payment” under the Tenant Fees Act
Your questions answered:
Q: “What if a building’s Head Lease says no pets? How will the “no pets” rule work?”
David: “In many ways this is a continuation of the rules that exist today. You’re allowed to withhold consent if you have a reasonable excuse, and not being allowed to have a pet due to it being a condition of the superior lease on the property would count as an acceptable response.”
Q: “Can we still charge higher rents for a tenant that wants to move in with a pet?”
David: “Yes, I don’t see why not. There’s nothing in the tenant fees ban that says you can’t. We’ll have to wait and see what the Bill itself actually says though.”
A new single Ombudsman to improve dispute resolution
Key announcements:
- Covers all private landlords, regardless of whether they use an agent
- Powers will include making landlords: Apologise, provide information, take remedial action, reimburse rent, pay compensation of up to £25,000
Your questions answered:
Q: “How will the new Ombudsman interact with the different Ombudsman for agents? Will they get combined?”
David: “The government have not provided any information on this yet.”
Other key announcements in the white paper
- All landlords must register on a new “Property Portal”, which is in effect the expected landlords register. This will be enforced by local authorities and it will incorporate the Database of Rogue Landlords and Agents, which will be made public.
- Properties in the private rental sector must meet the “Decent Homes Standard”. 21% of Private Rented Sector housing is currently non-decent.
- Landlords should allow tenant modifications to their homes, under the goal of wanting to help tenants make their house a home.
- Lifetime deposits will rely on market-led solutions rather than any immediate government intervention to make them mandatory.
- There will be no new housing court. Instead there will be a “package of reforms” that will target the areas holding up proceedings.
Implementation of the proposed changes
- Implementation will happen in 2 stages
- All new tenancies will become periodic, governed by the new set of rules, from a first implementation date
- All existing tenancies will transition to periodic tenancies on a second implementation date
- The industry will be given at least 6 months’ notice ahead of the first date
- There will be at least 12 months between the first and second dates
- Any renewals that happen between the first and second date will renew onto a periodic tenancy
Your questions answered:
Q: “What’s your best guess at some actual dates?”
David: “Given the timings involved to get each stage through Parliament, the earliest implementation date would be April 2024 if the government pushed things through as quickly as possible. That is unlikely to happen, so 2025 may be a more realistic date.”
Put your questions to the expert
As this is such an important topic, we’ll be dedicating time every month on our “News Hour with David Cox” webinar to cover the proposals in more detail. We’ll also share any updates as they become available. This is your opportunity to get your questions answered by the expert.