Renters' Rights Bill proposes significant reforms to private rental sector in England

The Renters Rights' Bill was laid before Parliament on 11 September 2024 and has progressed through its first two readings in the House of Commons.

The 226 page bill is extensive and provides business with greater detail on the proposed reforms previously outlined in the King's Speech.

Through the bill, the government aims to "provide tenants with greater security and stability", while benefitting landlords through "more straightforward regulation, and clearer and expanded possession grounds".

What will be the impact on the private rental sector of some of the bill's key provisions?

Abolition of 'no fault' evictions

The bill provides for the abolition of "no fault" evictions under section 21 of the Housing Act 1988.

It is intended to take immediate effect and will apply retrospectively, but with transitional provisions for cases where section 21 notices have been served before the commencement date.

The impact of this proposal will effectively see the end of Assured Shorthold Tenancies in England.

Abolition of fixed terms for short term tenancies

The bill provides for all tenancies of less than seven years to immediately become periodic tenancies, with a maximum rent period of one month. Again, this is to take effect immediately and will apply retrospectively.

Tenants will be able to terminate tenancies by giving two months' written notice, or less if agreed by the landlord in writing. Tenants will be entitled to withdraw a notice to quit if agreed by the landlord in writing, and will also be entitled to refunds of any rent paid in advance for any period after termination.

The explanatory notes to the bill refer to certain purpose built student accommodation (PBSA) being exempt. While a carve out for PBSA does not feature in the bill itself, it is expected to be dealt with in later regulations which should provide more detail. The bill does, however, provide for a new ground for eviction which relates to students in houses in multiple occupation (HMOs).

Limits on rent increases

The bill removes landlords' ability to rely on contractual rent review clauses in tenancies. Rent increases are to be limited to once a year, following the process under section 13 of the Housing Act, and any increase must be capped at the market rent. Landlords must first serve notice of the proposed increase (in a prescribed form), which tenants have the right to challenge at a tribunal.  

Properties to let must be advertised with a stated rent, and landlords and agents may not encourage or accept offers over the stated rent, to avoid "bidding wars".

Anti-discrimination

The bill introduces provisions prohibiting discrimination based on benefits status or having a child or children who live with or visit the tenant. These provisions are wide-ranging, applying to England, Wales and Scotland.

The bill also includes provisions for further anti-discrimination regulations to be introduced at a later date.

New grounds for possession

The bill introduces new grounds for landlords to regain possession of the property, including where the landlord holds under a superior lease which is due to come to an end, and where a landlord requires possession to be compliant with enforcement action. Other existing grounds are amended, including expanding Ground 1 (occupation by the landlord) to include the landlord's family members.

Significantly, the bill amends many of the notice periods required where a landlord intends to commence proceedings for possession. In particular, landlords should be aware that the notice period which applies to Ground 8 (rent arrears) is proposed to be extended  from two to four weeks, and the minimum arrears increased to three months or 13 weeks (if rent paid weekly or fortnightly), from the current two months or eight weeks.

Key grounds for possession and their proposed notice periods

There is a specific ground for possession related to students in HMOs (ground 4A), allowing landlords of full-time students to recover possession at the end of the academic year.  Landlords must give prior written notice that possession is required for the next student cohort.

The bill prohibits a person from serving notice seeking possession if they do not reasonably believe it can be relied upon. As is the case presently, a landlord will need to evidence the grounds being relied upon should the matter go to court.

Other proposed changes

The bill is wide ranging and also includes:

• introducing a Decent Homes Standard for the private rental sector;
• a new national private rental sector database of landlords and properties;
• a new ombudsman (expected to be the current Housing Ombudsman);
• extending "Awaab's Law" to the private rental sector;
• increasing enforcement powers for local authorities; and
• introducing an implied right for tenants to keep pets, subject to landlord's approval (not be unreasonably withheld or denied).

Progress of the bill

The bill is currently at House of Commons Committee Stage, which is expected to have its first sitting on 22 October 2024 and is scheduled to report by 28 November 2024. The government has issued a call for evidence in good time for this deadline.

Despite concerns by some MPs and landlord groups that the abolition of section 21 could lead to smaller landlords leaving the rental market, especially without significant court reform, the bill is expected to pass through the Commons with relative ease.

Osborne Clarke comment

Like its predecessor, the Renters (Reform) Bill (which did not make it into law ahead of this year's general election), the Renters' Rights Bill 2024 represents possibly the most significant overhaul of the rental sector in a generation.

While the government states that the bill should not have any negative impact on landlords who treat their tenants well, it remains to be seen what the real-world consequences of the abolition of section 21 will be, especially without significant court reform to manage the evidence-based possession claims and tribunal applications to challenge rent increases.  

The treatment of PBSA will be watched closely by the sector as the impact of abolishing fixed-term contracts will be particularly significant for this asset class if students can terminate part-way through academic years.

As always, the devil will be in the detail and so the industry will continue to monitor the bill's progress through Parliament with great interest.