Renters' Rights Bill divides opinion as it passes second reading in UK House of Lords

The Renters’ Rights Bill has passed its second reading in the House of Lords, with the issues debated by peers having significant implications for landlords and the private rented sector (PRS).

The main areas of debate, following on from the Renters' Rights Bill's first reading in the House of Lords in January, have included abolition of fixed terms, advance rent and student accommodation. The bill is now at committee stage in the Lords, which is expected to conclude by the end of February. The legislation could come into force later in spring.

Peers raised concerns as to the unintended consequences of the bill, particularly its implications for the court system, its ability to deal with the effects of the new legislation and the challenges around enforcement.

A major objective of the bill is to identify and effectively deter or remove bad landlords from the market. However, peers have expressed concerns that good landlords, particularly those with one or two properties, may be severely affected by these changes.

Student eviction grounds

Baroness Taylor, the parliamentary under-secretary of state for housing, speaking on behalf of the government, confirmed that private purpose-built student accommodation (PBSA) providers that are members of the government-approved code will be excluded from the reforms. The development will be welcomed by the PBSA sector.

Although they will not be subject to the same regulations as other private rental properties, PBSA providers will still need to grapple with the abolition of assured shorthold tenancies  with the ability to grant fixed-term, contractual tenancies regulated by the Protection from Eviction Act 1977, which may produce a two-tier system.

For non-PSBA accommodation, a landlord's ability to use ground 4A will be different for houses in multiple occupation (HMO) and non-HMO properties.

The government reaffirmed that "off street" student landlords of HMO properties would be able to regain possession to relet for the next academic year relying on the new statutory possession ground 4A.  

Landlords of students in one- or two-bedroom flats that are not HMOs do not qualify to use this ground. It was suggested that exemptions should also apply to smaller landlords renting one and two-bedroom flats to students. 

This would provide similar flexibility and help maintain the supply of student housing at a fairer rent, which is crucial for accommodating the annual influx of students – and encourages equality between students from different social backgrounds. 

There were also concerns raised that student landlords would simply exit the market, leaving students to rent more expensive  PBSA or stay at home. 

To serve a compliant section 4A notice, a landlord must have provided the full-time student tenant with notice prior to the start of the tenancy that it intends to use this ground for possession. The landlord must give at least four-months' notice, with the notice to expire between 1 June and 30 September.

For full-time students' with tenancies entered into prior to the commencement of the act, a landlord should be able to rely on this ground provided it serves a written statement within one month of the legislation's commencement date.

Unintended consequences

The government was also criticised by peers for pushing the legislation through quickly without enough consideration for the practical effects. It was argued that the rushed process could lead to unintended consequences and insufficient time would be given to landlords to prepare for the changes.

There has been a divide across the House of Lords also regarding the bill's impact on the rental market on whether it will drive landlords out of the sector, exacerbating supply issues.

Limiting rent payments in advance

Peers also reiterated concerns regarding the effects of the banning of upfront rent payments, which is likely to affect self-employed individuals, international students and those with poor credit histories.

Without the ability to provide upfront payments, these groups may struggle to secure rental properties, pending alternative products becoming more commonplace.

Who will pay additional costs?

The Decent Homes Standard is generally seen as a positive step; however, concerns remain as to the detail –  there is a consultation planned to determine how this will apply to the PRS – and how small landlords will afford the necessary improvements without passing costs onto tenants. Financial support and incentives may be needed to help landlords comply with the new standards.

The inclusion of provisions to allow pets in rental properties was welcomed by many in the upper house, recognising the mental health benefits of pet ownership. However, the lack of comprehensive pet damage insurance policies could leave landlords at risk of covering the costs of any damage.

Some peers argued that all these concerns were overstated and that the bill is well thought through and goes a long way to redress the balance between landlords and tenants. The debate highlighted the need for careful monitoring of the market's response to the new regulations.

Court process

The upper house  expressed sympathy for how the changes could pose challenges for small-scale landlords, particularly in removing problem tenants and facing long legal delays progressing claims through the courts. Ensuring that the legal process is efficient and fair is vital for maintaining confidence in the rental market.

Baroness Taylor confirmed  that the government is working with the Ministry of Justice to ensure the courts are prepared for the bill's impact: improvements will need to be made in efficiency and processing of claims to deal with the likely increase in disputes in the wake of its enactment.

Enforcement concerns

Concerns were also voiced that local councils may struggle to enforce the new rules due to underfunding, despite being granted new powers.

Effective enforcement is essential to ensure compliance and protect tenants' rights but there were question marks over the suitability and capability of administering criminal sanctions by those with no experience and training to do so.

The committee stage

Tabled amendments at the committee stage relate to the concerns highlighted in the second reading. It has been proposed that student landlords should retain fixed terms, that landlord and tenants may enter into a fixed term tenancy if both agree to it and that tenants may pay 12 months' rent in advance if agreed with the landlord.

Other sought amendments include:

• Tenants cannot give less than four months' notice to quit after entering into a tenancy. This would mean that a minimum tenancy term would be six months rather than two months.
• Removing the requirement that the First Tier Tribunal can only decrease tenancy rents, to prevent spurious claims being brought by tenants.
• Stop the tribunal delaying the date that a rent increase comes in to effect in order to remove the incentive for tenants to appeal all rent increases in order to guarantee delayed implementation.
• Provisions to ensure that landlords join a redress scheme .
• The secretary of state must consult with insurers on the availability of insurance for tenants for damage caused by pets before the appropriate section comes into effect.
• In terms of infrastructure and resources, proposals include that the section 21 procedure is maintained until the lord chancellor and secretary of state are satisfied that the court service has sufficient capacity. The secretary of state would also be required to consult on whether the Tribunal Service handling rent determinations is adequately resourced.

Osborne Clarke comment

Landlord lobbying is on-going although it is not anticipated that many (if any) of the amendments will be accepted as the government is on a clear pathway to pushing the bill through with very little change.

Landlords, therefore, have a short amount of time to consider their options, as the bill may come into force as early as this spring, albeit with a transition period.