Renters’ Rights Bill: What it means for rural residential landlords
© ISTOCKPHOTO The Renters’ Rights Bill (RRB) is making its way through Parliament, including much of what was laid out by the previous government in its Renters’ (Reform) Bill, which never made it into law.
The timing isn’t certain, but the RRB is likely to receive Royal Assent before Parliament breaks for its summer recess on 21 July. Most bets are that it will come into force in early autumn this year, although it could be sooner.
Lobbying by the Country Land and Business Association (CLA) over the past five years has led to amendments in both draft bills, recognising some of the issues in the rural residential lettings sector.
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Rural residential landlords need to be aware of the changes the bill will bring, says CLA senior legal adviser Harry Flanagan. They need to check over their arrangements and properties to ensure that they will be compliant once it becomes law.
The bill could make it more complicated to increase rents, so rural residential landlords who are behind with rent reviews should consider catching up before the bill becomes law, suggests Harry.
“The quality of properties will be key in future and there’s going to be a lot more admin, and there are hefty civil penalties. I think the days of the amateur DIY landlord are at an end, you need to be fully compliant and well organised.”
While the bill strengthens tenants’ rights in several areas, it could have the unintended consequence of reducing the availability of rural housing to let, she says.
“The real tragedy is that successive governments’ approaches to the private rented sector have made it harder to rent, as costs increase and supply shrinks, before they have managed to make it any easier for people to buy. The resulting housing crisis is felt acutely in rural areas where supply is so limited anyway.”
Court route for repossession
Under the new bill, as now, where a landlord wants to regain possession of a property all might go smoothly, with a notice requiring possession being issued and accepted and acted upon by the tenant.
However, where this is not the case, the only way to regain possession once the bill becomes law will be to apply for a court order on the basis of one (or more) of the new grounds and this will always require a hearing.
This will mean additional cost and delay, says Harry, particularly as the court system is already snarled up and may struggle with the inevitable influx of cases.
“If the court system were fit for purpose, a lot of people would be less worried about the impact of this bill,” she says.
Maximum one month’s rent up front
The bill includes a provision that no more than one month’s rent may be paid up front.
This will disadvantage foreign students and renters with a poor credit history, says Harry, creating a two-tier market split between those with good credit or the option of a guarantor, and those with neither.
An increasing number of rural landlords are selling properties, she says. The Budget’s cut to inheritance tax relief may push that number up further.
The abolition of “no fault” evictions in the RRB comes on top of proposals to increase Minimum Energy Efficiency Standards (MEES) to Energy Performance Certificate C, and decades of increased regulation on private lets.
Abolition of ‘no fault’ evictions
While Section 21 evictions, known as “no fault” evictions, are being abolished by the RRB, it expands the alternative grounds for possession under section 8 of the Housing Act 1988.
The grounds most commonly used in rural lettings tend to concern tenant behaviour and rent arrears, says Harry.
These grounds survive in the RRB, but in order to gain possession on the rent arrears ground, tenants will have to be three months in arrears (rather than the current two months), and the notice period has doubled from two to four weeks.
This means landlords face losing at least four months’ rent, with the now obligatory court route potentially adding many more months’ rent arrears to the process.
Lobbying wins for rural landlords
The CLA has lobbied over the past five years or so to highlight the particular circumstances of rural residential landlords, initially on the proposed Renters’ (Reform) Bill under the previous government. Its successes include the following, all concerning grounds for possession and which have survived into the RRB:
- A new ground for possession where the property is required for an incoming agricultural worker
- The “employers’ ground” which ensures possession is granted when an employment contract ends. This has been strengthened by making it mandatory, where currently in the Housing Act 1988 it is discretionary
- An equivalent of the existing “form 9” notice, which allows landlords to contract out of security of tenure when housing an agricultural worker, so preserving the right to repossess the property when the job ends
- Additional grounds specifically for landlords and tenants of agricultural tenancies where the superior lease ends and/or where the superior landlord becomes the tenant’s direct landlord.
Harry says that these new and amended grounds still do not go far enough to meet the needs of rural landlords, especially those who need to supply employee accommodation.
The CLA is pushing for further amendments to be included as the bill progresses:
- To amend the new ground for incoming agricultural workers to allow repossession for a wider range of employees, for example those in hospitality, particularly with farm diversification enterprises in mind
- Where the property is required to house an outgoing agricultural worker (or other protected tenant) that the landlord has a statutory duty to house and who is being moved to suitable alternative accommodation
- Where the premises are required for non-residential purposes, for example for a change of use to an office or an alternative enterprise.
So far, no amendments have been accepted other than those put forward by the government, so it will be an uphill battle.
Validity of notices
It has always been important to serve notices correctly, but the introduction in the Renters’ Rights Bill of a requirement that a rent increase can only be achieved through the service of the prescribed Section 13 notice will mean a new procedure for many landlords who have relied in the past on negotiation or on tenants accepting a request for a rent rise.
Civil penalties
Local councils will be able to take action against landlords who fail to join the Private Rented Sector Database and the Landlord Ombudsman Service, which the bill introduces, or against anyone marketing a private rented sector property for an unregistered landlord.
An initial breach could result in a £7,000 fine, while continuing or repeated breaches will see fines of up to £40,000 or criminal prosecution.
It will also become possible for local authorities to impose fines of up to £40,000 for illegal evictions, a departure from the current system which has criminal sanctions.
Awaab’s law – safe living conditions
The bill extends the provisions of Awaab’s Law to the private rental sector.
Two year-old Awaab Ishak died due to mould exposure in his family’s social housing.
This law makes landlords address serious housing hazards, such as dampness and mould, within a given timescale.
This will be subject to a consultation process first but its extension to private rented accommodation means that tenants will have the right to demand repairs and improvements are undertaken to ensure safe living conditions in a timely manner.
Main provisions of the Renters’ Rights Bill
Abolition of fixed-term assured shorthold tenancies, so that all residential lettings will become periodic tenancies, matching the rent payment frequency, usually monthly but in some cases weekly.
Tenants will have the right to give two months’ notice if they want to leave the property. Landlords will only be able to give notice if they have one or more of the legal grounds and the notice period for these varies – the most common is four months.
Rent increases – these can currently be negotiated but in future will only be possible by serving a Section 13 notice, which can only be done once a year.
If a tenant wants to challenge the increase, they can currently do so by applying to the First Tier Tribunal (FTT), which will assess the correct market rent for the property.
Under the Bill’s proposals the rent can be reduced by the FTT and cannot be raised higher than the level being asked for by the landlord.
Any new rent cannot be backdated and will only take effect from the date of the FTT decision, which may take months.
“No fault” evictions under Section 21 will no longer be possible. Evictions will only be possible on a range of grounds under Section 8 of the Housing Act 1988, with both mandatory and discretionary grounds available.
No rental bidding wars – landlords and agents will have to publish an advertised rent and will be prevented from accepting a higher offer. A civil penalty of up to £7,000 can be imposed where this is found to have been breached.
A private rented sector database will be created. Registration by landlords will be compulsory, with the register showing details of landlords, their properties and whether they are compliant with letting laws. There will be a joining fee and a fee per property.
An ombudsman will be introduced to help resolve disputes between landlords and tenants. This will be funded by joining fees paid by landlords.
The Decent Homes Standard, currently a requirement for social housing only, will be extended to private lettings, requiring them to meet minimum quality standards.
This will include accommodation let on assured tenancies, assured agricultural occupancies and Rent Act 1977 regulated tenancies. Consultation is expected on the introduction of this measure into the private rented sector.
Tenants with children and/or on benefits – landlords will not be able to discriminate against such tenants, so there cannot be blanket bans – any refusals will have to be for a legitimate reason.
For example, if a family with children wanted to rent accommodation in a busy farmyard, then health and safety issues could come into play as a reason for rejecting such tenants.
Preparing for Renters’ Rights Bill provisions
The three key areas of change in the bill are rent, length of occupation, and an increase in regulation, says Sarah Roberts, a Strutt & Parker director specialising in rural residential lettings.
The firm’s advice includes:
Once the bill becomes law, landlords must issue a statement of terms for all new tenancies and within one month of its commencement date, for all existing tenancies
Given that rents (in the first six months of a tenancy) and proposed rent rises can be challenged at the First Tier Tribunal, the initial rent level should be given careful consideration.
For new lettings, nothing higher than the advertised rent can be accepted
Tenancy terms will match rental payment frequencies and will be a maximum of one month
Rent deposits will continue to be capped at a maximum of five weeks’ rent
Rent reviews can only be carried out once in any 12 month period.
Assuming the bill is adopted in its current form, once it becomes an act then tenants have a right to repayment of any rent already paid for a period of more than one month.
Where an existing tenancy provides for multiple months’ rent to be paid in advance, for example quarterly, half-yearly or yearly, these provisions will become ineffective.
There may be a transitional period covering advance payments already made.
Grounds for possession include:
A landlord needing to occupy the property themselves or for family
Because the property is to be sold – in each of the above cases the tenant must have been in occupation for at least a year
The property was let as a result of the tenant’s employment by the landlord and the employment has come to an end
The landlord needs possession to house someone who will be employed by them as an agricultural worker.
Tenants have the right to request to bring pets. Consent must not be unreasonably withheld and landlords can impose a condition requiring insurance to cover any pet damage.
Landlords must also sign up to the new ombudsman scheme, Sarah says. If they do not do so, they will not be able to market their properties to let or recover possession.