What renter reform means for rural residential landlords

Regulation in England’s private rented sector could be at its tightest ever within just 18 months if government proposals become law.

The Renters (Reform) Bill, introduced to parliament by the government on 17 May 2023 and described by rural land agents as the biggest shake-up of the private rented sector in decades, will remove much of the freedom landlords and tenants have to negotiate the terms of a tenancy.

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The bill sets out to abolish section 21 no-fault evictions.

However, farmers who have an open market letting in the private market and need that property for an agricultural worker could take it back by serving two months’ notice.

Although the planned legislation is in its infancy and may be subject to amendments before it is passed, landlords are concerned that it could shift the power dynamic towards renters.

Jess Waddington of Knight Frank’s rural consultancy team acknowledges that it could create difficulties for landlords by adding another layer of legislation and regulation, but believes there are positives too.

She unpicks some of the key points and looks at what they could mean for rural landlords.

1. Abolition of assured shorthold tenancies and section 21 evictions

The bill abolishes section 21 of the Housing Act 1988 which allows landlords to recover possession on a so-called no-fault basis.

This goes hand in hand with the ending of assured shorthold tenancies (ASTs).

Going forward, there will be a unified system under which most residential tenants will be assured tenants, giving a tenant a more secure form of tenancy because it can be terminated only by the tenant choosing to leave or by the landlord serving notice on a specific statutory ground.

“We will see a move to a simpler tenancy structure where all assured tenancies are monthly rolling periodic tenancies with no initial fixed terms,” explains Jess.

She describes the outlawing of section 21 as an annoyance for landlords but added: “It’s not as dramatic as it first seems because a lot of the provisions within the bill are already covered by the Housing Act and apply right now.”

Jess says landlords should not panic about the ending of section 21.

“Think calmly and rationally,” she says. “A lot of the rural landlords we work with are property owners who want tenants who are going to stay for the long term, to make their house their home and to be part of the community. That is something we see a lot more in rural areas.”

2. New grounds for possession

Theoretically, the bill makes it easier for landlords to recover possession in certain situations.

For farmers it will mean they can repossess the dwelling if they need it to house an agricultural worker.

“Landlords who have an open market private letting can take it back to house an agricultural worker by serving two months’ notice,” Jess advises.

No detail has yet been given on what evidence would need to be supplied as proof to support this need, but it is likely to be job advert, a contract of employment or perhaps a business plan.

If a farmer needs to live in the property themselves they could also serve notice and the same applies if that occupation is required by close family members, although no definition of “close” has yet been released.

Repeated serious rent arrears is being introduced as a new mandatory ground for possession.

This will be where, over a period of three years, at least two months’ rent has been unpaid for at least a day on three separate occasions, provided the rent is payable monthly.

Jess says it would end the frustrations of landlords using the existing section 8 legislation to gain possession for rent arrears.

“It breaks the cycle of boom and bust when we see tenants who owe rent paying up on the day before a court date, allowing them to stay in the property, but not before the landlord has incurred cost and worry in dealing with that process.”

Under the current regime, should a tenant who has been served notice not leave the property when the relevant notice has expired, the landlord would have to apply to a court for a possession order.

3. Retention of assured agricultural occupancies

The legislation aims to retain assured agricultural occupancies (AAOs) and replicate the existing opt-out so that agricultural landlords can issue new periodic tenancies instead of AAOs.

However, this relies on the landlord informing the tenant from the outset.

4. Farming tenants and the superior landlord

There is a specific notice allowing possession by a farm tenant with an Agricultural Holdings Act 1986 or Agricultural Tenancies Act 1995 tenancy.

This would allow the farm tenant to serve notice on a residential tenancy – for instance, on the occupier of a farm cottage on an agricultural holding, to enable the farm tenant as landlord to that residential tenant to give vacant possession to the “superior” landlord, who is the landlord of the overall farm tenancy.

“Without this, farm tenants who sub-let residential property on the holding with the permission of the landlord could be in a position where they couldn’t deliver vacant possession on termination of the agricultural tenancy,” Jess points out.

5. Rent reviews

The right to include rent review clauses will be removed and a statutory regime applied where rent can only be reviewed once a year and on two months’ notice instead of the current one month.

Notice will need to be given using the section 13 notice procedure.

The legislation allows tenants the right to appeal excessively above-market rents before a tribunal, so it will be important for landlords to have a good understanding of the prevailing market rent for their property, should they need to defend a challenge from their tenant to a proposed increase.

Rental property listing sites are a good guide to establishing where a property sits in the rental market.

6. Property portal will require landlord registration

A new online portal will be created for the private rented sector. All residential landlords will need to register with this.

By default it is likely to create a national register of tenancies, but its intention is to help landlords understand their legal obligations and demonstrate compliance.

It is likely a registration fee will apply and, if a landlord lets a property without registering with the portal, they could be fined.

7. Pets

Tenants will have the right to have a pet on the property and the landlord could not unreasonably refuse this.

Grounds for refusal could include the accommodation being deemed unsuitable.

As many rural tenants already have pets living in their property with their landlord’s consent, Jess says this new term is unlikely to have a big effect on people letting out properties in the countryside