Many readers will already be aware of the Renters’ Rights Bill (RRB), and broadly speaking the likely consequences for the residential lettings market across England. Having recently had its third reading in the House of Commons, the bill is set to bring major changes to the private rental sector, affecting both short let and long let property owners and tenants. The Bill passed its third reading comfortably with all government amendments accepted and is now moving through the House of Lords. It is anticipated that changes will start affecting landlords, tenants, and property managers across the UK from the Spring.
In this article we take a look at the key aspects of The Renters’ Rights Bill and its potential implications for landlords, particularly those owning high-value properties typically rented by financially secure tenants.
The End of Section 21 ‘no-fault’ Evictions and Fixed-Term Tenancies
This is the cornerstone of the bill’s existence, and its most significant change to the status quo. It abolishes Section 21 notices, commonly referred to as “no-fault” evictions which have bene used in the past by unscrupulous landlords to bring an abrupt end to tenancies/tenants that are causing them inconvenience or trouble, leaving the tenants with no recourse to challenge the decision.
While some argue that this benefits tenants, it is worth noting that a significant proportion of Section 21 notices are issued for legitimate reasons, and from now on Landlords will must now supply specific grounds for possession, which are limited and will we think make evictions more complex and costly.
In addition, the bill eliminates fixed-term tenancies, replacing them with indefinite rolling contracts. This provides tenants with greater flexibility – they can issue notice to end the contract for any reasons at 2 months’ notice – but equally removes the certainty that fixed terms provided to them, as well as landlords. The majority of long-let tenants are by definition seeking stability, such as families choosing homes based on school catchment areas or specific commuter/work location.
In these cases, knowing that a Landlord can issue notice at any time (assuming it meets the statutory requirements for possession), they will face increased uncertainty. Property owners in the student rental market are particularly affected, as they may struggle to secure long-term occupancy agreements in advance.
Changes to Grounds for Possession
With the removal of Section 21, landlords must now rely solely on Section 8 grounds for possession. These grounds have been revised and expanded but also come with new limitations. Notably:
- Ground 1A: Allows landlords to regain possession for their own use, or for sale, but only after 12 months of tenancy.
- Ground 4A: Enables student landlords to reclaim properties under certain conditions.
- Ground 8: The rent arrears threshold has been increased from two to three months before eviction proceedings can begin.
Furthermore, landlords will need to exercise extreme care when serving notices, as incorrect applications may lead to civil penalties and legal complications in the already overcrowded judicial system.
Stricter Controls on Rent Payments and Increases
The RRB imposes stricter controls on rent increases, requiring all increases to be processed through the statutory Section 13 mechanism. This means:
- Landlords can only increase rent once per year.
- Tenants have the right to challenge rent increases at a Tribunal, delaying the process.
- The likelihood of more tenants disputing rent rises may slow down increases and create financial pressure on landlords.
Some property owners may attempt to pre-empt these restrictions by raising rents before the legislation comes into force, potentially driving short-term inflation.
Restrictions on Rent in Advance and Guarantors
The Bill introduces restrictions on rent in advance payments, effectively banning any rent payment beyond one month. This move is intended to prevent bidding wars but actually runs the risk of disqualifying a significant proportion of suitable applicants for a property. There are many who rely on that method in order to circumvent credit issues, alleviate temporary circumstances and also seek their own flexibility and as such this measure may well lead to rent inflation as landlords and owners seek greater reassurances. could inadvertently harm tenants who rely on upfront payments to secure properties.
Additionally, changes to guarantor liabilities mean that if a sole tenant dies, their guarantor is no longer liable for rent, though they remain responsible for other financial obligations. These provisions introduce additional risks for landlords who depend on guarantors for financial security.
Mandatory Membership in PRS Database and Redress Schemes
All landlords will be required to register with a Private Rented Sector (PRS) database and a redress scheme, both of which will involve additional costs. Marketing a property before completing this registration will be illegal, adding new administrative burdens and potential delays to the rental process. In fairness this is an excellent idea, and a structure that is long overdue. As an established, reputable lettings business we welcome this concept; although the additional admin will be burdensome the result should be a clearer playing field for everyone involved.
Overbidding and Market Dynamics
A new restriction prevents landlords from accepting rent offers above the advertised price. Although this is intended to curb competitive bidding, this will inevitably lead to artificially high rents, especially in higher value lettings regions, as landlords seek to insulate themselves against increasing cost bases and potential losses.
Implications for High-Value Property Owners
For landlords of premium properties, these changes introduce several concerns:
- Wealthier tenants seeking the reassurance of fixed terms for their own stability will be discouraged from renting under the new system.
- Increased risks and costs associated with evictions and rent disputes may push landlords to be more selective about tenants
- The removal of rent in advance will make it harder to secure the most appropriate and reliable tenants.
- The potential increase in compliance costs and bureaucratic requirements may lead some landlords to exit the rental market entirely, which will reduce supply and drive rent levels artificially higher as a result.
What’s Next?
The Bill is still under review in the House of Lords, and there is still time for further amendments to be introduced. That said there is no doubting the enthusiasm that the current Government has for this bill. As such, it feels likely that it will be passed in close to its current form and structure.
At The Cotswold Letting Agency, we recognise that these reforms introduce new challenges for landlords and property owners, and our team remains committed to offering expert advice and support to ensure compliance with the evolving rental regulations. If you have any questions or need assistance, do please get in touch with us – we look forward to helping and supporting in any way we can.
