Proposed new legislation is latest in a fast-changing landscape for private rented sector
Is this crunch time for residential landlords?
Residential landlords already struggling to keep up with legislation and guidelines, including the tenant protections extended by the government during the pandemic, may feel they have been experiencing constant waves of change so far – from fast-diminishing returns following cuts in tax relief through to the complexities of right to rent checks. But now, gathering power out to sea, lies a potential tsunami.
And while it includes a raft of legislation designed to curb poor practices and unscrupulous landlords, it will, nonetheless, impact the whole sector, with those ‘accidental’ landlords and small-scale property owners likely to be most affected, potentially leading to a significant sell off in the sector.
The Government’s long-awaited White Paper – A fairer private rented sector – finally arrived in June. It sets out structural changes, the biggest for renters in a generation according to the press statement from the Department for Levelling Up, Housing and Communities.
The aim is to improve conditions and rights for those in all housing. As well as changes in the law for privately rented property through the Renters Reform Bill, the Social Housing Regulation Bill will make all registered social housing providers subject to a tough new regulatory regime, with rigorous inspections and stronger powers to tackle failings by social housing landlords.
Re-shaping the renting landscape
For private landlords, the headline takeaway is that the sector will be subject to the Decent Homes Standard for the first time, giving all renters the legal right to a safe and warm home, and previously, Government had indicated it would ban Section 21 ‘no fault’ evictions.
This latter change is one of the most fiercely debated for landlords. The ambition of the legislation, abolishing section 21 of the Housing Act 1988 and re-framing the grounds on which a landlord can regain possession under section 8 of the Act, is intended to protect tenants from unscrupulous or unpredictable landlords.
Alongside, the Government had planned to introduce a simpler tenancy structure which it says will be more secure for tenants, yet more flexible for both parties, to re-balance the effect of removing section 21 no fault claims for possession, there is no current evidence this will now take place. No further steps have been made regarding the abolishment of section 21 and there is no evidence it is high on the current Government’s agenda.
If implemented, there will be a shift from assured tenancies and assured shorthold tenancies onto a single system of periodic tenancies for all privately rented accommodation. The effect of this change will be that a tenancy will only end if the tenant chooses to do so, and gives two months’ notice to the landlord, or if the landlord has a valid ground for possession. This will have an impact on the private rented sector, particularly on those Landlords who own just one or two properties they rent out. They may find they simply cannot recover back their property as their reason for ending the tenancy does not fall within the provided grounds or any of the new proposed provisions.
As landlords will only be able to evict a tenant in reasonable circumstances, the Government is making changes which it says will strengthen the position for landlords with legitimate grounds for taking back their property. This includes making it easier for them to evict tenants who are wilfully not paying rent, or who are repeatedly engaging in anti-social behaviour, and with scope to end a tenancy when a property is intended to be sold, or for the landlord’s own use.
There are also plans to create a passport form of deposit, to overcome the need to raise second deposits when moving home. A topic which has also been the source of much discussion among landlords, who see problems in releasing deposits before they may have had full opportunity to check for tenant damages.
Also, rent increases will be restricted to once annually, with an easier route for tenants to challenge increases through the First Tier Tribunal, and rent review clauses abolished altogether.
A new Ombudsman service will be established to provide a faster, less adversarial dispute resolution service instead of going to court, and all private landlords will have to participate. Other mediation and alternative dispute resolution procedures will be introduced to enable landlords and tenants to work together to reduce the risk of issues escalating.
And a new Property Portal will give landlords, tenants, and local councils a one-stop route to demonstrate and check compliance and other information, the intention being that tenants can check on landlords before taking a property and for local councils to have the necessary data to tackle criminal landlords. There are also plans to integrate the existing functionality of the Database of Rogue Landlords into the planned Property Portal, to make these publicly visible.
It will become illegal for landlords or their agents to apply a blanket ban on renting to families with children or those receiving state benefits. In future, this may be extended to include other groups such as those leaving prison.
Landlords will have to demonstrate good reasons for refusing tenant requests to keep a pet in their property, although landlords will be able to require an insurance indemnity from the tenant to cover the cost of any potential damage by the pet.
Against this backdrop of increasing complexity and lower yields, many private landlords, particularly those who may have fallen into the position accidentally – following a career move or perhaps inheriting a property – may be considering whether to divest and move out of renting altogether, or to move into short term, holiday letting.
As ever, there are pros and cons, and it’s worth considering some of the other potential changes being considered by Government.
If you are a landlord or tenant who would like a free initial consultation with a member of the Proerty Litigation team simple click on the “Speak to Our Experts” button on this page, call us on 01244 729 074 or email email@example.com
Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.