Guide to Investing UK – The Renters’ Reform Bill

Autumn Budget 2021: Relief Over Neutral Budget for Property Investors

Real estate experts UK are warning buy to let landlords about new broad sweeping reforms proposed to impact real estate investment in the UK. Here’s our guide to investing UK.

Guide to Investing UK: Renters’ Reform Bill

The UK government will introduce broad sweeping reforms to the private rental market. According to the government, the Renters’ Reform Bill will introduce.

“a generational shift that will redress the balance between 4.4 million private rented tenants and landlords”.

The laws are yet to pass through parliament but are expected to be introduced by May 2023.

Real Estate Agents UK – Warn Buy to Let Landlords

Agents are warning investors, if introduced, the laws will have the broad reaching consequences. Investors need to know and understand their ramifications.

Rental increases

Landlords will only be allowed to increase the rent once per year and must give at least two months’ notice. The law will prevent rent reviews or automatic rental increases, which are vague and unrelated to the market. Tenants can challenge unjustified rent increases in a new tribunal process.

Fixed term tenancies scrapped

All new and existing tenancies will become periodic tenancies to allow tenants to leave when they want to leave, provided they provided 2 months’ notice. It is expected that there will be a requirement that all tenancies are in writing. 

Removal of Section 21 evictions

The law will abolish “no-fault” evictions under section 21 of the Housing Act 1988. Landlords will only be able to evict on fault-based grounds and “reasonable circumstances. These will be set out in the new law.

Changes to Section 8 of the Housing Act

Section 8 of the Housing Act 1988 provides landlords with the legal right to reclaim their property from tenants if they have failed to adhere to the terms of their tenancy agreement, such as not paying rent.

Landlords can apply for a ‘section 8’ notice from the court, which gives them the legal power to evict the tenant. Landlords must follow the correct procedures to ensure that the eviction is both legal and fair. The first step for a landlord wishing to serve a section 8 notice is to check that the tenant has indeed breached the terms of their tenancy agreement. This could be anything from failure to pay rent, to damaging the property or causing a nuisance.

Once the landlord has established that the tenant has broken the terms of the tenancy, they can apply to the court for a section 8 notice. Depending on the severity of the breach, the court may issue either a ‘mandatory’ or ‘discretionary’ notice. A mandatory notice requires the tenant to leave the property within 14 days, while a discretionary notice gives the court the option to extend this period if they feel it is appropriate. When applying for a section 8 notice, landlords must provide evidence that the tenant has breached their tenancy agreement, notice of intention to issue possession proceedings

The Renters’ Reform Bill introduces:

  1. A new mandatory ground for repeated serious arrears. Where the tenant has been in at least 2 months’ rent arrears 3 times within the previous 3 years, the Court must make an eviction order. This will apply regardless of the arrears balance at the time of the hearing.
  2. A ground for landlords wishing to sell or move themselves (or their close family) into their rental property.
  3. Specific grounds for supported and temporary accommodation.
Guide to investing UK - rent reform bill

Reformed Court process

Wide ranging reforms will be introduced to target issues which currently frustrate and hold up possession proceedings. It is not currently clear how this will occur? However, there will not be a new housing court introduced. There is a desire to encourage mediation services between landlords and tenants to prevent avoidable evictions.

Decent Homes Standard

The Decent Homes Standard (DHS) currently only applies to social housing. However, this will be extended to the private sector. It requires homes to be free from serious health and safety hazards and kept in a good state of repair by landlords.

Extended Ombudsman powers

A new Private Renters’ Ombudsman will be introduced whose powers and decisions will be binding on all landlords. Membership will be mandatory.

The Ombudsman will have powers to compel landlords to “put things right”, either by way of apologies, remedial action, or payment of compensation up to £25,000.

New Enforcement Measures

Civil Penalty Notices will be issued by local authorities to landlords who illegally evict or harass tenants. These will include:

  • Rent Repayment Orders for breach of the DHS
  • Tenant compensation through the Courts for breaches of the new regulations
  • Restrictions on a landlord marketing or reletting for three months following use of “moving” / “selling” grounds to remove tenants
  • Mandatory entries onto the ‘Rogue Landlord Database’

Other changes

Several other changes will be introduced, including:

  • A new property portal will be introduced to assist landlords understand and demonstrate compliance with their legal requirements
  • Pets will be permitted in rented accommodation, subject to the landlord requiring pet insurance covering damage to the property
  • Landlords will be encouraged to allow reasonable requests to hang pictures or change appliances
  • Purpose-built student accommodation is likely to be exempt from many of the changes. Other student properties will be included.

What does this Mean for Landlords?

Private landlords now need to be far savvier about how and where they invest. It is important to have a clear idea of why they are investing and their objectives. You might be interested to checkout our investor checklist here.

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  • Financial Analysis – a property investment tool that investors can use to create financial models to determine net return after tax and return on investment. Investors can understand specific tax implications. Our property comparison tool allows investors to compare investments on an after-tax basis to determine the best investment for them. Investors can even compare properties in different countries.
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Guide to Investing UK