The UK government published its Fairer Private Rented Sector White Paper yesterday. The stated government objective of the rental reforms is to ‘end the injustice of unfit homes and protect renters from the rising cost of living.’
In primary objectives of the White Paper are:
- Improve stability and security
- End arbitrary rent review clauses and unjustified rent increases
- Give tenants stronger powers to challenge poor practices and enable them to recover rent for non-decent homes
- Make it illegal for landlords to have bans on renting to families with children or those on benefits
- Make it easier for tenants to have pets
The White Paper aims to ensure millions of families benefit from living in decent, well-looked-after homes as part of the biggest shake-up of the private rented sector in 30 years. But what does this mean for landlords?
Improving Stability and Security
Changes to the current Tenancy System
The most common form of tenancy in the private rented sector is an Assured Shorthold Tenancy (AST).
An AST can be either a fixed-term tenancy or a periodic tenancy.
Fixed terms commit both landlord and tenant for an agreed period, typically 6 or 12 months.
During a fixed term, landlords cannot serve a Section 21 notice to evict a tenant, though they can use other grounds for possession.
Tenants can only leave during a fixed term with the landlord’s agreement, and they must pay rent for the duration of the term unless agreed otherwise. At the end of a fixed-term, tenancies do not automatically end – instead, they become periodic tenancies unless a new fixed term is agreed, or notice is served.
Periodic tenancies are weekly or monthly tenancies that do not last for a fixed period. They offer more flexibility to both tenants and landlords.
If a tenant wants to leave the property, they are liable for the rent until the required notice period has expired. This is typically one month but can vary.
A landlord can end a periodic tenancy with two months’ notice by using a Section 21 eviction notice or by using other grounds for possession.
The government will simplify tenancy structures and will move all tenants who would previously have had an Assured Tenancy or Assured Shorthold Tenancy onto a single system of periodic tenancies.
The government will provide at least six months’ notice of their first implementation date, after which all new tenancies will be periodic and governed by the new rules. Specific timing will depend on when Royal Assent is secured.
Ban on Section 21 Evictions & Reformed Grounds for possession
So-called ‘no fault’ Section 21 evictions – that allow landlords to terminate tenancies without giving any reason – will be outlawed. At the same time, the government is reforming grounds for possession to make sure that landlords have effective means to gain possession of their property where necessary, such as non-payment of rent.
The government is cognisant of the fact that the system must work for responsible landlords, letting agents, and communities. Landlords who maintain good letting practices and standards are a valuable part of the housing market and must be able to regain possession of their properties when necessary. The government will reform grounds of possession so that they are comprehensive, fair, and efficient, striking a balance between protecting tenants’ security and landlords’ right to manage their property.
The government also recognises that landlords’ circumstances can change, and will introduce a new ground for landlords who wish to sell their property and allow landlords and their close family members to move into a rental property. These grounds cannot be used in the first six months of a tenancy, replicating the existing restrictions on when Section 21 can be used. This will provide security to tenants while ensuring landlords have the flexibility to respond to changes in their personal circumstances.
Ending arbitrary rent review clauses
When a landlord needs to adjust rent, the government wants changes to be predictable and allow time for a tenant to consider their options.
To this end, the government will only allow increases to rent once per year (replicating existing mechanisms) and will increase the minimum notice landlords must provide of any change in rent to two months. The government will end the use of rent review clauses, preventing tenants from being locked into automatic rent increases. Any attempts to evict tenants through unjustifiable rent increases are unacceptable.
The government acknowledges that most landlords do not increase rents by an unreasonable amount but in cases where increases are disproportionate, the new legislation aims to ensure that tenants have the confidence to challenge unjustified rent increases through the First-tier Tribunal.
Safe and Decent Homes
The majority of England’s 4.4 million tenants enjoy safe and secure rentals, but 21% of private rented households currently live in unfit homes. Today’s while paper brings in rental reforms that mean homes must be free from serious health and safety hazards, and landlords must keep homes in a good state of repair, so renters have clean, appropriate, and useable facilities.
The government will legislate to introduce a legally binding Decent Homes Standard (DHS) in the Private Rented Sector for the first time.
To be ‘decent’ we will require that a home must be free from the most serious health and safety hazards, such as fall risks, fire risks, or carbon monoxide poisoning. Landlords must make sure rented homes don’t fall into disrepair, addressing problems before they deteriorate and require more expensive work. Kitchens and bathrooms should be adequate, located correctly, and – where appropriate – not too old, and also require decent noise insulation. Renters must have clean, appropriate, and useable facilities and landlords should update these facilities when they reach the end of their lives. All rented homes must be warm and dry.
Banning ‘No DSS’, ‘No families’, and ‘No pet’ practices
Some landlords refuse to allow benefits claimants to view properties or consider them as potential tenants, and they may advertise properties with restrictions like ‘No DSS’, ‘No Benefits’, or ‘Working Professionals Only.’
The government finds that it unacceptable for landlords to refuse to consider someone as a prospective tenant, simply because they are on benefits or have young children. The government will make it illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.
The government has advised it will support landlords to make informed decisions on individual circumstances rather than relying on blanket bans and will work with the insurance industry to address landlord and agent misconceptions that it is difficult to arrange insurance for properties where tenants are in receipt of benefits.
The government will legislate to ensure landlords do not unreasonably withhold consent when a tenant requests to have a pet in their home, with the tenant able to challenge a decision. Alongside this, they will make it easier for landlords to accept pets by amending the Tenant Fees Act 2019 to include pet insurance as a permitted payment. This means landlords will be able to require pet insurance so that any damage to their property is covered.
A new Ombudsman covering all private landlords
The government is trying to ensure that Private Rental Sector tenants have the same access to redress as those living in other types of housing. A single government-approved Ombudsman covering all private landlords who rent out property in England will be introduced, regardless of whether a landlord uses an agent. This will ensure that all tenants have access to redress services in any given situation and that landlords remain accountable for their own conduct and legal responsibilities.
Making membership of an Ombudsman scheme mandatory for landlords who use managing agents will mitigate the situation where agents try to remedy a complaint but are reliant on a landlord who is refusing to engage.
Ombudsmen protect consumer rights. They provide fair, impartial, and binding resolutions for many issues without resorting to court. This will be quicker, cheaper, less adversarial, and more proportionate than the court system. A single scheme will mean a streamlined service for tenants and landlords.
The new Ombudsman will allow tenants to seek redress for free when they have a complaint about their tenancy. This could include complaints about the behaviour of the landlord, the standard of the property, or where repairs have not been completed within a reasonable timeframe. Membership of the Ombudsman will be mandatory and local councils will be able to take enforcement action against landlords that fail to join the Ombudsman.
The Ombudsman will have powers to put things right for tenants, including compelling landlords to issue an apology, provide information, take remedial action, and/or pay compensation of up to £25,000.
Summary
The changes outlined in the White Paper intend to provide 4.4 million households with more secure, higher-quality homes and give councils the tools they need to crack down on the minority of non-compliant landlords.
It should make it easier for landlords to repossess their homes in reasonable circumstances, including in cases of antisocial behaviour.
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