Tom Entwistle comments on the progress of the Bill and its implications for landlords
The Government is evidently taking decisive steps to ensure swift progress of the Renters’ Rights Bill through the Commons and the Lords, with a view to having the Act implemented before Easter.
The Bill has received its first reading in the House of Lords, which means it is now ready for Peers to debate its second reading in the Lords. It passed from the Commons last Tuesday where the Government’s amendments were passed, including limiting the amount of rent landlords can take in advance to one month, adding a student ground and changes to licensing rules.
This second reading is due to take place in the Lords on 4 February and while there’s ongoing debate and objections to some of the measures and amendments with the landlords’ representatives, given the large Labour majority in the Commons it is thought the Bill will go through largely in the Government’s way.
Warning: This article is a guide, not advice and applies primarily to England. It is not a full interpretation of the law which is still not settled on this subject. Always seek professional advice before making or not making important decisions.
So, The Renters' Rights Bill is on track to become law before Easter 2025, sooner than many people thought. On the day the Bill receives Royal Assent all residential tenancies in England will become assured tenancies. Assured shorthold tenancies will no longer exist, existing ones will convert on the day (commencement date) to periodic tenancies. With few exceptions, there will no longer be any fixed term residential tenancies in England.
The end of no-fault evictions which allow landlords to ask tenants to leave without having to give a reason is the standout change. In future landlords will need a valid reason to evict a tenant. There will need to be a court hearing where the landlord or their representative will attend, and there will need to be good convincing evidence to justify their claim.
The Bill will also prevent landlords and agents entering bidding wars, accepting offers above the advertised rent, it introduces enhanced safety standards under the Decent Homes Standard, restricts rent increases to annual capped at the "market rate" increases, and includes several measures on discrimination violations, among other measures.
Hansard states that: “For England’s 11 million tenants, representing some 4.6 million private rented sector households, the Bill provides the robust protections needed to increase security and standards, helping people to put down roots in their communities, keep jobs and build careers in their local areas.”
“We are also supporting England’s 2 million landlords and recognising the importance of privately rented homes to our economy. The Bill will give good landlords the confidence to let their properties, equipping them with the tools needed to charge a fair rent and reclaim their properties when they need to, while driving out rogue and bad actors who undercut the majority.”
“The Government have worked closely with those across the sector and across political parties to ensure that our measures strike the right balance. I will now move to the specific content of the Bill and outline the ways in which, when taken together, this package of reforms will support responsible landlords and tenants alike.”
Despite this reassuring rhetoric concerning The Renters’ Rights Bill, when it becomes law, it will represent the biggest change to managing rental property in more than a generation. And it won’t be all plain sailing for landlords and letting agents.
In her excellent revue of the yet to be enacted legislation, “Be Prepared: Renters’ Rights & Residential Landlords in England Kindle Edition available at £2.50 from Amazon, author and ex-solicitor Patricia Ogunfeibo makes it clear she agrees that reform of the sector is called for. Also, ex-solicitor and landlord Suzanne Smith is doing some excellent commentary on the Bill.
However, she thinks the volume of legislation affecting the private rented sector (PRS) will become even more vast that is already the case. It is also likely to generate a considerable amount of litigation requiring high court involvement for some years to come.
While Ms Ogunfeibo thinks there are some sensible measures in the Bill, as has been expressed elsewhere, taking the worse case scenario where tenants are intent on gaming the system, the minority sport of achieving extended rent-free living, it could possibly be described as a “rogue’s charter”, my words.
She advises landlords to think very carefully about their future involvement with the PRS as, and she stresses this is looking at the worst case, so not to panic too much, but where there is a local housing authority, they will unlike previously, effectively get funding to impose their “duty to enforce” the new legislation, with the imposition of heavy fines.
On the positive side it is likely to catch those rogue landlords that everyone wants out of the system, but in the process responsible landlords may also become entangled in the legal complexities of this new regime.
The new legislative and punitive powers that housing authorities will have are not to be taken lightly. There are likely to be more landlord court cases than previously and so Ms Ogunfeibo recommends that responsible residential landlords in England build a legal “war chest” just in case, to ensure their financial survival.
It is not enough to think that if you are a responsible landlord, if you follow the rules to the letter and you use a rigorous vetting procedure, you will always be in the clear. You can still be caught out in those rare occasions where a tenant goes against you. It is your word against theirs and largely the onus of proof is on you.
In that respect using an agent gives protection - agents
Even with the benefit of section 21 accelerated possession, as now, evictions can take between 6 months and two years. Under the new regime with section 8 the process may be even more protected, especially as the courts are overloaded, and we can expect, contrary to Government assurances to the contrary, more court cases.
In my experience of letting to residential tenants over many years, around 95 percent or more tenants, given vigorous vetting procedures, are good to excellent. They pay their rent on time and look after the property; you can’t ask for more.
But in the uncertain nature of the landlord’s occupation, there are no guarantees, there’s always the odd exception. If you are unlucky enough to get a bad tenant, a devious rogue trying to game the system, then under the new regime you might be in for an expensive experience, hence Ms Ogunfeibo’s warning.
You can mitigate the chances of trouble by, as I’ve said, rigorous vetting and keeping meticulous records. You will find more guidance on what’s needed in the article here – Twenty Steps to Successful Landlording.
For those landlords wishing to leave the sector there is still a window of opportunity (albeit a closing one) to use Section 21 if you want to dispose of your property and sell with vacant passion. However, I would urge you to consider the following:
1 – if you have owned your property for any reasonable period, you could be faced with a hefty capital gains tax (CGT) bill when you sell.
2 – the new legislation contains grounds for possession if you genuinely wish to sell or reoccupy the property.
3 – do you have an alternative use for the money, one that is as safe and likely to earn you the same rate of return as your rental property?
4 – the new regime will favour the serious landlord, the landlord who is willing to become entirely familiar with all the new the rules and regulations, following them to the letter. By making sure you generate detailed documentary evidence at each stage of the letting process you will be in a much stronger position should you have tenant troubles.
5 – Always consider using rent guarantee and legal protection insurance / and or a guarantor – these are relatively inexpensive safeguards.
6 – An independent inventory service is a great way to provide independent evidence that will stand up in court, again a relatively inexpensive safeguard.
7 – Using a letting agent gives you an extra layer of protection as they become an independent third party. They can provide excellent independent witness testimony at a court hearing, which judges will receive with credibility.
Tags:
Comments