Renters (Reform) Bill explained

The Bill is making its way through Parliament (currently due for a second reading) and its likely to be some time before we see any change to the PRS but when we do, those changes will be significant and, amongst others, include:

• Ending of certain kinds of assured tenancy;

• Changes to the grounds for possession in relation to assured tenancies;

• Changes relating to rent and other terms of the assured tenancy. Landlords will, for example, only be able to increase the rent annually by giving 2 months’ notice in accordance with section 13 of HA1988, which increase tenants will be able to challenge in the First-tier Tribunal (Property Chamber); and

• The introduction of a ‘landlord redress scheme” for prospective, current or former residential tenants to make a complaint against a member of the scheme to be independently investigated and determined by an independent individual.

There has been significant fanfare around the Bill with the mainstream press talking about abolishing the section 21 notice procedure used to terminate an assured shorthold tenancy (AST) which is often referred to as a ‘no-fault eviction’.

In fact, what the Bill intends, under the heading ‘End of certain kinds of assured tenancy’, is the abolition of ASTs entirely and the removal of the ability to grant any form of fixed term tenancy.

The effect will be that any tenancy agreement entered into where the annual rent is between £750 (£1,000 in London) and £100,000 will be a full periodic (monthly) assured tenancy which may only be terminated by the landlord where one (or more) of the grounds for possession in schedule 2 HA1988 are satisfied.

To address the obvious concerns around being able to recover possession of a property let on a full assured tenancy, the Bill proposes to amend the current grounds for possession which will allow landlords to recover possession where:

• the landlord requires possession to occupy the property as their or their spouse’s/civil partner’s, or close family member’s only or principal home (Ground 1) or the landlord intends to sell the property (Ground 1A).

• Grounds 1 and 1A will only be available where the tenancy has existed for at least six months and where the landlord obtains possession on these grounds the landlord will be prohibited from letting or marketing the property for three months from the date specified in the notice seeking possession.

• within a 3 year period at least 2 months’ rent is unpaid for at least a day on three separate occasions (Ground 8A). This will be a mandatory ground in addition to the current mandatory Ground 8 (two months’ arrears at the date of service of the notice and at the hearing for possession) and where these grounds are satisfied the court must make a possession order.

• the tenant has been guilty of conduct causing or capable of causing a nuisance or annoyance as opposed to behaviour ‘likely to cause’ a nuisance or annoyance. This is a discretionary ground where the court must be satisfied that it is reasonable in all the circumstances to grant possession.

The explanatory notes to the Bill state that the PRS has doubled in size since 2002 with 4.6 million households or 11 million people renting from a private landlord. The objective of the Bill ‘is to ensure private renters have access to a secure and decent home and that landlords retain the confidence to repossess their properties where they have good reason to’.

There is understandably some concern that the proposed changes, particularly the end of ‘no-fault evictions’, will make residential property less attractive as an investment and may drive investors out of the sector at a time when there is a shortage in housing and the Government should be promoting housebuilding and investment.