Billed as the biggest overhaul of the private rented sector in many years, the rental reform white paper and consequent renter’s reform bill will have a big impact on tenants and landlords. For those running their own portfolio, planning to grow a portfolio or even starting one, it’s important to stay on top of these changes to legislation.
What is the Rental Reform White Paper?
Between July and October 2019, pre the Covid Pandemic, the government launched a consultation on proposed changes to the private rented sector, and initially it was expected this bill would become law in 2020, however the pandemic pushed that back.
The May 2021 Queen’s speech announced a white paper would be due on the bill in the Autumn, but did not mention a definite date for legislation. It’s been a long time coming, we don’t have all the answers yet, but we do have some hints at where this legislation is going.
It’s important to remember, the Renter’s Reform Bill is a piece of legislation that will affect England, Scotland and Wales. Northern Ireland have the power to set their own housing policy. The various individual countries in the UK do have a history of looking at each other’s housing policies, and so a change in England may prompt changes elsewhere.
Will the people working on the bill for England be looking at Scotland’s overhaul of the private rented sector that started in 2017 with the move to Private Residential tenancies? Here are 5 reasons why you need to pay attention to the forthcoming reforms.
- The removal of Section 21
Section 21 was framed by some tenant’s groups as a win for tenants to stop greedy, unscrupulous landlords evicting tenants for ‘no reason’ under no fault rules. The reality for landlords, is that while section 21 may have been used for many possession cases, it almost always had a reason.
The government’s published information all says section 21 will go, however, there is a proposed strengthening of other grounds to end tenancies under section 8 of the housing act, including: more mandatory grounds, the landlord intends to sell, the landlord intends to occupy, or major refurbishment is planned for the property. The Scottish system may provide an indication of where this is heading for England, as the proposals look very similar to what is in place now in Scotland.
Reduced possession powers for landlords are likely to have a knock on effect to their confidence in the rental market, a key point for all landlords to remember is that prevention is better than a remedy. The majority of tenants are good tenants, the majority of landlords are good landlords. Effective referencing pre tenancy, being discerning about who goes into your rental property and not creating a problem at the start of the tenancy by being unprofessional or desperate to get a tenant, should help to avoid needing to deal with a possession case later on.
- Encouragement for longer term tenancies
There is an absence of any indication of what this might look like in anything published by the government. Possibly the absence of information in relation to this point is due to it being a really difficult issue to solve. On the one hand many tenants would like greater security within their rental properties while many landlords would also like longer term tenancies as well, the average tenancy length in the UK is now just over 4 years. However, a change to the default being long term tenancies doesn’t suit all areas of the markets.
Consider students, who generally are looking for a year by year arrangement, those on short term work contracts or moving around for work who want short term accommodation rather than multiple years of tenancy. In addition there is the large amount of renters who state flexibility as one of the key reasons they choose to rent. There is a balance to be struck, and as a landlord, the hope is that longer tenancies are encouraged and provided for in legislation, but not mandatory, as they are not going to suit everybody. A landlord and tenant should still have the room to agree 6 or 12 month tenancies if it is in both their interests.
- Overhaul of the courts system
A key area of concern when looking at any proposed legislative changes in relation to landlord/tenant law is the time taken for the parties to get justice through the courts. Pre-Covid, wait times for possession cases were much longer than was fair to either party, those time periods have only increased as a result of the pandemic, as have the hoops for landlords to jump through, even when their possession claim is valid.
The consultation in 2019 asked questions about the state of the court system and fitness for possession hearings. The 2021 announcement of a rental reform white paper makes no specific mention of this. However, it is a key point of concern for landlord and tenant groups. As with the possession grounds, it’s possible people are looking at Scotland’s tribunal system to look at the effectiveness of a separate system that only deals with possession issues.
- Lifetime deposits.
This seems a great idea for landlords and for tenants. The idea that a deposit can be transferable between tenancies without having to be returned and re-protected would be a win for tenants and landlords. The current system disadvantages tenants, because they must pay for a new deposit before they can move, then wait to receive their previous deposit back. That creates a financial burden, but also discourages tenants moving to more desirable or better quality accommodation, which is what many professional landlords seek to provide.
The detail on this will be important – protecting the portability of tenant deposits – but also protecting the landlord’s ability to make legitimate claims against the deposit for damages and rent arrears, post tenancy, when the deposit has been transferred to a new tenancy.
- Rogue landlords and a letting agents database
Let’s start with the obvious questions first, if a rogue landlord and letting agent database is introduced, then surely a similar rogue tenant database would be required? The aim of this legislation is to promote quality and people behaving correctly in relation to tenancies. How this scheme will work is one of the most keenly awaited elements for the government’s renter’s reform bill.
Would landlords support membership of redress schemes for landlords? I believe generally they would, I can imagine using this as a selling point to attract better quality tenants through demonstrating that I am taking my responsibilities as a landlord seriously. Would landlords and tenants both benefit from knowing which letting agents had been caught out behaving badly? That is a big step forwards too. Both parties can avoid dealing with known rogues and it makes the system better for landlords and tenants.
In professionalising the lettings industry and business of being a landlord, it seems only reasonable that tenants should also behave well, and while the vast majority do, there should be a robust way of flagging up when tenants have damaged previous rental properties, delayed or not paid rent without good reason or otherwise breached the tenancy agreement.
If a rogue tenant database is a step too far, what about rent receipts forming part of a credit report so that constant delayed or missed payments could be flagged on the tenant’s subsequent lettings application? Or a possession claim upheld against a tenant being a matter of judgement record so that subsequent landlords are aware. This area needs careful consideration, and balance between landlord and tenant interests.
Further to the question of redress against rogues, currently around England there is a mess of mandatory licensing in relation to HMOs, and local schemes in relation to licensing HMOs not covered under the mandatory scheme, or indeed all rental properties. The approach is haphazard, and it’s questionable whether it actually is weeding out the bad landlords, rather than just heaping further compliance and cost on the good ones.
A national database approach for England, linked to the redress schemes already in place, would mean that all landlords and letting agents would be registered, all tenants would have an impartial body to complain to if they’re not happy and it would end the confusing local rules. Both Scotland and Wales have licensing schemes in place at a national level, and both at significantly less cost than the majority of local licensing schemes in place in England. Let’s see what the rental reform white paper has in store.
Creating a win for all
Debate around the renter’s reform bill should not be landlord vs tenants, as it has often been framed by various special interest groups. Landlords and tenants share a common interest in good quality housing, at a fair price. A tenant receives a safe and comfortable home with the flexibility to move as their needs change. The landlord runs a successful business which helps people and society by providing good quality accommodation. Shouldn’t this always be a win for both sides. If the debate on this issue can focus more on how the system can be improved for all, rather than one side winning at the other’s expense that would be a great step forward for the renters reform bill.