Renters Reform - What will this mean for the PRS?

A lot of discussion has taken place since June 2022 when the government announced that the PRS would be Levelled Up, but what does that actually mean in practice and how will the Renters Reform Bill impact landlords, tenants and the PRS?

Firstly, one of the key points to consider is to ignore the trade press and national press who lead with headlines and never factor in the detail.

Abolishing Section 21

A lot of emphasis has been placed on ‘no fault Evictions’ when in fact what should actually be referred to is the service of notice to obtain vacant possession’. There is no way of evicting a tenant just by serving a section 21 and to clarify, the eviction process takes a lot longer than a mere two months.

The Section is the first step to a landlord gaining possession but with ‘no reason’ given, therefore the abolition of this notice will mean that the landlord will be required to state ‘grounds’ (reasons) should they wish to regain possession. This would require Section 8 of the Housing Act 1988 (1996) to be amended.

Currently there are 17 Grounds under Section 8 - a combination of Mandatory and Discretionary. Most landlords are put off from serving the notice relying on Discretionary grounds based on lack of evidence or merely because they feel a judge would not grant possession. Therefore, it is crucial that tge amendments to Section 8 allow a landlord to rightfully have the opportunity to obtain possession should they need to do so. Remember that most claims for possession discussed tend to revolve around tenants in breach (rent arrears, ASB, false statement, damage to the property), yet it’s important to hear in mind that landlords are sometimes in a position where they must sell due to changes in financial circumstances, inheritance tax bills, changes in familial circumstances such as separation, divorce, caring for loved ones who are in care.

In short, it’s important to look at both sides of this very complex coin - for several years now landlords have been offloading their investment properties for fear of this significant change without having been given clear facts.

It’s not as simple as ‘removing’ a notice, the Ministry of Justice would need to be involved, the court process will have to change (no N5B, no Accelerated Possession) as will the key elements relied upon under the Deregulation Act 2015.

A New Version of Section 8

This notice has been in place since the Rent Act 1977 (RA1977) when Grounds were referred to as ‘cases’ and then amended for the purposes of the HA1988 and then again in 1996; so effectively we will be going back to a version of what was available to landlords under the RA1977, but with a modern, current day twist.

Again, it’s not just the Grounds that will change, the court papers, processes - all reliant on the MOJ. It can’t be given the importance and significance of this shift in housing law.

A key question is if a landlord is ‘genuinely’ selling and is required to rely on a ground in section 8, how will this impact the sale? Is the government going to impose restrictions on landlords selling and as such impact a already archaic and snail like process? A great deal of thought needs to go into this element and speed here is definitely not of the essence.

Periodic Tenancies

The current position is that a landlord can enter into a ‘fixed term’ tenancy and then continue/extend the tenancy to periodic. There have been many instances why the periodic is more advantageous - flexibility, the ability for the tenant to serve one month’s notice, landlord may wish to sell - so what will the impact be? What will the tenant be permitted to do? Will the process require the service of a prescribed form? Can terms be varied, if so , how? Will the default position be Statutory or Contractual?

Rent Increases

No cap on rent increases mentioned here yet, but giving a tenant a two month warning that rent will increase is a practical, sensible move. If the notice period changes, so will the Section 13(2) and the process of appeal to the First Tier Tribunal (Property Chamber).

Blanket Bans on refusing Tenants with Children

There has been an ongoing debate over two key areas which raise concerns. When a landlord states No DSS - an abbreviation for Department of Social Security which was replaced with DWP - Department of Work and Pensions, what that actually means is no tenants wanted in receipt of ANY benefits, that includes sickness, JSA, disability, housing, etc. There is a lot of case law where tenants have been refused properties on the basis that they are in receipt of benefits but also that the tenant has children.

Therefore, will the changes in legislation will need to be reflected in the Equality Act 2010 meaning that refusing a tenant with children sits under the protected characteristics?

Let’s with Pets

Restrictions in place for tenants with pets have been a bone of contention for a long time and in general it’s not often the pet that’s the problem, it’s the owner.

The introduction of the Tenant Fee Ban 2019 did not take into consideration the impact capping the security deposit would have on tenants. This blinkered approach meant that tenants were either properties if they had pets OR required to pay a ‘Pet Rent’ meaning that the whole point of assisting tenants in paying less, actually meant they paid more in the long run.

So if pets are to be permitted and consent ‘not unreasonably withheld’ , what criteria will be in place to protect the landlord against irresponsible pet owners? A vetting process for the pet and owner, a set of criteria requiring infestation treatment, a pet passport, vaccinations in place, and stipulations relating to damage caused by the pet, must factor into the equation.Would it be a legal requirement for pet owners to take out insurance given that currently it is not a prerequisite in law for tenants to even hold contents insurance?.

The deposit schemes will of course, amend their criteria when dealing with deposit disputes that are pet related and pet clauses would be present in all relevant contracts. Again, this significant legislative change would require the Tenant Fees Act 2019, the Localism Act 2012, the Consumer Rights Act 2015, and the Housing Act 2004 (Section 213 ) to be amended.

Moving away from legislative change, how would this consent impact freeholders and their leases who have placed restrictions on leaseholders regarding pets and animals being kept in flats and apartments ? Freeholders would need to be factor these changes into their leases and possibly vary the terms of existing leases.

A New Ombudsman

The PRS is well versed with Property Redress and the role the Property Ombudsman and the Property Redress Scheme play in the sector, but how will an Ombudsman who is solely responsible for Private Landlords make a difference to tenants and the kind of enforcement that is currently available to consumers?

The tenant has several routes available to them should they feel it necessary to report a landlord - The First Tier Tribunal (Property Chamber), the Local Authority and Trading Standards. Whilst each enforcement organisation may overlap on some ways with another, the tenant does not have one point of reference. As with the Redress Schemes currently in place, an Ombudsman may be able to bring certain elements ‘under one roof’ as it were, allowing tenants to be heard if a landlord is found to be in breach of offences that can be readily addressed through a scheme. The Housing and Planning Act 2016 introduced Banning Orders and the ‘Rogue Landlord List’ which means that the tools are already available to be properly implemented through a Code of Practice for Private Landlords to adhere to.

A Central Digital Property Portal

Leading organisations in who have worked alongside the Letting Industry Council have been vocal about the need for a UPRN which will identify rental properties and as such provide a property footprint which will benefit the property sector and the consumer who is purchasing or renting a property. Alongside a URPN, a digital property portal can drawn down information that will ensure compliance in relation to health and safety matters, paperwork and deposit protection.

A Review of Housing Standards

Housing Condition and Decent Homes Standards for the PRS have been long been a concern to stakeholders involved in the housing sector. The Bill intends to put in place a much wider brief that currently applies to the social housing sector, and we would hope that the benchmark is much higher and enforcement much more readily relied upon.

Again some elements within the Housing and Planning Act 2016 and Homes (Fitness for Human Habitation) Act 2018 could be revisited, along with a further review of the Housing Health and Safety Rating System (HHSRS) and the tweaking of the Sections 11 - 16 of the Housing Act 1985.

Author’s Comment

The sector has been vibrant and strong for many years, now more than ever not only do tenants rely upon housing provided by Private Landlords, but Local Authorities and Social Housing providers have been reliant on landlords to fill the void in housing provision which has not been addressed by governments for many many years. Piece meal legislation and lack of enforcement has meant that landlords that need to be punished are not and those that comply and jump through hoops to run an exceptional portfolio, are penalised and therefore exit.

The fundamental issue is that the drafting of such a pivotal piece of legislation requires time, thought, planning and some very good lawyers.