The Renters Reform Bill promises to be the biggest shake up to the private rented sector since the Housing Act 1988, assuming it ever sees the light of day!
However, whereas the Housing Act 1988 significantly increased the freedom of landlords, the changes in the Renters Reform Bill will restrict this freedom.
Although we can hope for there might be some changes to the detail, eg exempting student lets from the ban on fixed terms, it’s now a question of when, not if, it comes into force. And this new world order for the PRS will take a lot of getting used to for landlords.
Managing change is a challenge at the best of times, let alone during a period of economic headwinds and high interest rates. With the delays in the Bill’s passage through parliament, landlords and renters are in a limbo land, wondering if and when the changes will come into force.
This blog post examines the broad areas of concern and risk in the current draft of Renters Reform Bill, and what landlords can do to get ready for it, and manage the upcoming changes proactively.
In writing this post, I draw on my experience as both a lawyer and a self-managing landlord.
At a glance: How to prepare for the Renters Reform Bill
Where are we now with the Renters Reform Bill?
The Renters Reform Bill was published on 17 May, and is due for its second reading in the House of Commons when it will be debated. The date for this has not yet been announced.
During the Bill’s passage through both houses of parliament, there will be a lot of discussion by the various pressure groups. Some of the detail of the Bill is likely to change, and the government needs to publish the detail on the Decent Homes Standard, the Property Portal and the PRS Ombudsman.
Click here for a more detailed analysis of the stages that the Renters Reform Bill will pass through before receiving Royal Assent.
The earliest that the Bill can receive Royal Assent is early next year, as it still hasn’t had its second reading debate in the House of Commons. The new rules will come into effect for new tenancies at least six months after Royal Assent. Tenancies that are already in place on that day will have an additional 12 months under the pre-Renters Reform Bill regime.
This means that the earliest the new rules will come into effect for new tenancies (the first implementation date) will be the end of 2024, at a push. For existing tenancies it will be the end of 2025 at the earliest, the second implementation date. The abolition of Section 21 will come into effect on the second implementation date, ie end of 2025 or even 2026.
Although it’s likely to change before it becomes law, and implementation is two years away, it’s not too early to be thinking of how to get ready for the Renters Reform Bill. Landlords can do this by looking at the key areas of risk and thinking how they will manage the risks, and consequential changes to their businesses.
>> Related Post: Renters Reform Bill Timetable: What Happens When?
Different landlord responses to the Renters Reform Bill
There has been a lot of concern about the Renters Reform Bill on the part of landlords, with wide range of reactions, such as:
- Opt out: “This is the final straw, I’m selling up!”
- Undecided: “I’m going to wait and see”
- Bargaining: “Where are the loopholes?”
- Resigned acceptance: “I guess I’ve got no choice”
- Embracing change: “This is an opportunity. How can I get my business ready?”
I’m in the last camp, and see the implementation of the Renters Reform Bill as an opportunity for those landlords who decide to stay, and quickly adapt to the new regulatory environment.
How can landlords manage these regulatory changes?
The Renters Reform Bill will bring a change to the regulatory environment in which all landlords and businesses operate in the private rented sector in England.
Successfully navigating change rarely happens by accident in any industry. In the corporate world, best practice is to respond to regulatory change through a change management programme, to make sure the business will be ready to adapt to the changes.
In order for landlords and property businesses to adapt successfully to the changes that the Renters Reform Bill will bring, they’ll need to do the following:
Step 1: Understand the potential impact of the changes
The Renters Reform Bill will affect different business models in different ways. For instance, for landlords with reliable long-term tenants already on rolling contracts, they won’t be too concerned about the ending of fixed-term tenancies. For student lets on the other hand, the abolition of fixed-term tenancies could be a game changer, although it is possible that there may be an exemption.
Even though some of the detail hasn’t yet been finalised, landlords should be thinking the potential impact of the Bill on their business now.
Step 2: Plan how to get ready for the changes the Renters Reform Bill
Landlords should start to planning how they’ll adapt to the changes in the Renters Reform Bill. Some of the changes may be minor (for instance ensuring that new safety documents are uploaded to the new database), but others may be fundamental.
For instance, with the abolition of Section 21 making it harder to rectify bad choices of tenants, the landlord may need to change the type of tenant they are willing to consider, and become more risk adverse.
It’s a good idea to speak to other landlords, your letting agent or listen to advice from the NRLA.
Step 3: Communicate with stakeholders
The next step is communicating the plan to “stakeholders”, to use the management jargon.
This means letting the relevant people (eg renters, letting agents) what the plan is to comply with the new law, eg new pet policy or a new tenant selection policy, and work towards being ready before the Bill is implemented,
Step 4: Implement the plan
The good news is that there’s plenty of time to get ready for the changes that will come with the implementation of the Renters Reform Bill.
The even better news is that I’ll be creating a printable checklist for my subscribers closer to the time, that will go through the key areas of the Bill that landlords will need to be ready for.
You can subscribe below for free, so you don’t miss out:
What are the key problems with the Renters Reforms for landlords?
The Renters Reform Bill has added to the concerns of landlords. It is seen to compound the continuing impact of the punitive taxation for individual landlords brought in by the notorious Section 24, and the legislative limbo regarding whether landlords will need to have EPC C ratings for their properties.
>> Related Post: The 10 Key Changes in the Renters Reform Bill
As far as the version of the Renters Reform Bill published on 17 May 2023 is concerned, these are the areas that are worrying landlords:
1. The consequences of abolishing of Section 21
With the abolition of Section 21, it’s going to be harder, costlier and longer to evict tenants, even if the landlord has good reasons.
On the positive side for landlords, it will be easier to evict tenants for rent arrears. This is because mandatory Ground 8 is being amended so that the landlord will have the right to evict tenants who have owed more than two months’ rent for at least a day on three separate occasions.
At the moment, if the tenant reduces the arrears to a little under the 2 months’ rent, Ground 8 will not apply. This means that the landlord would have to use Section 21, which can’t be used during a fixed term, or convince the judge it is reasonable to evict the tenant under Ground 10.
On the negative side, the landlord will need to show to the judge that the relevant ground applies (for instance, that they are genuinely selling up. For discretionary grounds, they’ll need to convince the judge the discretion is reasonable. This is all a big change from the “no reason needed” Section 21, and will require landlords to keep good records as well as spend money on legal advice.
This will inevitably lead to higher costs for landlords when they wish to terminate a tenancy. And there’s also the question of whether the court system will be fit for purpose when landlords will no longer have the paper-based Section 21 to rely on.
>> Related Post: How will landlords be able to terminate tenancies with the new Section 8?
>> Related Post: What abolishing Section 21 means for private landlords
2. Getting ready for the new implied right for tenants to have a pet
Many landlords are very concerned that tenants will soon have a right to keep a pet, unless the landlord has reasonable grounds to refuse. Guidance is due to be published, and it’s likely to exclude HMOs and where properties need to be hypoallergenic.
What can landlords do to get ready for the patter of little paws in their rental properties? The best thing to prepare for this Renters Reform change is to have a pet policy, and also undertake regular inspections. Requesting tenants to take out pet insurance will also be important.
>> Related Post: How to reduce the risk of damage from pets
>> Related Post: Model Pet Policy
3. End of fixed term tenancies
The proposed end of fixed term tenancies is unlikely to cause a major problem for single lets, where private renters stay an average of 4.4 years, according to the 2021 English Housing Survey.
This is not the case for student lets, who tend to let out rooms in HMOs on a fixed term basis for the academic year. Many student landlords fear that this change would undermine their business model, and are contemplating selling up or ending student lets. That said, it is possible that this may change as the Bill passes through parliament as student lets are generally see as needing different rules.
4. The increase in bureaucracy
The Renters Reform Bill will undoubtedly increase the amount of bureaucracy for landlords.
For instance, the new database will require landlords to upload documents for every property. The rules will have teeth, and create an offence of “knowingly or recklessly” providing false or materially misleading information to the database. We still don’t know exactly what the database will involve, but it will be additional task for landlords.
Landlords will need to be very careful with their paperwork and certifications, not least because the local authority will be able to see if the EICR has expired.
Another example is the process to increase rents. Whereas now rent increases can be agreed, and confirmed by a letter or addendum, after the Bill comes into effect, landlords will need to serve a formal Section 13 notice.
Finally, with the new Ombudsman, landlords may be called upon to explain their decisions and actions, and will need to have good records to explain why they did certain things. This means more structured decision-making and better record keeping.
There will certainly be an increase in the demand for property virtual assistants!
5. Courts not being prepared for Section 8
One of the big concerns about abolishing Section 21 is that the court system, which is already overburdened, will not be able to cope with the volume of evictions.
When the Renters Reform Bill was published on 19 May 2023, Michael Gove released a statement saying: “The Government remains fully committed to improving the court system for landlords and tenants […] we will align the abolition of section 21 and new possession grounds with court improvements. This includes end-to-end digitisation of the process and our work with the courts to explore the prioritisation of certain cases, including anti-social behaviour.”
We are waiting for details of how this will work in practice, particularly given the current backlog in the courts for evictions.
Landlords should bring this up with their MPs, and argue that Section 21 shouldn’t be abolished until the courts system for Section 8 is fit for purpose. The courts, not just landlords, need to get ready for the Renters Reform Bill implementation.
Final thoughts
The Renters Reform Bill will undoubtedly affect the way landlords run their property businesses. It will also affect those businesses such as letting agents and property virtual assistants who provide support to landlords.
We might not know all the detail, but the direction of travel is clear.
Unless your decision is to exit the market, it’s wise to start thinking about how to get ready for the changes in the Renters Reform Bill. You can do this figuring out whether what you need to change, and how you’ll go about it.
You may also find useful
- Renters Reform Hub
- What abolishing Section 21 means for Landlords
- Terminating tenancies with the new Section 8
- The proposed new rights for tenants to keep a pet
- How to increase rent
