Home » Landlords: How to get ready for the Renters Reform Bill

Landlords: How to get ready for the Renters Reform Bill

Renters Reforms high speed train arriving soon slow shutter speed

The Renters Reform Bill promises to be the biggest shake up to the private rented sector since the Housing Act 1988, and it has gathered pace in its way through parliament. With the Committee Stage now out of the way, it’s just the Report Stage and Third Reading to go, before it heads to the House of Lords. Given that the Bill has cross-party support, it’s now a question of when, rather than if it becomes law.

Thiis new world order for the PRS will take a lot of getting used to for landlords. Unlike the Housing Act 1988, which significantly increased the freedom of landlords, the changes in the Renters Reform Bill will restrict this freedom.

Managing change is a challenge at the best of times, let alone during a period of high inflation and high interest rates. This blog post examines the broad areas of concern and risk in the draft of Renters Reform Bill that was passed by the House of Commons Committee on 28 November 2023. It also looks at what landlords can do to get ready for it, and manage the upcoming changes proactively.

Updated: 6 January 2024

Where are we now with the Renters Reform Bill?

Passage of the Renters Reform Bill through parliament
The Renters Reform Bill is nearing the end of its passage through the House of Commons

The Renters Reform Bill was published on 17 May, and the Bill concluded its Committee Stage on 28 November. The next stages are the Report Stage and Third Reading, before it will go to the House of Lords and go through the whole process again.

During the Bill’s passage through parliament so far, there’s been a lot of discussion by the various pressure groups, many of whom gave evidence in the first two days of the Committee Stage. Some of the detail of the Bill is likely to change, and the government needs to publish more 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 spring 2024, although given it still hasn’t completed its passage through the House of Commons, it may be in the summer. 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 new rules for new tenancies (the first implementation date) might come into effect in autumn / winter 2024, with a fair wind and assuming no election before Royal Assent. For existing tenancies it will be autumn / winter 2025 at the earliest, the second implementation date. The abolition of Section 21 will come into effect on or after the second implementation date, depending on whether the courts are ready.

Although it may still change in the detail before it becomes law, and implementation is a year 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. The more landlords that leave the PRS, the higher the demand from tenants.

How can landlords manage these regulatory changes to the PRS?

Change management word cloud
Change management word cloud

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.

Landlords (or their letting agents) are also going to have to keep meticulous records, as errors in uploading documents to the PRS Portal could result in a fine or a Rent Repayment Order. It’s not too early to get your documents in order.

It’s a good idea to speak to other landlords, your letting agent or listen to advice from the NRLA.

Another avenue of support is The Independent Landlord Community private Facebook group. I’ve set it up as a landlord-only supportive space where landlords can ask questions and share knowledge. I’ll be keeping an eye on the discussions and remove anyone who doesn’t respect the rules.

>> Join: The Independent Landlord Community Private Facebook Group

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?

A woman standing in front of doodles which show she is trying to make her mind up whether to stay as a landlord
“Where does the Renters Reform Bill leave me now?”

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 needed to have EPC C ratings for their properties (although that has now been taken off the table).

>> 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. Michael Gove has promised that Section 21 won’t be abolished until there is “end to end digitisation” of the court system, when landlords will no longer have the paper-based Section 21 to rely on.

>> Related Post: How will landlords be able to evict tenants 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

cat scratching

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. Michael Gove has already conceded that student landlords will have a mandatory ground for possession. However, despite a lot of requests to keep fixed term tenancies for students at the Committee Stage, the government pressed ahead with its plans to abolish fixed term tenancies for all but purpose-built student accommodation.

The NRLA has been advocating for there to be a minimum initial six-month period for all renters, not just students, before tenants can end their tenancy with two months’ notice, due to the high tenancy set-up costs for landlords. If fixed term tenancies are abolished, I foresee the high up-front costs of the “tenant-find” that letting agents offer landlords becoming uneconomic, because of the uncertainty. This may lead to more tenants using online platforms like OpenRent to find tenants themselves, or for agents not to charge a set-up fee if landlords use their full management services.

There’s still time for this to change as the Bill passes through parliament, so it’s not too late to contact your MP about it if this affects you.

>> Useful Resource: How to find tenants using OpenRent

4. The increase in bureaucracy

paper chase for limited company landlords, man trying to get control of bureaucratic paperwork

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, backed up with the right for tenants to claim a Rent Repayment Order for breach. 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!

>> Related Post: What we know about the new PRS Landlord Ombudsman

>> Related Post: How landlord can increase rent using a Section 13 notice

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.

In its response to the Select Committee report on 20 October 2023, the government announced that Section 21 wouldn’t be abolished until “we judge sufficient progress has been made to improve the courts. That means we will not proceed with the abolition of section 21, until reforms to the justice system are in place.”

We’ve since had no indication of how long this would take, other than mention in the King’s Speech of an initial commitment of £1.2 million to begin designing a new digital system for possessions”.

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 what you need to change, and how you’ll go about it.

>> Join: The Independent Landlord Community Private Facebook Group (landlords only)

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High speed train hurtling into a station, with the plaque Renters Reforms on the front of the train, how to get ready for the change

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