Does the Renters’ Rights Bill deliver the promised level playing field?

Writing in the Daily Telegraph on 11 September 2024, Housing Minister Matthew Pennycook said: “Our Renters’ Rights Bill will level decisively the playing field between landlord and tenant and ensure that their interests are balanced”.

He concludes by saying they want a “strong, sustainable private rented sector that works all round; a level playing field of rights and responsibilities.”

In the Second Reading debate, both Angela Rayner and Matthew Pennycook said “good landlords have nothing to fear” from the Bill.

What’s the verdict on the Renters’ Rights Bill? Does it live up to the promises made by the government?

In this blog post, I examine whether the Renters’ Rights Bill really is fair and balanced to both parties, and whether it will deliver a “sustainable private rented sector that works all round”.

Last updated: 10 October 2024

What I like about the Renters’ Rights Bill

First things first, I’m not against tenancy reform.

I was broadly supportive of the Renters (Reform) Bill and don’t have a problem with abolishing Section 21. I agree that the playing field needs to be levelled, to borrow the overworked metaphor used by the current and previous governments!

I also agree that standards need to improve, as there are still too many low quality properties in the PRS.

Starting with the positive, here are the key things I like about the Renters’ Rights Bill:

1. The introduction of the Decent Homes Standard

The quality of many homes in the PRS needs to be improved. The English Housing Survey 2022-23 estimates that 21% of properties in the PRS are “non-decent”. This means they have a Category 1 hazard, are not in a reasonable state of repair, don’t have reasonably modern facilities and services, or don’t provide a reasonable degree of “thermal comfort”.

There is considerable regional variation, with 32% of privately rented homes in the North West estimated to be non-decent, reducing to 12% in London. According to the ONS Private Rent Data published in September 2024, the average monthly rent in the North West in August 2024 was £885, compared to £2,129 in London.

Landlords have less profit in terms of cash to maintain or upgrade their properties in the North West than London, yet the cost of repairs and replacement items (eg a boiler) is similar across the country.

I welcome the introduction of the Decent Homes Standard to the PRS. It is not acceptable for landlords to let properties for people to live in that are not of a decent standard. I hope that the Decent Homes Standard will either make landlords bring the homes they let up to scratch, or induce them to sell up.

We don’t yet know what that will look like as the detail will be published in regulations. The previous government consulted on how the standard should be adapted to the PRS, but the results hadn’t been published by the time of the election.

We don’t know how whether landlords will be given time to bring their properties up to standard. Some may need a back to brick refurbishment, particularly if the landlord needs to retrofit energy efficiency features to bring it up to an EPC C.

Also, we don’t know how the DHS will be assessed. The Bill gives the Secretary of State wide powers to decide how it will be assessed in regulations that specify “the provision about the manner of assessing whether qualifying residential premises meet the requirements specified by [the DHS] regulations”.

This wording is wide enough to enable the Secretary of State to make it compulsory for the Decent Home Standard to be assessed by a third party, and not self-certified.

Landlords cannot carry out a back to brick refurb while someone is living in the property. If the tenant doesn’t move out of their own volition, the landlord will need to use Ground 6, ie that they “intend to demolish, reconstruct or carry out substantial works to the whole or a considerable part of the property, and cannot reasonably carry out the work while the tenant remains in residence”.

As always, the devil will be in the detail.

>> Related Post: The Renters’ Rights Bill and the Decent Homes Standard

2. The new Private Rented Sector Database

I also welcome the introduction of the Private Rented Sector Database as that will make it easier for local authorities to take enforcement action against non-compliant landlords.

We don’t yet know what the database will contain, and I do hope that legitimate privacy concerns by landlords are taken into account. For instance, landlords who hold HMO licences receive a large amount of unsolicited post to their address from rent to rent operators, letting agents, builders, home improvements and direct to vendor offers to buy the property. Access to the landlords’ addresses should only be given to legitimate authorities, such as the local council, or HMRC.

The government has said the PRS Database will also be used for “communicating changes to requirements – ensuring landlords have access to simple up-to-date information about their responsibilities”. This may make it easier for landlords to keep on top of their obligations, as well as enabling applicants and tenants to check compliance.

There are stiff penalties and private landlords won’t be able to let a property without registering themselves and the relevant property on the database.

3. The introduction of the Private Rented Sector Landlord Ombudsman

From a conceptual point of view, I think it is good that tenants will be able to make a complaint about landlords in a setting that is outside of the court system.

It also has a benefit for landlords as it will be impartial and binding on both parties. Hopefully this will enable problems to be nipped in the bud, and also for an independent third party to tell a tenant that the landlord is not in the wrong.

As with all good initiatives, it will be only useful if it provides a quick and reliable method of resolving disputes. There are long delays with the Housing Ombudsman for social housing. According to Shelter, the Housing Ombudsman reaches a decision within 6 months “in most cases”, but a formal investigation can take up to a year. This is a very long time.

>> Related Post: The plans in the Renters’ Rights Bill for the PRS Landlord Ombudsman

4. The implied right for tenants to have pets

The Bill introduces an implied term into tenancy agreements for tenants to be able to keep a pet if they ask in accordance with the process, and the landlord can’t refuse unless they have reasonable grounds to turn down the request.

I’m a pet friendly landlord and allow reasonable pets in my properties. This includes small dogs, cats and hamsters so far! I’ve not had any trouble, but I have a Pet Policy and take steps to mitigate risks.

We haven’t yet seen the guidance, but I expect reasonable grounds for landlords to refuse a pet would include an HMO, where the landlord or their family has a pet allergy, where the pet or number of pets aren’t suitable for the property, or if there are concerns about pet welfare, eg a dog left at home all day while the tenants are out at work.

>> Related Post: How to reduce the risk of pet damage

Key areas where the Renters’ Rights Bill is not fairly balanced

Here are the areas where I believe the Renters’ Rights Bill goes too far, and isn’t fair for landlords.

1. Unfair changes to rent increase process

The Renters’ Rights Bill makes it compulsory for landlords to use the Section 13 statutory procedure to increase rent, and the notice period doubles from one month to two.

As is the case at present, tenants will be able to challenge the rent increase at the First-tier Tribunal (FTT) by using the process under Section 14 of the Housing Act.

Currently, the tribunal decides on the market rent for the property, and the rent increase is backdated to the date specified in the notice (unless it would cause “undue hardship” to the tenant, where the FTT has the power to delay the rent increase to the date of their “determination” (decision).

However, under the new rules, if the tenant challenges the rent increase, it won’t come into effect until the first date rent is due after the date of the FTT determination, and the tribunal will have the power to delay the increase for a further two months.

While the Renters (Reform) Bill was in Committee, Matthew Pennycook (then Shadow Housing Minister) referred to challenges in the FTT of rent increases as being “vanishingly rare”.

Despite the fact there are few cases in the FTT at present, research from the NRLA shows that the average wait time from application to hearing is currently around 18 weeks. Where the FTT decides they need to inspect the property, the average wait times increase to 27 weeks.

As a challenge of s13 rent increase notice will delay the rent increase, and the process is free for tenants, they will have every reason to challenge even the most reasonable of rent increases. For instance, an increase of CPIH that will result in a rent that is less than market value.

With an increase in the FTT’s workload inevitable, it is highly likely the wait times will increase further.

In the Guidance, MHCLG justify this change by saying they wish to “ensure tenants are not unexpectedly thrust into debt”.

However, it doesn’t take into effect that the rent increase will be legally justifiable, and not above the market rent, otherwise the FTT would have reduced the rent. It won’t be “unexpected”, as tenants will have had two months’ notice of the rent increase, and more if they refer it to the FTT.

David Smith of JMW solicitors describes this as “rent suppression”. Falling short of rent control, it will nevertheless “slow down the process of rent increase dramatically” as it will suppress in-tenancy rent increases.

I believe that the changes to s14 do not create a “level playing field”, but unfairly delay the ability of a landlord to make a reasonable increase to the rent. This is likely to be exacerbated by delays at the FTT. (I hope the FTT is planning to expand capacity).

>> Related Post: The new rules about rent in the Renters’ Rights Bill

2. Changes to ground 8 serious rent arrears are not fair

In the King’s Speech briefing notes, the government said that landlords “must enjoy robust grounds for possession where there is good reason to take their property back”.

As we know, Section 21 “no fault evictions” will be abolished. I don’t have a problem with that. However, one of the key reasons why landlords use s21 to evict tenants is because of rent arrears.

As well as abolishing Section 21, the Renters’ Rights Bill is making it harder for landlords to evict tenants who are in rent arrears. Not only is the notice period doubling from 2 to 4 weeks, but the tenant will need to be three months in arrears, and not two months as at present.

Data from the Ministry of Justice published in August 2024 shows that the median average time from claim to landlord repossession in the period April to June 2024 increased to 25.4 weeks, up from 22.1 weeks in the same period in 2023.

It may therefore take up to a year to evict a tenant for rent arrears, and increasing the time by 6 weeks (2 weeks extra notice and another month’s rent arrears) makes it even harder for landlords, despite rent arrears being a valid ground for eviction.

This is another area where the Rights Bill goes too far, and tilts the playing field or the scales, whatever the metaphor, in favour of the tenant.

>> Related Post: Guide to using Section 8 Grounds for Possession in Renters’ Rights Bill

3. No minimum term

One of the good amendments at the Report Stage of the Renters (Reform) Bill was the introduction of a requirement for a tenant to be in a property for 4 months before they could serve 2 months’ notice to quit, effectively creating a 6 month minimum term.

This avoided tenants using the property as “Airbnb light”, and enabled landlords to recoup their letting costs with six months’ rent. It also enabled tenants to move on if they were unhappy with the property, and didn’t tie them in.

I believe that it would be fairer to have a minimum term of 6 months for a tenancy.

4. Increased costs for landlords

The Renters’ Rights Bill directly introduces more costs for landlords, with compulsory membership of the Ombudsman and individual and property registration on the PRS Database.

There will also be other increases in costs for landlords:

• It will cost more for landlords to use Section 8 than Section 21, and obtain an order for possession, as they will need to take legal advice and prepare a more complex claim.
• Rent guarantee insurance will become more expensive as it will be harder and costlier to evict tenants.
• Mortgage companies and other lenders will need price in the extra costs of obtaining an order for possession when assessing the risk of lending. This may increase borrowing costs for landlords.

The Impact Assessment for the Renters (Reform) Bill said “overall, the average annual cost to landlords over the ten year appraisal will be £17 per rented property”.

I would be very surprised if the direct increased costs per property are so low, let alone the indirect costs. I’ll update this post when the Impact Assessment for the Renters’ Rights Bill is published.

Whereas many landlords were able to mitigate the impact of the Tenant Fees Act 2019 by moving from letting agents to online platforms like OpenRent to find tenants, landlords will either need to absorb the costs themselves, or pass them onto tenants through increases in rent.

Where the Renters’ Rights Bill may make tenants worse off

There are several aspects of the Bill that I believe will end up being bad for tenants. These include:

1. Abolition of fixed terms for student lets

The abolition of fixed term tenancies will make life very difficult for landlords and tenants alike, who at present let on the basis of an academic year.

With the end of fixed term tenancies, a significant number of students will serve a notice to quit so they can leave after their exams finish in May.

This means that landlords are likely to increase the monthly rent for the period September to May, as their costs will increase (they will have council tax and unoccupied insurance to pay when properties are empty, but their revenue would be for 9 months instead of 11 or 12.

Landlords won’t be able to obtain possession of their properties ahead of a new academic year under the new Ground 4A, unless the property is an HMO and students are full-time.

Landlords may decide to rent by the room, instead of a joint tenancy, and this won’t reduce rents for students either. Increased costs will be passed on to students.

As a result of these changes, many landlords are likely to either stop letting to students, or increase the monthly rent.

Finally, given that landlords will soon be signing up students for the 2025-26 academic year, it’s not clear what the transition rules will be, particularly if the new tenancy system comes into place before the existing tenancies end and the next set of tenancies start.

2. Removing fixed term tenancies

Many tenants like the security of a fixed term tenancy.

When the initial fixed term expires, I give my tenants the option of letting it roll onto a periodic tenancy or entering another fixed term. 50% choose to have a fixed term tenancy, as they like to know that I will not be able to sell up or decide for whatever reason to terminate the tenancy. (Even though I assure them that I have no plans to sell).

As landlords will be able to obtain an order for possession at any time after the first 12 months of a tenancy if they wish to sell up, tenants will paradoxically have less security than they do if they are on fixed term tenancies at present.

3. Tenants with imperfect credit history will find it hard to rent

With the abolition of Section 21, the changes to Ground 8 (serious rent arrears), and the expected increases in the premiums for rent guarantee insurance, landlords are going to become extremely conservative when they select tenants.

Will landlords be able to ask for rent to be paid in advance?

One way that landlords can mitigate the risk of tenants without a good credit history is by asking for rent to be paid in advance as an upfront sum.

However, it’s not clear whether or not the Bill prohibits landlords from taking rent upfront.

David Smith says in his blog post will be “impossible to take rent for any period longer than one month”, although any shorter period is permissible”. Angela Rayner said in the Second Reading debate: “This Bill will protect tenants from requests for large amounts of rent in advance”.

On the other hand, Polly Neate from Shelter disagrees, and has said there is nothing in the Bill “to prevent landlords from demanding tenants either cough up huge sums of rent up front or hit the road”.

The Bill doesn’t state in words of one syllable that landlords can’t take upfront payments.

David Smith argues it’s implicit because the rental period needs to be no more than one month, but neither the Guidance or the Explanatory Notes say that landlords can’t take rent up front (ie when tenants pay for 6 rental periods at the same time).

In fact, Clause 9 says that if a “person who paid rent in advance as a tenant under an assured tenancy is entitled to be repaid any part of that rent that relates to days falling after the end of the tenancy”.

Certainly, if advance payments of rent are to be prohibited, guidance needs to be very clear on this.

The impact on tenants

The impact of all of these changes is that applicants with an imperfect or no credit history, foreign students, and those without a steady job will find it harder to find a landlord who will be prepared to rent to them.

It also means that students won’t be able to stagger their rent payments to match when they receive their funding.

4. Rental bidding rules will push up asking rents

Landlords will not be able to accept offers of rent that are above the proposed rent stated in the listing or other offer.

This means that landlords may advertise a property at a higher amount than they would ordinarily, in the expectation that tenants will bid below the proposed rent.

5. Less flexibility and mobility

A knock-on effect of longer notices to quit (two months instead of one) is that it will take longer for tenants to be able to move properties.

They’ll either need to serve notice and hope they find something in time to coincide with their departure date, or wait to find something and then serve notice, and have a long period of overlap if their current landlord does not release them before the two months’ notice expires.

This will increase the time it will take for renters to move, reducing their flexibility and mobility.

Why summer 2025 is too soon for a “big bang” start date of Renters’ Rights Bill

The Renters’ Rights Bill will make significant changes to the way landlords let properties to tenants, and Matthew Pennycook has said he hopes it will come into force for both new and existing tenancies at the same time “by Summer 2025”.

Assuming the Bill receives Royal Assent in January or February 2024, there won’t be much time to get ready for the implementation by Summer 2025:

• Regulations will need to be published and studied.
• Guidance will need publishing that makes the terms of what the Renters’ Rights Act clear. There are many things that are not 100% clear at the moment (eg can landlords take rent in advance, what will the transition arrangements be for student HMOs in Summer 2025 as it’s not clear how it will work, does the tenant’s notice to quit have to expire at the end of a rental period? )
• Landlords and letting agents will need to have training on the new rules.
• Landlords / letting agents will need to explain the changes to their tenants.
• New tenancy agreements will need to be drafted and implemented.
• Processes will need updating.

It’s a lot to do in a short period of time. Given the increase in the number of offences, there will be a lot at stake for landlords and letting agents.

It will be particularly tricky for student tenancies starting for the 2025-26 academic year. See David Smith’s post: Student Tenancies, Renters’ Rights, and the Challenge of Commencement.

We need a reasonable transition period to enable the private rented sector to move onto the new tenancy system in an orderly fashion.

>> Related Post: Renters’ Rights timetable: What happens when?

What the Renters’ Rights Bill does not address

1. Regulation of letting agents

Even though letting agents will be subject to a few new obligations, non-compliance of which may result in fines (eg not checking both the landlord and the property have valid database entries), the Bill does nothing to improve professionalism among letting agents.

Many landlords will be reliant on the advice of their letting agent when it comes to compliance with the Renters’ Rights Act. However, there are no minimum qualifications and continuing professional development / training, no register and no single, mandatory and legally enforceable code of practice for letting agents.

Landlords will have to take it on trust that their letting agents actually understand the ins and outs of the new regime. Given the large fines and changes to Rent Repayment Orders, this leaves landlords in a precarious position if they leave it to their agents.

If the government truly wants to improve standards in the PRS, they need to properly regulate letting agents by implementing the recommendations of working group into the Regulation of Property Agents, chaired by Lord Best.

It’s the Wild West out there…

>> Related Post: Why and how landlords must manage letting agents

2. Court delays and court reform

The Guidance to the Bill refers to MHCLG working with the Judiciary, the Ministry of Justice and HM Courts and Tribunals Service to “ensure that the county court is prepared for the changes to the tenancy system”.

It also says they will “work towards digitising the possession process”, whatever that means.

There is nothing concrete in the Bill or in other announcements about what will happen and when it will happen.

Given the long delays at present discussed above at both the county court level and the First-tier Tribunals, the Bill does not give any real comfort to landlords that they won’t end up losing money because of court delays.

The courts and tribunals are “essential services” that landlords are legally obliged to depend on. The government really does need to address the court and tribunal delays if they genuinely wish to deliver the “sustainable private rented sector that works all round” that Matthew Pennycook promised in his article in the Daily Telegraph.

3. EPCs

The apparent requirement for landlords to upgrade rental properties to an EPC C (still officially unconfirmed), is a sword of Damocles over the heads of many landlords. Although it’s outside the scope of the Bill, it’s an issue that many landlords are concerned about.

The sooner the government clarifies its plans for EPCs, and the support available to landlords where the investment required would not be economically viable, the better.

>> Related Post: EPCs and the government’s plans to improve energy efficiency in the PRS

Final thoughts

The Renters’ Rights Bill will undoubtedly lead to a more professionalised approach by landlords, which is something I support.

“Professionalised” is a mindset, and can include a landlord with one property, as well as the big build to rent corporates. It’s about learning about the obligations of a landlord, taking them seriously, and following the spirit and intent of the law. Being a good landlord.

Often the accidental landlord is characterised as not being compliant and not having a professional approach. However, in my experience, it’s commonly landlords with large portfolios who aren’t professional in the way they run their businesses.

I have direct experience of viewing properties up for sale by large landlords, who they haven’t covered the basics eg an unsatisfactory EICR, a boiler that had never been serviced, front door locks that don’t work properly, and general all-round grottiness. It is right that the Bill will make it easier for local authorities to check whether rental properties in their patch are compliant.

However, landlords leave compliance to letting agents at their peril. There is no such thing as “let and forget”. The buck stops with landlords, as Labour MP Jas Athwal found out.

All landlords need to take the Bill seriously, and make sure they understand their new obligations.

This is where belonging to a landlord association or subscription service is indispensable, even (or perhaps particularly) for landlords who use letting agents. I recommend the NRLA (use the code SSAFF15 to get. a £15 discount), the Guild of Residential Landlords, and Landlord Law (use the code RW75ZK3R to get a 20% discount).

I hope that the government will give landlords enough time to learn about the new rules and make the transition to the new tenancy system. I also hope the courts are improved so that landlords can recover possession and increase rents promptly.

Finally, I hope that the government addresses the places where the Bill goes too far, so that the Bill is genuinely fair to both landlords and tenants, and delivers the promised “level playing field”.

>> Related Post: The 12 key provisions in the Renters’ Rights Bill

>> Related Post: How the Renters’ Rights Bill differs from the Renters (Reform) Bill