Update on the Renters’ Rights Bill: Key Changes and Implications for Landlords and Tenants

The Renters’ Rights Bill was published on 11 September 2024, and had its second reading in Parliament on 9 October 2024. This Bill was introduced by the government following the abandonment of previous efforts to reform the residential rental market under the former Renters’ (Reform) Bill by the Conservative government. Unlike a mere rebranding, the Renters’ Rights Bill signifies enhanced protections for tenants. While it shares many similarities with its predecessor, several notable differences have emerged since its publication, including increased civil and criminal penalties for landlords who do not promptly comply with the new regulations.

Key Features of the Renters’ Rights Bill

  1. Abolition of Assured Shorthold Tenancies (ASTs): This pivotal change will eliminate fixed-term tenancies, transitioning to a model that offers tenants greater flexibility. Under the new framework, tenants will enter into month-to-month tenancies, which will afford them more security and predictability.
  2. New Grounds for Possession: While landlords are set to lose the s.21 no fault eviction option, they will still retain s.8 rights to seek possession. The specific grounds for doing so will be redefined and expanded.
  3. Statutory Rent Increase Procedures: The Bill stipulates clear procedures governing how and when landlords may increase rent.
  4. Right to Keep a Pet: The Bill provides tenants with the right to request permission to keep pets in their homes. This permission cannot be unreasonably withheld, save for circumstances where a superior landlord or beneficiary of a restrictive covenant so require.
  5. Anti-Discrimination Measures: Landlords will be explicitly prohibited from discriminating against tenants based on their benefits status or family composition.
  6. Ombudsman and Redress Scheme Requirements: Landlords will be mandated to comply with a structured complaint resolution process with penalties for non-compliance. A new private rented sector landlord ombudsman will be established.
  7. Increased Penalties for Breaches of Eviction Protections: The Bill will impose stiffer penalties for landlords who fail to comply with their statutory obligations.
  8. Ban on Bidding Wars: Landlords and their agents will no longer able to market properties with the intention of accepting offers above the listed rental price. They will be obligated to accept offers no higher than the list price.
  9. New Private Rented Sector Database: It will be compulsory for all landlords to register with a new landlord database prior to marketing properties for let. Failure to register can result in fines and will also prohibit landlords form seeking possession under s.8.

What is changing in the Bill:

The “No Fault” Evictions Ban:

One of the most impactful changes in the Renters’ Rights Bill is the abolition of the s.21 so called “no fault” eviction route. The current legislation allows landlords to serve a s.21 notice to bring a tenancy to an end without needing to specify a reason. Landlords currently only need to give tenants 2 months’ notice to bring a tenancy to an end on expiry of a fixed term tenancy or give two months’ notice to end a monthly periodic tenancy. Landlords have used such notices in order both to gain possession of their properties and to secure increases in rent.

The Bill, as currently drafted, proposes the repeal of section 21 of the Housing Act 1988 in its entirety and will convert all existing fixed term tenancies to periodic tenancies. This means landlords will no longer be able to serve termination notices without relying on specified statutory grounds. However, the proposed changes will not prevent a tenant from giving a landlord 2 months’ notice to vacate..

Although the abolition of fixed term tenancies will result in properties being occupied pursuant to monthly period tenancies, tenants will benefit from an initial 12-month period where the landlord cannot terminate the tenancy.. Even after the 12-month period, where landlords are not relying on any breaches of tenant obligations, landlords will have to give a minimum of 4 months’ notice (rather than the current 2 months’ notice) and will need to rely on a ground under s.8 of the Bill when serving the notice.

Expanded Grounds for Possession Under s.8

Whilst “no fault” evictions will be abolished, the Bill introduces several new grounds into s.8 and Schedule 2 of the Housing Act 1988 that landlords can utilise to seek possession of a property. These changes include:

  1. New Ground 1 – Possession for Use: This ground will allow landlords to reclaim their property for personal use, with relaxed requirements. Currently, landlords / spouses have to have lived in the property as their principal residence and have to provide notice that they may wish to rely on this ground prior to the commencement of a tenancy. The new proposals in the Bill will eliminate the requirement for prior notice and expand the right to possession so that landlords can rely on intended occupation by family members.. However, landlords must still give four months’ notice of their intent to possess the property and the notice must expire after the tenancy has been in place for at least 12 months.
  2. New Ground 1A – Possession to Sell the Property: Landlords will potentially be able to obtain possession if they intend to sell the property or grant a long lease of the property (for a term of 21 years or more). The landlord would need to give the tenant four months’ notice which cannot expire within the first 12 months of the tenancy..
  3. Amended Ground 6 – Property Development: While this ground largely remains the same process as under current legislation, the amended ground will prohibit landlords from using this ground for eviction within the first six months of a tenancy. This adds an additional layer of protection for new tenants who might otherwise be at risk of eviction shortly after moving in.
  4. Amended Ground 8 – Rent Arrears: It is proposed that landlords will only be able to serve a valid s.8 notice if tenants are three months in arrears, an increase from the current two-month threshold. This means that landlords cannot pursue a mandatory possession order unless the tenant has consistently failed to pay rent for three months. Furthermore, any delays in Universal Credit payments cannot be counted toward the arrears calculation, providing further protections for vulnerable tenants.

Many notice periods will also be increased from 2 months’ notice to 4 months’ notice.

Additional Landlord Duties and Prohibitions

S.13 Duties / Prohibitions: Landlords and letting agents will have new statutory duties and will not be permitted to do any of the following without consequence:

  1. Purport to let a property for a fixed-term;
  2. Purport to end a tenancy by giving a notice to quit rather than a s.8 notice;
  3. Give notice orally (not in writing);
  4. Serve a s.8 notice which doesn’t comply with s.8 requirements and grounds of possession;
  5. Serve a s.8 notice specifying a ground to be relied upon without having a reasonable belief that the landlord will obtain possession based on that ground.; and,
  6. Following service of a section 8 notice relying on Ground 1 or 1A (for personal use or sale), landlords and/or agents will not for a period of 12 months be able to:
    1. let the property for a term of 21 years or less / market the property for letting for a term of 21 years or less
    2. grant a licence to occupy / market the property for a licence to occupy; or
    3. authorise anyone else to market the property for let or licence.

(Marketing is defined as advertising or telling people privately)

S.15 Financial Penalties and Offences: This section of the Bill will give new powers to local housing authorities to impose fines on both landlords and letting agents if the s.13 duties listed above are breached and any breach results in a tenant leaving the property within 4 months of the breach.  The initial penalty will be capped at £7,000 but this can be extended if there are continuing or persistent breaches.

A landlord will commit a criminal office if it serves a s.8 notice relying on grounds that the landlord does not reasonably believe will be successful (see above). Any landlord committing such an offence will be liable for a potentially unlimited fine on summary conviction in the Magistrates’ Court.

Other Penalties:

There will be new fines imposed by the local housing authorities under new powers provided in the Bill. Landlords who market properties for rent in the private rented sector (“PRS”) but who have failed to join the ombudsman service or who have failed to register on the PRS database will face an initial fine of £7,000, rising to up to £40,000 or even an unlimited fine if there is a criminal prosecution for continuing or persistent breaches.

Significantly, directors and shareholders of any company landlord or letting agent will also face personal liability for many of the fines, penalties and criminal offences.

Rent and Rent Bidding

Under the new s.55 provisions, Landlords will have a duty to state the rent and avoid rental bidding wars.

Landlords and letting agents will be prohibited from listing a property for rent without specifying the rent at the outset. They will also be prohibited from encouraging or accepting rent offered above the listed rent. There may be a £7k penalty for any landlord, letting agent or any shareholders and directors that are complicit in breaching s.55.

Rent Increases

S.7 of the Bill creates a new mechanism for increasing rent during the monthly periodic tenancy:

The proposal is that rents will only be reviewed annually and in accordance with the existing framework set out in s.13 Housing Act 1988 procedure (regardless of what the parties have contractually agreed). This means that rent review clauses will be, essentially, defunct.

S.8 – Procedure for challenging rent increases:

A landlord wanting to increase rent will need to serve a s.13 notice in the usual way, on the tenant after an initial12-month period expires.

If the tenant thinks that the proposed rent is excessive, they can make an application to the First Tier Tribunal for an assessment. The tribunal can then only impose the lower of either; a) the market rent or b) the increased rent proposed by the landlord.

There is no scope for the FTT to exercise discretion outside of this and so their assessment powers are limited.

Interestingly, this not only applies to the rent being increased during a tenancy but also applies to the initial rent. If a tenant believes that the rent being charged at the outset is too high, they are also able to refer it to the FTT for an assessment.

The FTT will also be given a new power to decide whether a s.13 notice is valid (they could not do so previously).

Additional Tenant Protections

The Renters’ Rights Bill introduces a variety of additional protections and responsibilities aimed at enhancing tenant security:

  1. Deposit Protection: Landlords will remain obligated to protect tenants’ deposits in a government-approved scheme. The Bill also stipulates that if a deposit is not protected at the outset of the tenancy, landlords may still serve a s.8 notice, provided the deposit is protected at the time the notice is served.
  2. Awaab’s Law: This significant provision will require landlords to investigate any reports of health hazards within 14 calendar days of being notified. If significant issues are identified, landlords must address them within 7 days, or within 24 hours if the issue poses an imminent danger. Landlords will also be required to provide alternative accommodation at their own expense if necessary.
  3. Decent Homes Standard: the current framework that governs social housing will be implied into tenancy contracts meaning that tenants will be able to bring breach of contract claims seeking damages if homes are not kept to a decent standard.

What Happens Next?

Although the Bill has only just gone through its second reading, commentators have suggested that it is likely to pass into law with very few material changes. The Bill is expected to become law by summer of 2025.

The effect of the Bill is yet to be seen but many private landlords are already looking to sell. Whilst this may be good news for first-time buyers as there may be more affordable housing on the market, it may also lead to a reduced supply of affordable rental property.

We are committed to guiding clients through these evolving legal landscapes, ensuring you are well-prepared for the changes ahead. If you have any questions or need further assistance regarding the Renters’ Rights Bill or general property law, please contact a member of our team.