The Renters (Reform) Bill – Tenant’s rights, a continued attack on Landlords, can we not achieve a fair balance?

Only a Bill, not yet an Act of Parliament (Law), it may be radically changed in debate or indeed face opposition and never see the light of day.

What’s been proposed in the Renters Reform Bill?

• Getting rid of Assured Shorthold Tenancies and, more controversially, Section 21 (the ability to remove a tenant without wrongdoing) deemed to some as a fundamental property right.
• All tenancies will become periodic – any reference to a ‘term certain’ is to be disregarded.
• Introduction of a new ground for possession under the Section 8 route; a new mandatory ground for repeated serious arrears making eviction mandatory, but only where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears balance at the hearing; a new ground meaning that a landlord can apply section 8 to a tenancy if they wish to sell a property, or if they wish to allow their family members to move into a rental property.
• The notice period for rent reviews is to be doubled from 1 to 2 months.
• It will be unlawful to ban renting to families with children, pets (consent not to be unreasonably refused) and those in receipt of benefits.
• A new ombudsman who would have powers to compel an apology, provide information, take remedial action and/or pay compensation of up to £25,000. It is also intended that the ombudsman be able to require landlords to reimburse rent to tenants where the “service of standard of property they provide fall short of mark”. The ombudsman’s decision will be binding on landlords. Should the complainant accept the final determination, failure to comply may result in repeat or serious offenders being liable for a Banning Order. Landlord’s membership of the ombudsman scheme would be mandatory.
• A new digital Property Portal would be introduced to help landlords understand and demonstrate regulatory compliance with their legal obligations. It is proposed that landlords will be legally required to register rental properties on the portal.

Commentary

Landlords may certainly feel a continued attack; could this perceived overregulation just make life worse for tenants, or in debate can the right balance be struck?  This Bill comes after the Tenancy Fees Act 2019, which regulates the fees that can and cannot be charged to Tenants and imposed a ceiling on the value of tenancy deposits. More controversially, this followed the inability to offset Buy-to-Let mortgage interests against rental income – the only type of business where you cannot offset the full cost of interest against the income from business. Moreover, following the introduction of the GDPR, landlords must register and pay an annual fee to the ICO in order to deal with the personal information of prospective and eventual tenants.

When Thatcher opened the market up in the 1980s, it grew impressively, providing plenty of housing stock. What had happened before was that increasing regulation meant that people left the private rental market because they could not get their properties back – the fundamental right to property had been undermined. This meant that those who wanted to rent found that there were no properties available, or of the property that was available, it would be at high prices. This is why perhaps the most controversial part of this bill is getting rid of S.21 (the ability to remove a tenant without wrongdoing). That of course is the fundamental heart of a proprietary right – “it is my property and therefore I am entitled to have it back by giving reasonable notice (2 months in case of an Assured Shorthold Tenancy), when I want”. This ensures that there is a regular supply of property and balances supply and demand. I should add that nobody is compelled to enter into a tenancy agreement, neither landlord nor tenant, therefore if it does not seem fair then landlords may not make contracts available.

The ‘my property’ concept applies not only to the proposed abolishment of S.21 (the ability to get your own property back) but it also relates to issues such as pets – that if you own a property, surely it is up to you to decide whether to have pets or not.  If pets are going into properties, then landlords may reasonably insist on insurance to cover the costs of damage or extra cleaning involved, again making it more expensive for tenants. The Bill seems to fail to address the real problem which is that not enough houses have been built.

All that this Bill, in its current form, may achieve is to continue to disincentivise landlords, decrease supply, which in turn pushes up rental prices, making life difficult for tenants.

If we go down this route rather than making it easier for landlords to increase supply, then we will find that we have fewer rental properties, a less mobile work force and a lower ability for people to move where jobs are.

More regulation should come with incentives for landlords to ensure availability of property and fund the requirements of the regulation. The Bill’s proposal of an ombudsman, digital portal, new S.8 grounds (but no substitute for a Section 21) and increased notice period of rent increases are all helpful and will increase the quality of rented property, so long as they are designed not to overburden landlords who are already having to manoeuvre a stressful minefield of obstacles and endless costs with little prospect of making a living.

By Arman Khosravi 17th May 2023