As To Let landlords, you’re probably aware that the UK housing market could be on the cusp of some big changes with the proposed Renter’s Reform Bill. Hailed by the government as a “once-in-a-generation overhaul of housing laws”, this new bill seeks to make sweeping reforms in areas such as rental prices and tenancy rights. Big changes are sure to have a drastic impact on England’s 2.3 million private landlords like yourself. But what exactly will these reforms mean for your business? And are those calling it ‘pro-tenant’ or ‘anti-landlord’ right? Is it likely to have landlords fleeing the market and further exacerbate the shortage of privately rented homes? With an average of 40 applications for rental homes coming onto the market already, will the gap widen further?
In this blog post, we’ll explore how the upcoming Renter’s Reform Bill may affect by-to-let landlords – ultimately helping you to make informed decisions about your UK property investment future.
What is the Renters’ Reform Bill?
The overall focus of the Renters’ Reform Bill is improving the standard of privately rented homes and giving England’s 11million renters clearer rights. It includes regulations to ensure that tenants have a comfortable place to live and that criminal landlords are prosecuted. It also includes legislation to assist landlords in evicting problem tenants and to make sure both landlords and tenants are aware of their rights. Forming part of the government’s ‘Levelling-Up’ initiative, the Renters’ Reform Bill follows on from the ‘A fairer private rented sector’ whitepaper and promises to provide greater protection for renters in England and Wales. It aims to empower the 1.6 million people living in dangerously low-quality homes, in a state of disrepair, with cold, damp, and mould, and without functioning bathrooms and kitchens are able to access better living standards without fear of repercussions.
The bill is a step change in protections for renters and will help ensure that tenants are not unfairly evicted from their homes.
What are the key changes proposed in the Renters’ Reform Bill?
- Abolishing “no fault” evictions by getting rid of section 21 and providing tenants with more security and power to challenge unfair rent increases and poor practises.
- Introducing more possession grounds for landlords, so they can regain their property in various situations, including when they want to sell their property, move in close family, or in cases of anti-social behaviour and rent arrears.
- Providing stronger protections against backdoor eviction, including an option for tenants to appeal excessively above-market rent to an independent tribunal.
- Introducing a new Private Rented Sector Ombudsman to provide fair, impartial, and binding resolution to many issues and avoid costly court procedures.
- Creating a Privately Rented Property Portal to assist both landlords and tenants in understanding their legal obligations and rights.
- Giving tenants the right to request a pet in the property that landlords must consider and cannot unreasonably refuse, while also allowing landlords to require pet insurance to cover any damage to their property.
When will the Renters’ Reform Bill Become Law?
It is important to note that the Renter’s Reform Bill is not legislation yet. Having had its first reading at Parliament on Wednesday 17th May 2023, the bill still needs to pass through a number of stages before it becomes an ‘act and thus law.
Important stages of a bill becoming a law in the UK Parliament:
- First Reading:
- Official stage where the bill is announced and published
- No discussion or amendments possible
- Second Reading:
- First debate stage
- Details of the bill cannot be changed
- “Reasoned amendment” can be tabled opposing the bill
- Bill approved or defeated
- Defeat at second reading is rare for government bills
- Programme Motion: Timetable for remaining stages approved after vote on second reading
- Committee Stage:
The longest and most thorough scrutiny stage where public bill committees conduct clause-by-clause scrutiny and take oral evidence from key stakeholders.
- Report (Consideration) Stage:
MPs propose amendments or new clauses to the bill. The Speaker decides which ones are discussed and voted on.
- Third Reading: A final opportunity to debate the bill, involves speeches by MPs and ministers, and ends with a vote to approve the third reading of the bill.
Once the Renters’ Reform Bill has passed through the House of Commons, it is passed to the House of Lords.
The House of Lords works similarly to the House of Commons in terms of bill stages. However, there are some key differences that set it apart:
- The Lords has no time limit on debates since it’s self-regulating.
- During the committee stage, the bill is usually debated on the floor of the House. All members can participate, and amendments are rare.
- At the third reading, the bill can be amended only if the amendments focus on something that hasn’t been voted on before.
- If a Commons bill gets rejected by the Lords, it falls. However, if an identical bill is passed in the next parliamentary session, it can receive royal assent without going to the Lords.
- After consideration, the bill is either sent back to the Commons or forwarded to the Lords, depending on which House last received it. The “ping pong” process continues until both Houses agree. If a deadlock occurs, the bill falls.
- The final stage is royal assent when the monarch approves the bill to become an act of parliament.
Because the House of Lords has no set time limit for debate, it is difficult to predict exactly when the bill will be passed. It is is also important to note that the proposals are subject to change throughout the process.
Is the Renters’ Reform Bill bad for buy to let landlords?
Is abolishing Section 21 bad for landlords?
The Renters’ Reform Bill has sparked controversy over the proposed removal of no-fault evictions, specifically Section 21. While landlords express concern, it’s worth examining the potential benefits of this change. Section 21 has been abused by some landlords, making it a contentious issue.
The proposed reforms aim to create a fairer system for both landlords and tenants. If passed, tenancies will only end when the tenant chooses to leave or the landlord has valid grounds for possession.
This will lead many landlords to question:
- What counts as a valid reason to possess my house?
If you plan to sell your house (after 6 months of tenancy) or for you or a close family member to move in, you can still give a tenant notice.
- Does that mean that I am stuck with problem tenants?
Thousands of landlords use Section 21 yearly to avoid the more lengthy and costly Section 8 eviction process. With it taking up to twelve months to deal with non-payment of rent, it is easy to see why. This bill proposes to ‘beef up’ the Section 8 process to make it easier to evict problem tenants. Streamlining the eviction process, the new Bill proposes introducing more comprehensive possession grounds for landlords. In case of a legal grounding, this bill aims to make it easier for landlords to repossess their property, including proposing a mandatory ground for repeated serious arrears to hold tenants accountable. Thus, rather than removing the safety net for landlords, the bill proposes strengthening the one that they should be using instead.
Are periodic tenancies a problem for landlords?
The bill also advocates for a single system of periodic tenancies. Rather than signing an agreement for 6 months or a year, tenants will be able to give 2 months notice at any time during their tenancy.
Whilst landlords may be concerned that this will lead to increased effort and costr coming from frequently re-letting a property it’s worth thinking: would you prefer a stable home or to move around every few months and never feel settled? Moving out of a rented home is inconvenient and expensive for tenants too, therefore they are likely to stay a minimum of 6-12 months unless they have a compelling reason to leave earlier.
Should landlords be concerned about tenants having the right to request a pet?
Being put off by the idea of stained carpets, chewed skirting boards and animal smells is perfectly understandable, so it is easy to see why not being able to unreasonably refuse pets is a cause for concern. However, the operative word here is ‘unreasonably’. The bill stipulates that landlords are able to stipulate an enhanced deposit or that the tenant has specialist insurance to cover pet damages.
Is introducing a new Private Rented Sector Ombudsman positive for landlords?
The introduction of a new Private Rented Sector Ombudsman is a positive step for landlords in the UK. The ombudsman will provide an independent and impartial service to tenants and landlords, helping to resolve disputes quickly and efficiently. It will also aim to tackle the root cause of problems, rather than simply dealing with individual complaints. This should help to reduce the number of disputes that arise in the first place, saving both time and money for landlords. Furthermore, membership of the ombudsman service is compulsory for all housing associations and local authorities, meaning that landlords have access to a free and reliable source of advice when needed.
Is creating a Privately Rented Property Portal good for landlords?
Creating a privately rented property portal will make it much easier for landlords to access relevant guidance and information in one place. Providing landlords with an easy-to-use ‘front door’ to access all the necessary information they need could improve their awareness of their obligations and be a conduit for communicating changes, as well as providing tenants with performance information on landlords, ensuring that quality landlords are recognised.
Should buy to let landlords be concerned about the Renters’ Reform Bill?
In conclusion, the Renters’ Reform Bill has the potential to bring about significant changes to the rental market in the UK, and it is natural for buy-to-let landlords to have concerns about its impact on their business. While these concerns about the Renters’ Reform Bill are understandable, it is important to recognise that the proposed changes aim to strike a balance between tenant protection and landlord rights. By enhancing the eviction process, providing clearer guidelines, and promoting fair practices, the bill seeks to improve the rental market for both parties.
However, due to the unfinished nature of the bill, it is light on the much-needed detail. Will the changes to section 8 be robust enough for landlords to evict difficult tenants? Will there be other additions as it moves through the legislative process? At this point it is hard to tell.
We expect amateur and uneducated landlords to baulk at the reforms and flee the market, providing a lucrative opportunity for astute investors. UK wide rent already increased an average of 11.5% in 2022, with forecast even higher rent increases in 2023. This legislation will ensure higher rent increases in future.
As the bill progresses through Parliament, it is crucial for buy-to-let landlords to stay informed, engage in the legislative process, and adapt their business strategies accordingly.
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