This article is written by one of our team, Alessandra Pellecchia, who is a dual-qualified lawyer, specialising in Contentious Litigation, Regulatory and Internal Compliance. She has a personal interest in England and Wales property law.
On 16 June 2022 the Government published a white paper called, “A Fairer Private Rented Sector,” which covers the abolition of section 21 notices, change to rent review procedures, the introduction of a Decent Homes Standard, the right to keep pets, as well as proposals to improve dispute resolutions.
This has been described as the biggest shake up of the private rented sector so far. The intention of the paper is clearly to reset the tenant -landlord relationship.
The aim of this article is to discuss the impact of the important proposals on tenants and landlords.
Fixed term contracts are dead
Fixed term Assured Shorthold Tenancies (ASTs), usually having a length of 6 months or 12 months, do not exist anymore. There is no stated length to tenancies anymore and all the tenancies are periodic from the start with no defined end date. That means that somebody must take a defined action to end the tenancy.
What can that action will be?
For tenants they will just need to give two months notice at any time. For landlords…not quite the same situation. Landlords cannot end the tenancy for any reason within the first six months. Then, after the six months, they must give a specific reason to end the tenancy.
No fault evictions are also dead. The abolition of Section 21.
Previously it was possible to terminate a tenancy which was coming to an end for no reason. That is known as Section 21. According to the White paper it would be not possible to terminate the tenancy in such way, because there is no end so the only way as landlord to terminate the tenancy is to give a valid reason.
One of those reasons is that the landlord wants to move back into the property or move a family member in there. Another reason is the landlord wants to sell the property.
In these situations, the landlord can have the property back, but he needs to prove that these are the reasons. The situation becomes more complicated if the landlord needs to terminate the tenancy because of the tenants: there are reasons around anti-social behaviour and damaging the property but rent arrears has always been a problem as it could be difficult to prove in court that there are rent arrears.
So far, once the tenancy is coming to an end, the no-fault route would be used to regain the property back. According to the White paper the landlord would not be able to do so anymore. A new ground for eviction is being introduced which is around persistent rent arrears. So, if a tenant has been in at least two-months arrears, three times within three years, then that means the Court must grant the landlord possession, even if all those arrears have been cleared by the time the court date happens. This is an improvement but it still something that the landlords are going to be concerned about.
Rent and rent review
Contractual rent increases will no longer be permitted either, so there can be no index-linked or fixed uplifts. All rent increases will have to take effect by service of a statutory notice in accordance with section 13 of the Housing Act 1988. In practical terms, rent increases are being limited to once per year and the landlord must give two months notice of doing it. Tenants can challenge excessive rent increases.
But what is excessive? Not sure.
Tenants can go and challenge in a Tribunal if they wish. The good news is that the Government confirm in the white paper that they are not interested in implementing rent controls, so that means that the landlord can, at the start of the tenancy, set the rent at whatever they want.
There are going to be more compliance obligations. The first change is that all the landlords must join an ombudsman scheme. Currently all letting agents must be part of an ombudsman so if they do something wrong, tenants have got a route of recourse. However, if the rent is from a private landlord, tenants do not have that option.
That is because the requirement to join an ombudsman is coming through.
Information about properties must be listed on a new digital portal property portal. The idea is that things like gas safety certificates and electrical checks are uploaded centrally, where they can be viewed by local authorities and tenants.
Consent to keeping pets
Landlords cannot unreasonably withhold a consent for a tenant to get a pet.
What is reasonable and unreasonable? Unfortunately, also in this case there are no clear criteria to refer to.
Of course, at the start of a tenancy the landlord can choose whether he wants to rent to someone with pets or not. If the landlord chooses to rent to someone who has got a pet or wants a pet during a tenancy, he can insist on them taking out a pet insurance as a condition of the tenancy. It may be an extra burden on the tenants’ shoulders as they now consider the extra expenses and another criteria when they try to secure a rental property.
The first improvement to be considered would be regarding the ability of tenants to move in and immediately give notice and then move again two months later.
The tenants can effectively use a property for short-term accommodation and that will leave the landlords having to pay all the costs of setting up a tenancy over again.
It would be appropriate to set a minimum of six months term in the same way as there is for landlords, having more flexibility and having greater security.
The second point that landlords are concerned about is the impact on student lets. For student properties the landlord will often line up tenants for the next September earlier in the year, as it is known that the previous tenants will move out in June or July and that the tenancy has a defined end date.
However, according to the White Paper the previous tenants are not going to have an end date. They can say when they are thinking about moving out but, if they change their mind and decided to stay longer, they can do that, so it is going to be tricky to line up tenancy in advance.
Third and finally: the removal of no-faulty evictions. Previously this kind of eviction was often used in situations where there was actually a fault, but serving section 21 was just the quickest way to bring a tenancy to an end. Trying to prove fault requests a different court process with can take a very long time.
Court reform has been promised as part of this White Paper. If court are not reformed, and it does take a long time to get any kind of possession proceedings through, that is going to cause problem.
What does all this mean? What is going to happen?
Anyone who has been in property for long enough to remember the impact of the Rent Act 1957 will spot the clear dangers of this proposed legislation.
Although the circumstances and level of interference are less draconian, the 57 Act removed the ability of the landlord to obtain possession when required and resulted in an instant cessation of all new investment in the private rented sector. Of course, circumstances were different in 1957 and there were multiple instances of abuse of tenants, but the principle remains. Subsequent attempts to mitigate the effects on the private sector (Regulated tenancies, Fair rent etc) failed and it was not until the introduction of the AST with landlords able to regain possession, that investment in the sector took-off again.
Although it is proposed that landlords may recover possession in order to sell, there is clearly an onus of proof that may deter. The in order to re-occupy clause did not work with Regulated tenancies and seems unlikely to work now