Biggest change in the lettings sector for 10 years….
After nearly 3 years since the queen mentioned the rental reform bill in her speech in 2019 the government finally released their white paper: A Fairer Private Rented Sector
There is still lots of grey area, however here I have summarised the highlights
Fixed term contracts are DEAD!
1) There will no longer be fixed term contracts. All contracts will be periodic from the start and run month to month. Action will have to be taken to end the tenancy either by the tenant or the landlord. The tenant will have to give a 2-month notice informing the landlord they will like to end their tenancy and do not have to give a reason why. The tenant can give notice from the day they move in, there will be no minimum period before the tenant can give notice whereas a landlord will have to wait 6 months before giving their 2 months’ notice. Additionally, the landlord will have to give a specific reason why they want to end the tenancy which brings us to point 2
No fault evictions are DEAD!
2) No more no-fault evictions, meaning unlike now where the landlord can issue a section 21 notice asking for the tenant to vacate his/her property without providing a reason will no longer be possible. The landlord will have to give a specific reason of why he wishes to end the tenancy, a bit like the current section 8 with reasons such as, wanting to move in a family member into the property or wanting to sell the property. There will also be new reasons available to the landlord such as anti-social behaviour. Rent arrears, although not new will be adjusted where if the tenant has owed more than 2 months rent 3 times in the last 3 years the court will have to issue possession even if at the time no rent is outstanding.
Annual rent increases only
3) Rent increases will be limited to once a year, where the landlord will have to give 2 months notice and the increase cannot be excessive. We don’t know what excessive means, but the tenant will have a right to challenge the rent increase if they deem it to be excessive. Good news is that the government ruled out any rent controls.
More paper work…
4) There will be more compliance, right now all agents must be part of an ombudsman scheme, but now landlords not using agents will also have to be signed up with an ombudsman scheme in order to rent their property. Additionally all the current compliance documents such as gas and electric certificates will have to be centrally uploaded for everyone to access and view such as the local council and possibly new tenants.
5) Consent for pets, landlords will no longer be able to be unreasonable withhold consent for not having pets. What is unreasonable is not clear but the tenant will be able to request to have a pet. The landlord can still decide before the let if they want to rent to someone with a pet or not, but once the tenant moves in and request to have a pet the landlord must be reasonable. The landlord can also ask the tenant to pay for pet insurance that covers any damage caused by pets in the house that he/she, or the tenant can claim against should such a scenario arise.
What do I think….
I strongly believe in reform and feel that it is way overdue however there are somethings in the paper that concern me:
Short lets and uncertainty…
A) All contracts being periodic: We feel this can be beneficial and give both the tenant and landlord flexibility. Most of our contracts are periodic after the initial fixed period ends. Tenants and landlords have to give 2 months notice which is plenty of time for either party to prepare to move on. However the tenant being able to give 2 months’ notice at any time, even on day 1 seems unfair for the landlord and gives the tenant a chance to do short lets. The landlord will have no certainty of how long the tenant will stay and if the tenant does leave after 2-3 months the landlord will have to go through all the cost and effort to re-let the property. We feel the tenant also should not be able to give notice until 6 months have passed.
I want my house back…
B) No-fault evictions: Although right now landlords majority of the time have a reason to evict a tenant, they all take the non-fault eviction route as it is quicker and simpler with a guaranteed outcome. Using the current section 8 with a specific reason can get very complicated and expensive due to extra legal fees with the outcome not being guaranteed as the onus is on the landlord to prove the tenant is in the wrong. We agree tenants should not be evicted for no reason, but if a landlord cannot evict a tenant without having to go through a long and expensive process it will put of further investment in the industry, and we will lose more landlords resulting in lesser rental properties and increased rent which doesn’t help tenants. There are talks that the courts will also be reformed but if this is not done there will be a lot of issues and investors will simple look in other industries to invest in. The way courts deal with evictions must be reformed in alignment with these new rules.
When is this all taking place?
Right now it is just a white paper and has not been introduced to the parliament yet. Once introduced there will be many readings and the details can change drastically. Once the final version has been agreed and approved by parliament we will be given 6 months’ notice before all new tenancies have to meet the new rules. A second date will then be given as to when all existing tenancies will have to meet new requirements, so we are some way away from the any changes taking place.
As always, the government has told us what we won’t be able to do, but not what we can do. However as a professional lettings agent and a landlord myself, I am not concerned, I have read and heard landlords saying it is the end of the private rental sector... this is all hype, I don't see anything in the paper to suggest all private landlords should abandon ship and sell all their investment property. The general direction set by the government seems right but how we going to get there seems a bit messy at the moment and most importantly this is a long way away hence we have plenty of time to prepare and adapt.
I will keep you posted on any substantial updates….