We have reviewed the Renters (Reform) Bill ("the Bill") so you don't have to.
Landmark reforms to deliver a fairer private rented sector ("PRS") for Tenants or Landlord-bashing legislation? Many of the proposals clearly do have tenants in mind and will be largely welcomed. Others do appear ill-thought-out when viewed through the wider Living Sector institutional investment lens.
We have briefly set out the main thrust of the Bill and our observations as to what might need thinking about (or indeed re-thinking).
The big one is abolition of fixed-term, assured shorthold tenancies and their replacement with periodic assured tenancies with rental periods of no more than a month.
This must be the most contentious and worrisome. The government white paper and recommendations prior to the publication of the bill advised that all student accommodation (not just government registered Purpose Built Student Accommodation ("PBSA")) should be an exception to the abolition of fixed-term tenancies due to the need to conform the marketing and letting of such accommodation with the academic year. That exception is not currently included in the Bill and there are concerns amongst student landlords that non-PBSA operators will be forced out either of the student market or the PRS altogether. This surely cannot be the intention and we hope that this is addressed on the journey through parliament.
The abolition of s21 (so called "no-fault") evictions. In practice that means that the landlord will always have to prove grounds for possession whether that is one of the tenant default grounds or one of the landlord "need" grounds (including an intention to occupy by the landlord or landlord's family, an intention to sell or an intention to redevelop). Note that at present there is no guidance as to what constitutes an "intention" in these circumstances but there is a criminal sanction for landlords who misuse any of these grounds.
This one has been on the cards for some years and to a certain extent the effect on institutional landlords will have already been considered and factored into the risk matrix when investing in Built to Rent properties.
A mandatory landlord redress scheme.
This is predominantly for the benefit of the tenant, but we query who will end up paying for this?
A national database of landlords and properties for rent.
Perhaps unintended consequences – has the draftsperson considered how that will interact with data protection legislation?
A raft of new and "tinkered with" grounds for possession.
The most interesting and potentially contentious of these are the redevelopment, personal or family occupation and intention to sell grounds.
A right for tenants to request permission to keep pets (including where superior landlord consent is required, although if the superior landlord refuses consent it is reasonable for the immediate landlord to refuse).
In a post pandemic world we all need a therapy pet (especially Landlords).
The white paper also indicated that the government would be seeking to apply the updated Decent Homes Standards to PRS in the same way as they currently apply to the social housing sector. This recommendation has not yet made its way into the Bill, but the government is still indicating that it will potentially be included within secondary legislation. The impact of this may well be to force a number of lower-tier landlords out of the market altogether as the cost of bringing substandard accommodation up to the decent homes standard may simply be too expensive. Having said that, that may be the case anyway as the ratcheting up of minimum EPC ratings continues.
This is undoubtedly the biggest shake up of residential legislation in the PRS since the liberalisation of the sector in the late 1980s and it effectively reverses that liberalising trend. While this is not the end of the world for long-term landlord investors with good quality, well-managed portfolios (and once the dust has settled those landlords may even benefit from reduced availability of properties), it potentially will mean that older, lower-quality stock is lost from the market as it is becomes just too expensive to bring up to standard. It may well also mean a further levy of some description on landlords to pay for the proposed property redress scheme and national database.