The Renters Rights Bill from the Labour Government is a repackaged version of the Conservative's Renters Reform Bill, which never made it into law. While large parts of the headline proposals look rather familiar, there are a number of key differences which, on the face of things, extend security for existing tenants a little deeper. But for many landlords and tenants who have a good relationship, things won't change much from how they are now.
Over the next year or so the bill will pass through Parliament. Given the size of Labour’s majority, this should be a fairly straightforward process. However, the bill will be subject to scrutiny and challenge by both the House of Commons and House of Lords. This means that what makes it into law may differ somewhat from the proposals outlined below. Here we outline how the 10 largest proposals will affect the market, alongside how the grounds for possession may change. This page will be updated to reflect changes to the bill as it passes through Parliament.
1. The Headline: "Abolish Section 21 and move to a simpler tenancy structure where all assured tenancies are periodic."
Our view: This is probably the largest headline change. In a similar fashion to the Conservative’s bill, landlords will lose the ability to serve a Section 21 notice, a so-called ‘no fault’ eviction. All tenancies will become infinite rolling contracts until notice is served by the landlord or the tenant. This will be implemented at the same time for new and existing tenancies, probably in the summer of 2025.
Tenants can end the tenancy by giving two months' notice at any time. Rents can be increased once a year during a periodic tenancy using a Section 13 notice and providing two months' notice, as they can today. However, landlords will no longer simply be able to offer a new 12-month AST at a higher rent.
For most landlords, this is unlikely to make a big difference to the day-to-day running of their property. Landlords looking to secure possession of their property will instead use one of the new mandatory grounds. But given that in some cases the timescales to regain possession will be longer and the evidence bar higher than it is today, landlords will be increasingly cautious about who they rent to.
2. The Headline: "Ensure possession grounds are fair for both parties, giving tenants more security, while ensuring landlords can recover their property when reasonable."
Our View: Under the current system, Section 21 notices are served by landlords for a wide variety of reasons as it’s typically the most efficient way to secure possession of their property. In some, but by no means all cases, Section 21 is served as an alternative to claims for arrears or anti-social behaviour. The Bill proposes new grounds for possession which are more restrictive than today.
Landlords will be able to issue a Section 8 notice, based on grounds 1 or A1, for mandatory possession to facilitate the sale of their property or its occupation by themselves or their family. This is permitted after the first 12 months of the tenants moving in and with 4 months' notice. Mandatory possession will be given for rent arrears of 3+ months (two months under the current system), while possession will be at the discretion of the judge for rent arrears of less than three months.
The ability of landlords to quickly secure possession of their property in cases of rent arrears or anti-social behaviour will be the acid test of a new system. So far in 2024, it’s taken an average of 38 weeks between landlords applying for possession and repossession by bailiffs, despite the number of requests for possession running at 30-40% below the five-year pre-covid average. Given the bar for possession has been raised and the court system will see more cases, the ability of the court system to deliver verdicts quickly is critical to landlords' trust in the system.
3. The Headline: "Provide stronger protections against backdoor evictions by ensuring tenants are able to appeal excessive above-market rents which are purely designed to force them out."
Our view: Our lettings index shows that the average rent for a tenant renewing a contract is around £150 per month below what a similar newly let home would achieve on the open market. Most landlords value long-term tenants who look after the property. So in most cases, sitting tenants typically pay a little less rent than what someone moving into the home for the first time could expect to pay.
The Renters Rights Bill will allow tenants to challenge rent increases at a tribunal if the increase takes their rent “above market rate”. Although appeals to the First Tier Tribuneral are free, experience of the Scottish system, which operates in a similar fashion, suggests that less than 1% of requests from landlords for higher rents end up in front of a tribunal. We expect a similar story in England, with almost all increases in rent mutually agreed between the landlord and tenant.
4. The Headline: "Make it illegal for landlords and agents to discriminate against prospective tenants in receipt of benefits or with children."
Our view: When letting a property, landlords tend to look for someone they believe will be a good fit for the home, look after it for the long term and pay the rent on time. Beyond these requirements, landlords tend to be agnostic. While landlords are already prohibited from discriminating on a wide range of grounds, the sustainability of the tenancy will always remain the paramount consideration.
Sustainability typically takes two forms. Firstly, the property has to be suitable for the tenant, so few landlords will, for example, let a one-bed flat to a couple with two children. Secondly, ensuring the tenant has the means to pay the rent means most landlords will choose a higher-earning tenant in a secure job over a lower-earning one in less secure employment. Increasing the barriers to regaining possession of a property is likely to mean landlords become increasingly cautious over tenant selection, including increasing the role of homeowning guarantors.
5. The Headline: "Given tenants strengthened rights to request a pet in a property, which the landlord must consider and cannot unreasonably refuse".
Our view: While around 20% of private landlords will consider a pet from day one, our research suggests that the majority do not. And this is a majority which has grown since 2019, when deposits were capped at five weeks rent. In some cases, landlords will agree to a pet once they’ve developed a relationship with the tenant and they know their property is being looked after. Typically, the initial reluctance towards pets stems from two places.
Firstly, with deposits capped at five weeks rent, it means it will cover a smaller proportion of potential damage. And secondly, many properties are not suitable for a pet. Most flats contain provisions in their lease to limit animal ownership either wholly or at the freeholders' discretion. In most cases, the terms of the landlord’s lease with the freeholder will provide grounds for ‘reasonable refusal’.
6. The Headline: "End the practise of rental bidding by prohibiting landlords and agents from asking or accepting offers above the advertised rent."
Our view: The level of competition that tenants have faced in finding somewhere to live in recent years has sometimes meant potential renters offer more than the asking price or paying three or six months worth of rent up front. This trend varies significantly across the country and in different types of market. However, unlike selling a home, most landlords put equal weight on the tenant’s income and references as they do the headline rent. Most landlords would forgo a little extra rent for an impeccably referenced, high-earning tenant. Increasing the timelines to achieve possession is unlikely to change this any time soon.
In the short term, banning above asking rent bidding wars as well as the practise of handing over more than a month's rent upfront is only likely to drive up advertised rents and make it harder for tenants who are not in secure employment to find somewhere to live. It is unlikely to do anything to make renting more affordable and enforcement is also an issue. Rather, offering tenants more choice and increasing the level of competition between landlords is the optimum way to keep rental growth capped.
7. The Headline: "Introduce a Private Rented Sector Landlord Ombardsmen that will provide quick, fair, impartial and binding resolution for tenants’ complaints."
Our view: The creation of an Ombudsman for tenants (although not landlords) renting privately should give tenants greater access to support if and when they need it. While most tenants have good relationships with their landlord, if this relationship breaks down, the Ombudsman will have a role in providing mediation. This may also reduce the pressure on the court system which is likely to get busier on the back of the abolition of Section 21.
8. The Headline: "Apply the Decent Homes Standard to the Private Rented Sector."
Our view: The vast majority of landlords take pride in offering homes which comply with and exceed the Decent Homes Standard. And the English Housing Survey shows that the number of ‘non decent’ homes has been steadily falling. The minority of landlords who fail to provide homes which live up to standard have often remained under the radar with local authorities failing to enforce existing legislation. So while higher standards are desirable, they need to be backed up by enforcement.
9. The Headline: "Apply 'Awaab's Law' to the sector, setting clear legal expectations about the timeframes within which landlords in the private rented sector must take action."
Our view: Similar to ensuring homes meet the ‘Decent Homes Standard’, most landlords make sure problems are investigated and dealt with as quickly as if they were living in the property themselves. Outlining reasonable response timelines legally should help to set expectations, but once again, the effectiveness of the legislation is tied to local authorities' ability and willingness to enforce standards.
10. The Headline: "Create a Private Rented Sector Database to help landlords understand their legal obligations and demonstrate compliance."
Our view: While landlords already have to prove compliance to regain possession of their property, offering tenants the ability to check that their landlord has carried out required checks is a sensible move. It should help drive up standards and help local authorities enforce the rules when they’re broken. However, given the high level of duplication, the database should replace all selective licencing schemes set up by local authorities.
