Renters Reform Bill – What’s new and what do you need to know

The Renters Reform Bill is closer than ever to getting passed and will have a huge impact on renters and landlords alike. For a lot of renters, this will be welcomed as it primarily aims to promote renters’ rights. However, for a lot of landlords, it will not be so welcome news as it will mean more regulation and restrictions moving forward. The Labour Government has stated that they are introducing this bill to create a fairer rental market for all. But what does that really mean?

Section 21 ‘no fault evictions’

If passed, the Bill will abolish Section 21 ’no fault evictions’ granting greater security for renters. Early last year the BBC reported a surge in ‘no fault’ evictions by bailiffs being issued on UK tenants. Section 21 is highly contentious providing a lack of security and safety for tenants. No fault evictions have been a long-standing contentious issue with the previous Conservative Government vowing to have it abolished in 2019. This never happened despite senior ranking politicians like Michael Gove MP actively speaking out against them, with the previous legislation making no further progress ahead of the last election. When then asked about it in a BBC Interview Michael Gove said as much as he might be in favour of Section 21 being abolished, he claimed it was up to the House of Lords to decide the ‘rate of progress.’ Well that certainly doesn’t seem to be deterring the new Labour Government.

Advance rent cap

The Bill will also include new rules to cap advance rent payments to one month’s rent (in advance) instead of multiple months’ rent. This aims to make renting more accessible for those on lower incomes and to prevent them from being excluded from the rental market altogether. The obvious anxiety for landlords is the lack of assurance that tenants can afford their rent and upcoming payments. However, the Bill still allows for payments of a ‘security deposit’ of 6 weeks to be made upfront and a month’s advance on rent aiming to create a fair market for landlords and renters alike. A big motivator to abolish upfront rent payments is to target a small number of landlords requesting nearly a year’s rent upfront. These kinds of practises have made the rental market inaccessible for a lot of people and causing serious personal financial issues.

Ombudsman

Further new amendments to strengthen the rights of tenants will also include a new landlord-funded Ombudsman, providing renters and landlords with a way to fairly solve disputes involving a neutral third party. This Ombudsman will be created and funded by fees paid for by the landlords. This Ombudsman has been proposed as the best way forward for tenants and residents to resolve any disputes.

Students

There will also be changes to prevent students from being pressured into signing long leases at the start of the academic term. There will be regulations and limitations on when it is appropriate for landlords to approach students to renew their leases and how many times the subject can be broached to avoid pressure tactics. The Bill will also further put an end to any loopholes in rent payment orders (RPO), ensuring ‘superior landlords’ can be liable for RROs if an offence has been committed. This will apply even if the rent was not paid directly to them but through an agent or immediate landlord.

Not entirely thought out

The Bill has already faced criticism from market experts for being flawed in places and not well thought out. The National Residential Landlords Association (NRLA) has urged further supervisions to be considered to safeguard vulnerable tenants, including those in financial troubles. The NRLA have maintained that whilst they are not anti-reform, they are keen to see the bill thought out properly so that when it does come into power it is right and fair for all those it involves. The NRLA are particularly keen to reinstate confidence back into the UK rental market after some turbulent years. This of course is not only reinstating confidence for the tenants which is amply emphasised in the Rental Reform Bill but also important to encourage landlords to invest in much needed housing. There has also been speculation that new Renters Reform Act will create a big business opportunity for letting agents. It Is expected that the enhanced regulation on landlords may encourage landlords to enrol into the ‘managed property model.’ This model would mean the letting agent would manage the property and all new regulations on behalf of the landlord for a premium fee. This may encourage landlords that have never used this service previously to buy in at the benefit of the letting agent companies. Obviously, the added cost of subscribing to a ‘managed property model’ would also fall on the landlord as a result. This arguably could further discourage landlords from investing in UK property.

Second Reading

The Bill had its second reading in the House of Lords on 4 February. Whilst some key elements to the bill need to be ironed out and resolved, it is clear further regulation is coming for the UK rental market. Whilst some may say it’s overdue, others will question how this may affect the already tenuous issue of housing and the effect it will have on investment in UK property. Given Labours persistent efforts to encourage growth in the UK economy and housing market it is tricky to see how these revisions will encourage growth and investment in some cases. A lot of speculation has arisen regarding the pressure this will put on landlords moving forward and whether many will decide with the heightened regulations and proposed fees to not invest in property. This will of course will only lead to wider issues for the housing market. The Bill is expected to receive Royal Assent in Spring 2025.