New legislative changes for the private rented sector: what you need to know

Posted: 16/12/2022

The fairer private rented sector white paper published on 16 June 2022 promises to bring into force some of the biggest legislative changes to residential tenancies in over 30 years. Landlords operating in the private rented sector (PRS) need to take heed as these changes will greatly affect how landlords need to manage their assured shorthold tenancy (AST) portfolios.

What is the government doing to assist tenants?

Abolition of notices pursuant to section 21 of the Housing Act 1988 (as amended) (section 21 notice)
By far the most eye-catching proposal is the government’s proposal to stop landlords being able to end ASTs without having to give a reason. Currently, assuming landlords have complied with the various obligations imposed on them by statute and regulations, a landlord is allowed to serve a section 21 notice on tenants of ASTs by giving them a minimum of two months’ notice.

No reason needs to be given and, unless there is a technical fault with the section 21 notice or an irremediable non-compliance by the landlord with the relevant statutes and regulations, a tenant will have no defence to a claim for possession brought on expiry of the notice.

It is not yet certain when landlords will no longer be able to use section 21 notices. At the moment, the proposal is that at least 12 months after the proposed reforms come into force, pre-reform tenancies will not be allowed to use section 21 notices anymore. But this may change and, currently, the only proposed exemptions to this reform will be purpose-built student accommodation.

Limitations on rent reviews
Rent reviews will be limited to annual rent increases only. Landlords will need to give a minimum of two months’ notice of the rent review to their tenants. The proposed changes will also see an end of automatic rent review clauses.

The government wants to give tenants confidence to challenge unjustified increases through the First-tier Tribunal (FTT). The FTT will not be able to increase rent beyond that requested by the landlord.

Pets and decoration
This is a topic which has been widely reported on over the past few years and tenants will be glad to see that landlords will not be able to unreasonably withhold consent when they request to have a pet in their home, with the tenant able to challenge a decision not to allow one.

However, landlords can insist on tenants having pet insurance and there is a proposed amendment to the Tenant’s Fees Act 2019 to include pet insurance to cover any resultant damage to the property.

Furthermore, landlords will be encouraged to allow tenants reasonable requests to redecorate or change appliances provided that the tenants return the property to its original state when they vacate.

No blanket DSS or family bans
It will become illegal for landlords or letting agents to have blanket bans on renting to families with children or those in receipt of benefits. Furthermore, landlords and agents will not be able to stop families from viewing properties.

The government also proposed to provide support to landlords who let to benefit claimants, however, it is unclear what form this will take.

What is the government doing to assist landlords?

The government has proposed new grounds for possession to give landlords an effective means to gain possession of AST properties where their tenants are breaching their obligations. These proposed new and amended grounds for possession when landlords serve notice pursuant to section 8 of the Housing Act 1988 (as amended) (section 8 notice) are:

• Sale of the property.
• The landlord and or their close family members wish to move into the property. However, it will be prohibited to use this ground in the first six months of the tenancy. One thing to note is that there will be a restriction on landlords re-letting or marketing a property for three months following use of the moving into or selling grounds for possession.
• A new mandatory ground for repeated serious arrears. To be able to use this new ground for possession, a tenant will need to have been:
  • two months’ in arrears of rent;
  • in arrears at least three times in the last three years; and
  • even if the tenant clears the arrears by the date of the hearing, a judge must grant an order for possession.
• New specific grounds for supported and temporary accommodation.
• The notice period for existing rent arrears eviction grounds will be increased to four weeks.
• In cases of criminal behaviour or serious antisocial behaviour, the notice period for the existing mandatory eviction ground will decrease.

One thing to note is that under the new rules, contrary to what is in place currently where a landlord takes money for a deposit, it will need to demonstrate that it has protected the deposit before making a claim for possession based on a section 8 notice.

Other proposed reforms

A new ombudsman
The government is proposing to set up a new ombudsman. Membership will be mandatory for landlords. It is proposed that the ombudsman will have wide-ranging powers including compelling landlords to issue apologies, provide information, take remedial action, pay compensation of up to £25,000 and require landlords to reimburse rent to tenants in certain circumstances.

Any ombudsman decision will be binding and failure to comply with a decision may result in repeat or serious offenders being liable for a banning order or enforcement through court.

A more efficient court process?
The government plans to introduce a package of wide-ranging court reforms to help make the process of going to court more efficient. Some of the proposals to achieve this will include increasing county court bailiff capacity; introducing a paper-less process; giving urgent cases priority; strengthening alternative dispute resolution services; and use of the ombudsman to reduce the caseload in the county courts.

Council’s enforcement powers
Local authorities will be given power to issue fines via civil penalty notices to landlords who illegally evict or harass tenants or who do not meet requirements of the new system. They will be able to issue rent repayment orders for breach of decent homes standard and minimum fines. It will also be much easier for local authorities to put landlords onto the Rogue Landlord Database (RLD) and it will also be mandatory to put landlords who fall foul of the new regime onto the RLD.

What does this all mean?

At the moment, registered providers of social housing will not be exempt from these changes. They will need to review their starter tenancies which allow them to use section 21 notices for a limited time before the tenancies become assured tenancies. It will not be possible to grant this type of tenancy when the statute comes into force and section 21 notices are no longer allowed to be served on pre-reform tenancies.

For all landlords in the PRS, this means yet more change and uncertainty. There will be an even greater onus on landlords to ensure that the properties they let are safe and free of disrepair. There is likely to be an even greater increase in the number of claims brought by tenants where landlords fail in these responsibilities.

Furthermore, the drafting of the new tenancy agreements will be key as landlords and agents will not be able to simply re-issue new agreements to existing tenants under the new regime where mistakes have been made. This is likely to mean even longer agreements being drafted with even more obligations contained in them to ensure a landlord is able to successfully evict tenants who breach their obligations.

Tenants will be very happy with the proposed changes. The reforms will give them greater security of tenure and provide them with some certainty that, when they rent a property under the new rules, they will be able to live there for far longer than under the existing regime assuming they do not breach the tenancy terms.

Tenants will be more likely to be able to keep pets and make a rented property feel like their home. There will also be even greater oversight on landlords who fail to comply with their obligations to keep their tenants’ homes fit for habitation.

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