Renters Reform Bill (England) / What to Expect?

Tenancy law in England is a complex area. There are more than 150 Acts of Parliament that are related to English tenancy relationships. In general, rights and obligations of tenants and landlords are regulated under the Landlord and Tenant Acts, but specifically under the Landlord and Tenant Act 1985. Moreover, as a common law country, England’s tenancy law is highly affected by jurisprudences. Certain principles are put forward by courts, and these rulings become integral parts of law. This obviously requires a sophisticated interpretation of law in light of High Court’s approach. Therefore, a competent & professional assistance will set the tenants apart when it comes to renting a house. That’s one of the many reasons why a growing number of clients each year are choosing to benefit from The NedLon’s services.

That being said, critics of English tenancy law usually assert that landlords are being disproportionately protected against tenants. Indeed, this is not false. When compared with the European Union countries, England’s tenancy law clearly favours landlords over tenants. The general legal approach of the EU on tenancy law suggests that tenants are in a weaker position visà-vis landlords, thus they must be under additional protection in the face of law. This additional protection is mainly provided via compulsory legal regulations, which are rules that cannot be changed, modified or reversed even with mutual agreement of parties. Therefore, compulsory legal regulations are exceptions of freedom of contract.

To simplify this for you, think of it as such, you as the tenant have the right to freely agree and accept any provision you wish. This is defined as “freedom of contract principle.” However, sometimes, the law states that you cannot accept a provision, even with your own freewill. In this case, the law itself sets forth the rule (“compulsory rule”) and you cannot agree on a provision that contradicts with this. If you do, the agreement (or the contradictory part of it) will be void. This is one of the reasons why you will see severability clauses in most contracts. But this is a whole different topic, so I’ll not dig into this for now. In other words, compulsory rules protect you even against your freewill. This is a matter of a state’s theory of policy approach, it has ups and downs which should be tackled in detail. However, this is not the subject of this article, thus I’ll leave this topic for another time.

Critics of English tenancy law oftentimes argue that the absence of efficient compulsory rules in favour of tenants is a fundamental issue that provide excessive advantage to landlords, especially in a real estate market that is experiencing a historical overload in demand and unprecedented rise in rent amounts. English lawmakers historically perceived tenancy relationships as any other private agreement, thus intentionally selected not to intervene in the landlord-tenant relationship by way of dominant compulsory rules.

Undoubtedly, this approach of English lawmakers is a result of the British political theory. British system is mainly a “liberal” welfare state system. Thus, freedom of contract principle is usually valued above the protection of tenants (or assumably weaker parties) via compulsory rules. To the contrary, as a result of their political theory choice, states that have adopted “social democratic” welfare systems tend to include compulsory rules protecting tenants against landlords. It’s important to understand this fundamental difference between England and major EU countries.

After this brief explanation, let’s dive into the proposed Renters’ Reform Bill (“RRB”). The RRB undoubtedly created controversy as it offers fundamental divergences from the current English tenancy law that provides excessive advantage to landlords. RRB contains important changes in law which will highly increase the protection of tenants. Therefore, it is clear that English landlords are not happy with the RRB. However, the government is aware that it is walking on thin ice and that these proposed reforms must be carefully tailored and applied. Thus, real estate investments are of utmost importance for the government and it does not want to create insecurity for current or prospective landlords, which will result in decrease of investment in the real estate market. The government must establish a delicate balance between improved security for tenants and continuance of investments in the market. But what does the RRB offer? I’ve outlined some core points for you:

a) Removing Section 21 Evictions

The most important reform proposed by the RRB is undoubtedly the repeal of Section 21 evictions, which is also known as “no-fault” evictions. Currently under Section 21 of the Housing Act 1988, private landlords are entitled to evict tenants in England and Wales after the end of the fixed term tenancy or at any time during a rolling periodic tenancy, without showing any reason. This power of landlords creates uncertainty and leaves tenants in the dark.

Furthermore, it can be argued that Section 21 and the abusive application of it is potentially derogatory in terms of the tenants’ right of “quiet enjoyment.” Tenants, who are legally entitled to occupy and enjoy the rented houses, undoubtedly should be allowed to foresee and plan their future. It’s clear that the threat of sudden eviction hanging over tenants is disruptive for their lives.

Moreover, let’s not forget that predictability is an essential element of law. Due to its vital nature and inseparable connection with the right to housing stipulated under the Universal Declaration of Human Rights, tenancy agreements should be separated from other types of contract.

In addition, the proposed removal of Section 21 evictions is closely linked with a practical and well-known concept as “revenge or retaliatory eviction.” Usually, Section 21 gives room for landlords to serve Section 21 notices on tenants who request repairs or complain about poor housing conditions. Thus, tenants are mostly afraid of raising their rightful complaints about accommodation and they take potluck. The proposed regulation will also prevent “revenge evictions.”

To ensure a smooth transition, after abolishing Section 21 (“no-fault”) evictions, the RRB proposes to put all tenants into a single system of periodic tenancies to level the playing field.

But what about notice periods to end the tenancies? Let’s start with the tenants. According to the proposal, to terminate the tenancy relationship, tenants will need to give at least two months’ notice. This proposed notice period is aimed at ensuring that landlords have time for finding a new tenant, so that void periods in which the house will be empty will be avoided.

When it comes to landlords, it’s for sure that they won’t like what the RRB may bring. According to the proposal, to terminate the tenancy relationship, landlords will have to rely on a “reasonable cause” in order to evict tenants. This is, by far, the most radical change, as currently landlords do not need to show a reason for evicting tenants as per Section 21. But what’s more important is the definition of “reasonable cause.” This legal definition and relevant causes will be indicated in the law. Thus, it’s too early to dig into this, however, at the first glance, it can be foreseen that reasons such as persistently late rent payments, default or any other breach of tenant obligations will be determined. Obviously, as a radical shift in landlord rights, after the enactment of RRB, time should be allowed for a smooth transition and amplified compliance. It’s foreseen that the regulation will do so.

b) Rent Increases and Advance Rental Payments

Another important change which the RRB proposes concerns rent review clauses. The RRB will end the use of rent review clauses and only allow increases to rent once per year. Moreover, the RRB proposes that landlords must give 2 months’ notice of any rent increase. This change is aimed at preventing automatic rent increases that are vague or do not reflect changes in the market price. Indeed, in practice, it’s seen that some landlords request extremely high rent increases which contradicts with the actual conditions of the market. This leads to artificial rent hikes which are driven by a market of vague rent demands, rather than actual market conditions.

Currently, rent can be increased even during a fixed term tenancy if there is a rent review clause in the contract. Therefore, during the fixed term, the landlord cannot serve a Section 13 notice in accordance with the Housing Act 1988. The landlord can only serve a Section 13 notice and increase the rent when the fixed term expires and the tenancy automatically becomes a periodic tenancy. If the RRB becomes law, the use of rent review clauses will end and all rent increases during a tenancy will be conducted via Section 13 process. This proposal is aimed at extending tenants’ rights to challenge rent increases via the First-tier Tribunal, since each time a Section 13 notice is served, the tenant will have the right to bring the issue to the tribunal.

In addition, some landlords, especially in a housing market that is facing a huge demand overload, request the tenants to pay multiple months’ rent in advance. This request can be understood since landlords may have concerns about the financial ability of tenants. However, it must also be noted that this practice is being exploited by a lot of landlords. Besides, currently there is no limit on the advance payment which a landlord can demand. Especially for tenants who have a stable monthly income, paying months of advance rent can be extremely overwhelming.

The condition of advance rental payments in private housing contained ambiguity and dispute between tenants and landlords, especially in cases when a tenancy ends earlier than the period that the tenant has paid for. It is true that there are various court jurisprudences regarding this issue, however, it is not sufficient to end the discussions. Therefore, a legal regulation via an act is obviously needed for certainty. The RRB, with the aim of ensuring certainty, proposes to explicitly require landlords to repay any upfront rent if a tenancy ends earlier than the period that tenants have paid for. Furthermore, the proposal will limit the amount of rent that landlords can ask for in advance, which may be considered as an intervention to the liberal market by landlords.

c) Eviction and Gaining Possession

Contrary to what most landlords claim, the RRB also brings some important changes in favour of the landlords. The RRB proposes to strengthen the grounds for possession by expanding the scope of law. The proposal accepts that the personal circumstances of landlords may change.

In this direction, the proposal offers to introduce a new ground for landlords who wish to sell their property and allow landlords and their close family members to move into a rental property. Indeed, expanding the scope of grounds for possession under the Housing Act 1988 is undoubtedly a pro-landlord move.

Currently, Ground 8 stipulates that in case if the rent is payable monthly (which is the most common type), at least 2 months’ rent must be unpaid in order to evict tenants via invoking Ground 8. Thus, landlords complain that some tenants get away with improper rent payments by only paying off a small amount of arrears – taking them just below the mandatory repossession threshold of two months’ arrears. Besides, the current 2 months’ arrears threshold must be demonstrated not only at the time of serving notice, but also at the time of hearing. Thus, even after receiving the notice, bad tenants make small payments to get below the 2 months’ threshold, which let’s them avoid eviction. Such repeated actions of tenants undoubtedly creates a financial burden and loss of rent to the disadvantage of landlords.

In light of this, the proposal acknowledges that restructuring “rent arrears” as a ground for possession under Schedule 2 - ground 8 is necessary to prevent bad tenants to avoid eviction by only paying off small amount of arrears. The RRB will introduce a new mandatory ground for “repeated” serious arrears. The proposal determines a numeral threshold for both the frequency and amount of arrears, so that where a tenant has been in at least two months’ rent arrears three times within the previous three years - regardless of the arrears balance at hearing - eviction will be mandatory. It may seem like a small nuance to you, however, disregarding the arrears balance at hearing will provide a strong protection to landlords against bad tenants, since tenants won’t have the opportunity to avoid eviction simply by making small payments during the period between the notice and hearing. This pro-landlord regulation, if enacted, will ensure landlords to have a healthy and sustainable relation with their tenants, and to end their relations with bad tenants.

d) Single Ombudsman for Private Landlords

Currently, most landlords work with letting and managing agents. Therefore, tenants maintain their tenancy relationships with agents. Believe it or not, because of this, most of the tenants never meet or even know who their landlords are. This is an important issue for tenants, since tenants sometimes need to directly contact the landlord due to poor agent practices. Being left in the dark, especially in essential issues about the condition of the rented property is a matter that clearly disrupts tenants’ fundamental rights.

Despite the fact that tenants may demand the disclosure of landlord’s identity as per Sections 1 & 2 of the Landlord and Tenant Act 1985, in practice, this right of tenants most of the times is disregarded by using privacy concerns as an excuse.

Indeed, some agents are afraid to lose their clients (who in this case are landlords) and fail to provide such information by relying on “reasonable excuse” exception. However, please note that a mandatory obligation stipulating certain actions (data sharing) to be taken cannot legally be disregarded due to general exceptional clauses. Besides, both UK GDPR and the Data Protection Act supports the legal conclusion that landlord’s identity must be provided and cannot be retained due to “privacy exception” since there is an explicit provision in the Landlord and Tenant Act 1985.

Unfortunately, some agents still refuse to honour their obligation to provide landlord details. This is just one of the many poor practices of agents, and a practical misapplication which should be eliminated.

Currently, agents are required to be registered to a government-approved redress scheme. There are 2 redress schemes; The Property Ombudsman or The Property Redress Scheme. Any agent operating in England must belong to one of these schemes. The main idea behind this is to ensure that there is an authority which tenants can submit any complaints, queries or feedbacks to. However, there is no such authority for landlords.

In a similar approach to agents, the RRB proposes to establish an Ombudsman for landlords. This way, tenants will be able to challenge poor or faulty practices directly against landlords & landlords won’t be able to hide in the dark. This will create a sense of accountability for landlords, as well as agents. Landlords will be aware of the fact that their tenants can find the necessary information smoothly about them and reach out to the Ombudsman; agents will act with more caution since any poor practice conducted by their side can be escalated to the landlords, so that they might lose their clients.

e) Right to Keep Pets

The proposal is welcomed with joy by animal lovers. Pets are integral parts for their owners’ lives and having a pet should not categorically be a barrier for tenants to live in a desired property. Currently, having a pet negatively affects tenants’ search for houses, as the majority of the landlords do not really wish to let pets into their properties. According to the English Private Landlord Survey 2021, 45% of landlords were unwilling to let to tenants with pets.

In light of this systematic problem, the RRB will make it easier for tenants to keep pets by enacting two major amendments. Firstly, the proposal will ensure landlords do not unreasonably withhold consent when a tenant requests to have a pet in their home, and the tenants will be granted the right to challenge a decision. However, this regulation will obviously require interpretation of “reasonable grounds” for rejecting tenants’ demand for keeping pets. In this direction, some principles will possibly be construed in practice when tackling what is reasonable and what is not, such as age, floor material, window width etc. of houses.

However, at the end of the day, the government should provide some incentive to make it easier for landlords to accept pets. Thus, the proposal offers to include pet insurance as a permitted payment via amending the Tenant Fees Act 2019. This will bring an assurance for the landlords to allow pets in their properties.

f) Decent Homes Standard for the Private Rented Sector (PRS)

Houses in the PRS are naturally considered as a matter of liberal area. Thus, it is understandable and also necessary that landlords and tenants have more flexibility in terms of their decisions and demands. At the end of the day, houses in the PRS are subjects of liberal economy, just as other privately owned properties. Obviously, limited intervention to the private sector is an essential principle in ensuring the sustainment of the liberal economy, as well as continued investment.

However, there is also a downside of solely perceiving the housing sector as any other liberal area. Sometimes, landlords do not really take good care of their properties which they let, since they won’t be living in the properties themselves. This leads to a major problem of neglected houses that are in a seriously poor condition. Especially, in a dominantly pro-landlord system, tenants usually tend to ride with the punches rather than escalating the issue to the landlord or agent. Again, abolishing Section 21 evictions will also be an important step in reassuring tenants to raise the issues about poor housing conditions.

Currently, there is a regulation defined as “Decent Homes Standard” (“DHS”) in England. The DHS is a regulatory & technical standard that sets forth certain characteristics which public housing should bear. Naturally, such strict standards is necessary and understandable in social rented sector. Social housing system is basically a government-subsidised rent for people with low income who cannot pay the rent at market prices. It is a reflection of social welfare idea. It is a system which is maintained and monitored by the government, thus houses within the public housing system are regulated directly by the DHS.

In the same direction, the RRB offers to apply the DHS to the houses in the PRS, just like public housing. This is definitely an important step in acknowledging that tenancies are not only a matter of liberal sector, but also have close ties with the rights of tenants to live in houses that are in good condition. As stated above, tenancies are closely linked with the right to life. Thus, it is important for the government to be involved in the process of ensuring good quality housing in the PRS.

I’ve outlined some of the proposed amendments by the RRB. However, please note that there are other minor amendments contained in the proposal. Besides, the RRB may also change and new additions or amendments to the proposal may be made. Thus, it is still not enacted and various changes may occur. However, I personally believe that the public opinion is in favour of the proposal. Therefore, even if any changes to the proposal occur, it won’t really be a structural amendment that will type over the current proposal.

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