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Commercial Update 75: Changes on the Horizon for BTL Landlords

For those of you running businesses in the private rental sector, you will probably know that the Department for Levelling Up, Housing and Communities has released the “A Fairer Private Rented Sector” white paper (A fairer private rented sector – GOV.UK (www.gov.uk)).

The government envisages that these reforms will “reset the tenant-landlord relationship” and the white paper sets out a 12-point plan of action to deliver these promises.

Just as a reminder, white papers are policy documents produced by the government to set out proposals and future legislation. Broadly, they tend to be a good indication of the changes which the government intends to debate and consider in the coming months.

There will be further comment as things develop, but given the chunky nature if it (some 86 pages) of the white paper, a summary of some key headlines is:

  • The proposed abolition of “no-fault” evictions (under section 21 of the Housing Act 1988 to seek possession of property let on an assured shorthold tenancy on two months’ notice, either on a contractual break date or on or after expiry of the contractual term, without needing any underlying reason (other than that the fixed term has come to an end)) – this is to be replaced by a system where tenants will be able to end a tenancy by providing two months’ notice but a landlord will only be able to end the tenancy in ‘reasonable circumstances’ as defined by law. NB: It looks like tenancies granted to students in purpose-built student accommodation may be exempt from these changes.
  • A proposed restriction on rent increases and an end to the use of rent review clauses – the proposals are to only allow increases once per year and the tenant’s ability to challenge excessive rent increases will be improved.
  • Strengthening the existing grounds for possession where the tenant has breached the terms of the tenancy agreement, including persistent rent arrears and anti-social behaviour.
  • A ban on “no DSS” practices.
  • A new ombudsman covering all private landlords plus a new “Decent Homes Standard” into the private rented sector, which will be carried over from the social rented sector and is intended to be legally binding.
  • Changes for those renting with pets; and
  • Dealing with passporting (or transferring) deposits.
  • The introduction of a new digital property portal to help landlords understand their legal requirements.

So, what does the phrase ‘reasonable circumstances’ mentioned above mean? The white paper does not outline what those circumstances might be, but as the direction of travel appears to be to encourage longer term arrangements, the list may be quite short!

The government wants to provide greater security and better quality accommodation across the private rented sector and believes that tenants’ rights to stay in property on a longer term basis rather than a year to year basis may form part of the solution.

While supporting the need for safe and decent homes for tenants is a laudable aim, not being able to take back possession of property when a fixed term ends (unless the tenant has actually breached the terms of the agreement), may ironically lead to landlords cracking down on tenant breaches as they rely increasingly on such breaches to take back property.

It looks like the government proposes to implement the system in two stages. The aim is to provide at least six months’ notice of the first implementation date after which all new tenancies will be periodic.

All existing tenancies will then transition to the new system on a second implementation date with at least 12 months between the two implementation dates.

The real detail will be contained in the Renters’ Reform Bill, which is yet to be published, so watch this space…

Regards to all,

Roger