The Renter’s Reform Bill – What Does it Mean for your HMOs? [An UPDATE]

Fundamental changes to the Private Rental Sector are being ushered in with the Renters Reform Bill, and there are serious implications for HMOs.  A third reading of this very controversial Bill has just taken place in the House of Commons with over 200 amendments up for consideration. What are they and how should you respond?

The Bill has been described as the “biggest shake-up in the private rented sector in 30 years”. It is time to understand it and weigh up the impact it could have on your HMO business. 

What is the Renters Reform Bill?

The Bill – dubbed a “once-in-a-generation overhaul of housing laws” – has pledged to make it:

• More difficult to evict tenants.
• Easier for tenants to have pets.
• Mandatory for landlords to abide by a Decent Homes Standard.
• Illegal for landlords to issue blanket bans on letting to those on benefits.
• Compulsory for landlords to join an Ombudsman scheme.

Originally, HMOs were only mentioned once in the White Paper which was concerning, but the recently tabled amendments recognise the need for more flexibility in implementing the new legal requirements in HMOs.  All aspects of the RRB have impacts on landlords, tenants and letting agents. In this article I wanted to highlight the ones that will possibly affect you the most. 

The abolition of section 21 and the end of fixed term tenancies

This is the biggest impact and headline of the bill – but the recent amendments have somewhat watered down the initial drastic proposals. Currently the proposals mean

• A proposal for an initial six-month tenancy term instead of two. The previous draft of the Renters Reform Bill abolished fixed term tenancies, and allowed tenants to serve a notice to quit at any time. This meant that tenants would have been able to serve notice to quit on day one, effectively turning long-term tenancies into short-term lets. The new clause states that a tenant may give two months (unless the landlord agrees to a shorter period of notice) not earlier than six months from the date the tenancy begins.
• Grounds for possession of student properties and the extension of initial tenancies to at least 6 months will help provide continuity and certainty to landlords in the student HMO market.  
• There will no longer be Assured Shorthold Tenancies – all tenancies will be periodic. 
• The right for tenants to request a pet / have a child / rent a room on benefits has now been addressed with the introduction of a ‘reasonableness test’. . 
• A Private Renters’ Ombudsman will be created under the Renters Reform Bill – with all landlords required to sign up. 
• Assessment of properties under the Decent Homes Standard
• An assessment of the courts and barriers to possession before abolishing Section 21 provisions for existing tenancies. 
• New Section 8 Grounds with specific notice periods and clauses

Rent reviews and increase notice periods

Rent reviews would be limited to one per year with a revised notice period of two months put in place for any increase in rent. If a tenant believes a rent increase is unfair, they would be able to challenge this, while automatic rent review clauses would be disallowed from tenancy agreements.. 

Tenant modifications

Although no exact detail has been given in the Renters Reform Bill white paper, tenants would be permitted to ‘modify’ rental properties as long as the properties are returned to their original condition at the end of a tenancy.

Landlord Database

The guidance promised that Renters (Reform) Bill will introduce a new Private Rented Sector Database. The Bill proposes a new digital database where each landlord and each “dwelling” will have an entry, and unique identifiers. The database is referred to as the “Rented Property Portal” in the government press release. 

Landlord Redress Scheme  / Ombudsman

 In addition, the Bill will make it compulsory for all private landlords in England to join a government approved “landlord redress scheme”. This is for all private landlords, regardless of whether or not they use a letting agent. There is some confusion over the language here as although they are different, legally, the terms are used interchangeably in the amendment. Landlords will pay for the costs of the Ombudsman. It will be free for tenants to use if their landlord hasn’t dealt with a “legitimate complaint”. On the other hand, landlords won’t be able to use it if they have a legitimate complaint about their tenants.

NB 

Transition arrangements once the Bill receives Royal Assent has not been clarified as yet, so there are still many questions about how the new law will be executed.  

What are your thoughts about the RRB? Will this affect your business detrimentally or do you welcome the changes? 

I’d love to hear your views.

Wendy Whittaker-Large