The UK Government has finally announced its commitment to abolish Section 21 of the Housing Act 1988 in its long awaited White Paper – 'A Fairer Private Rented Sector', dated 16 June 2022. Whilst the end of the 'no-fault' ground for recovering possession is the main headline, there are a number of other key points to note. What's proposed is a significant shake-up of the UK private rental market and this forms part of the Government's wider 'levelling up' strategy. The primary objective of the reforms is to deliver a fairer deal for tenants, and if implemented, these plans could represent some of the most radical changes to the private rented sector in a generation.
We have highlighted the key proposals below but given the current Government turmoil, there could be substantial changes before any Bill is put before Parliament.
What type of tenancy will be affected?
The reforms are anticipated to apply to the current Assured Shorthold Tenancy (AST) regime which applies to most residential tenancies in the private rented sector. The proposals would see the replacement of ASTs with a single system of periodic tenancies – so no fixed term agreements.
The proposals do not currently apply to those tenancies which do not meet the AST criteria; for example those at a rent of above £100,000 per annum. A significant number of residential tenancies in Central London fall outside of the AST regime because of the rent payable, but the White Paper does not seek to capture these residential tenancies within the proposed reforms.
Top 10 Proposals
The abolition of s.21 so that a tenancy cannot be brought to an end for 'no reason'.
- This would remove a landlord's ability to recover possession of a property other than on specified grounds.
Amendments to the current grounds for possession. The grounds will be split into 'fault' grounds such as rent arrears, nuisance and other anti-social behaviour, and 'non-fault' grounds which will include a landlord being able to recover possession if the landlord or their family want to use the property as their home or want to sell the property.
- These grounds will have to be proved and if disputed, will require evidence to be put before a Court, or possibly the First Tier Tribunal. More detail on how the possession process will work is required.
The transition of ASTs to one system of periodic tenancies, giving tenants a right to end the tenancy at any point during the term by providing two months' notice.
- The rationale behind this move is that it will give tenants flexibility to move when they want but it arguably creates uncertainty for landlords.
Restrictions on rent increases to once per year.
- Rent increases would only be permitted once per year and can be challenged through the First Tier Tribunal. Rent review clauses will be banned.
It will be illegal for landlords or agents to have blanket bans on renting to families in receipt of benefits.
All tenants will have a right to request to keep a pet in the property and the landlord cannot unreasonably refuse consent.
- This is likely to be a common ground for dispute over whether consent has been unreasonably refused and the White Paper does not give detail on the forum for such disputes. It may be the case that these matters would be dealt with by the proposed Housing Ombudsman (see below).
The introduction of a new Housing Ombudsman that all private landlords will be required to join.
- The idea being that the Ombudsman will be able to deal with most disputes including complaints about the behaviour of the landlord or where repairs haven't been undertaken within a reasonable period of time. It will be for local councils to take enforcement action against landlords that fail to join the scheme.
The creation of a new Property Portal which will include details about landlords (including rogue landlords) and properties they let. The Portal would also set out whether a property meets the Decent Homes Standard.
Targeting delays in court proceedings by working with the Ministry of Justice and the Courts and Tribunal Service.
- This is certainly to be welcomed given the current delays in the progress of possession claims from issuing proceedings to a final hearing but it remains to be seen how this will be achieved in practice. The White Paper suggests that increased use of mediation and the possible use of the First Tier Tribunal to deal with certain cases may help to alleviate some of the burden on the County Court.
The introduction of a legally binding Decent Homes Standard
- This is subject to further consultation but the standard is expected to require homes to be free from serious health and safety hazards, including fall risks, fire risks and carbon monoxide poisoning. The Government has already increased regulation in this area but proposes to strengthen this.
When are the changes going to be implemented?
The UK Government has set out broad objectives for achieving its vision for the future. However, the operational and procedural practicalities of the changes are yet to be defined. The full details of the plans will not be available until the legislation, in the form of the Renters Reform Bill, is put before Parliament.
How we can help
Mishcon de Reya's Property Litigation team is able to provide specialist advice and assistance to both landlords and tenants as well as commercial investors and developers, who will need to take on board the wide-ranging reforms that are proposed.
We will continue to closely monitor the proposals as they develop so please look out for further updates.