Landlords and investors will likely have been following the news headlines about the changes that the government is seeking to make regarding the relationship between them and their residential tenants. What is not always made clear though, is what those changes are and how a landlord may seek to manage the changes.
The proposed changes are being implemented through the Renters Rights Bill, which is currently going through the House of Lords for approval. It is targeted at reforming the Private Rented Sector (PRS) by ensuring greater secu- rity and protections for renters. Of course, those improved rights may come at the expense of landlords and investors. Whilst some may have followed the changes closely, others may be feeling unsure of where they stand.
One of the key changes that will be brought into effect by the Bill is the abolition of no-fault evictions, which are currently actioned by issuing Section 21 Notices. This route was open to landlords whether or not there was a breach of the lease by the tenant, and provided landlords with certainty that they could recover possession of a property, and in turn this protected their investment and the value of the property.
The proposed changes mean that landlords will have to show specific reasons to evict a tenant.
After the Bill becomes law, a landlord will have to serve a notice relying on one of the specified and limited grounds for regaining possession. These include:
- If the tenant has fallen into rent arrears;
- If the tenant has breached the terms of their tenancy;
- If the tenant is involved in severe anti-social behaviour;
- If the landlord or their family need to move into the property;
- If the landlord wishes to sell the property or redevelop the property.
The Bill will also make changes to the length of notice landlords are required to give before they can apply to the court to evict a tenant. This will vary depending on the ground they intend to rely upon, the wait varying from immediately to up to four months before possession proceedings can be commenced. Under the Bill, certain grounds for eviction will also afford tenants a 12-month protected period at the start of their tenancies.
If a notice is challenged, and court proceedings become necessary to remove a tenant, landlords will need to provide the court with evidence supporting the ground they are seeking to rely upon. Landlords who knowingly or recklessly misuse grounds of possession to evict tenants risk being ordered to repay rent and/or fines from the local authority.
Further changes
Changes are proposed to the way that landlords apply rent increases to their tenants. The Bill will ensure that all rent increases in the PRS are made by landlords serving a notice on their tenants. Landlords will only be able to increase the rent once per year and the increases must be in line with market rates. Tenants will have the right to challenge any rent increases they consider to be in excess of the market rates by applying to a tribunal. Whilst this is intended to prevent landlords from using excessive rent increases as a backdoor lever to evict tenants, it is likely to result in a substantial amount of rent increase challenges which could be difficult and costly to deal with.
All landlords will be legally required to register them- selves and their properties on the Private Rented Sector Database to record their compliance with their obligations. Landlords who fail to do so will be at risk of penalties issued by the local authority, and will not be able to obtain court orders to evict tenants until they have registered, save in very limited circumstances.
What to do as a landlord investor?
The Bill remains in its finalisation stages and whilst it was reported to be coming into force this Spring, it may not come into force until Autumn 2025.
If you are a landlord or property investor, using the intervening period to prepare for the likely changes may be important. Consideration should be given to taking steps to recover possession from the tenants that are known or suspected to be (or become) problematic. Landlords may also want to take this time to ensure that there are suitable tenancy agreements in place and review the position on tenant deposits for each of their properties.
If you need advice about how these changes will affect your portfolio or issuing possession proceedings, please contact us at DFA Law.
