Part 2 of a quick initial look at the Renters’ Rights Bill draft, concentrating on what has changed from the late Renters (Reform) Bill that forms its basis. Part 1 of the headlines look is here, and our previous views on the Renters (Reform) Bill – much of which remain current – are here and here.)
First an erratum – the first version of Part 1, since amended, said that private providers of purpose built student housing would be outside the new assured tenancy regime, on a par with university owned accommodation. This was what I understood would be the case, but on closer examination, it is not in the draft Bill. So, the only student tenancy bit at the moment is the student ground for possession, which only applies to HMOs. Purpsoe built accommodation may or may not be HMOs, depending. There is also something odd in Schedule 1 to the Bill which refers to HA 1988 ground 4 as a student ground, when it isn’t, as well as the new ground 4A. It is bit of a muddle, and I expect there is more to come here.
Now onwards!
Rental Bidding – now this is an interesting one. The aim is to prevent an unpleasant practice that has emerged in certain high pressure rental areas where landlords and/or agents encourage prospective tenants to enter into bidding the rent they’d be willing to pay to secure the tenancy.
As was pointed out to me by a journalist, themselves a renter, this has an onward impact on everyone, as the highest bid is then portrayed by agents as the market rent for the area and used to raise current tenants’ rent, based upon what one particularly well off or desperate prospective tenant would pay.
So, first, landlords and/or agents are banned from inviting or encouraging anyone to offer more than the advertised rent, and, more interestingly, banned from letting at more than the advertised rent.
I gather this is a model recently introduced in parts of Australia, as oppose to a New Zealand model which just banned encouraging higher offers, not accepting them. I don’t think there is any research on how this has worked, because it is recent.
My sense – and it is no more than that – is that initially this may lead to properties being listed at a higher rent than the landlord reasonably expects to get, as the landlord can accept a lower offer and can then chose the best lower offer. But I don’t think this would last very long, as a) diminishes potential tenant pool, possibly to nil if the landlord gets it badly wrong, b) excessive initial rents can be taken to the FTT for determination of market rent (and this is likely to happen more often once the s.21 threat is removed. See below on rent determination), and c) it relies on a change of behaviour by tenants to do highest underbidding. In less high pressured rent areas, it may even work to prevent speculative high rent listings, as rent would have to be pitched at a realistic maximum. Nonetheless, it is an interesting move and we will see how it plays out.
Rent – initial and increases
Rent increases during a tenancy – can only be annual and via the section 13 Housing Act 1988 procedure, including service of proper notice with a proper notice period.
The tenant can challenge these by application to the First Tier Tribunal, who can determine whether the proposed rent meets or exceeds market rent. The big change here, and it is a good one, is that the Tribunal determined rent can only be the lower of a) the market rent, or b) the landlord’s proposed rent. Currently, the FTT can determine a market rent that is higher than the landlord’s proposed rent.
If the tenant applies to the FTT, the new rent will take effect from the date of determination or date given by the FTT.
The second change, for which I will claim a little credit for getting in there, is that the FTT will also be able to determine whether a section 13 notice is valid (form, date of effect, etc.). Currently the FTT can’t do that – see here for the problem.
Rent at start of tenancy – as far as I can see, the initial rent can be challenged in the FTT as over market level for the first 6 months of the tenancy.
Awaab’s Law
Awaab’s Law – AKA section 10A Landlord and Tenant Act 1985 – will also apply to the private sector as well as the social sector. While section 10A is in force, the underlying regulations have not yet been made. For those in the PRS who didn’t pay attention, this was the consultation on Awaab’s Law, No response to the consultation has yet been published. But in short, it will specify defects and a timescale for responding to those defects. It does not impose new repairing obligations above section 9A and 11 Landlord and Tenant Act 1985, just the timescale in which a complaint of relevant defects must be responded to. Breach of section 10A is actionable by the tenant. But the timescales are likely to inform local authority enforcement action as well.
Pets, benefit and children discrimination
This is pretty as per the R(R)B (though also extended to Wales and Scotland). The only significant difference on pets is that the tenant having pet insurance will be an implied term in the tenancy agreement (assuming that they have a pet), and a failure to insure would be a breach of tenancy.
The discrimination clauses are, as before, a prohibition on any blanket policy on prospective tenants on benefits, or with children, unless the discrimination can meet a legitimate objective. Any clauses in insurance or mortgages that would exclude benefits or children will be void.
But it is emphasised that
Nothing in this Chapter prohibits taking a person’s income into account when considering whether that person would be able to afford to pay rent under a relevant tenancy.
Rent repayment orders
RROs are generally extended to cover a 24 month period, rather than 12 months, and the tenant now has two years to make the application from the last date of offence/tenancy, rather than 12 months.
There are new RRO offences:
Mis-using a possession ground
Breach of a letting restriction
Continued breach after imposition of a civil penalty
Breach of Landlord Redress Scheme (see below)
Provision of false information to Landlord database
Previous RROs or civil penalties to be considered in an RRO award.
There are provisions for personal liability on directors of a landlord company where the offence was committed with their ‘consent or connivance’ – well overdue.
And, as noted in part 1, superior landlords will also be liable for RROs, overturning Rakusen v Jepsen.
(While on Rent 2 Rent, David Smith made an interesting point in his first note on the Renters’ Rights Bill. The change to assured periodic tenancies also make any clause in a landlord’s own lease requiring return of the property with vacant possession ineffective. This means that any rent 2 rent agreement for a fixed term can no longer require the property to be returned to the owner with vacant possession at the end of the term. There will be sitting sub-tenants. This effectively kills the private sector rent 2 rent model. It is only with housing associations/registered providers as rent 2 rent tenants that return of the property with vacant possession at the end of the term could be achieved. So Rakusen v Jepsen/superior landlord issues may become academic anyway. Frankly, given the state of the private sector rent 2 rent field, this can only be a good thing.)
Landlord Redress Scheme
Largely as per the R(R)B – landlords will need to be members of a redress scheme.
Landlord database
Again, largely as before and much will be in regulations. But the Secretary of State can by regulations specify what information in the database is to be available to the public. Councils get access.
What information will be required is to be set by regulations. One would anticipate it would include gas safety certs, EICRs and suchlike. But it will include banning orders, and convictions and civil penalties relating to banning order offences.
No possession order can be made if the landlord is in breach of the database requirements on them, and there are civil penalties of up to £7,000, or up to £40,000, depending on the breach, or prosecution for a criminal offence in the breach.
Decent Homes Standard
There will be a decent homes standard applying to social tenancies and private sector tenancies. For social it will be enforced by the Regulator of Social Housing. For the private sector, it will be local authorities. It will not be directly enforceable by tenants. It may, it appears, also apply to some kinds of Part VII homeless temporary accommodation.
The content of the decent homes standard is yet to be seen (it is not the existing one).
Enforcement
There is a general duty on local housing authorities to enforce landlord legislation in its area. There may be a ‘lead authority’ nationally.
New powers to require information and documents from landlords, and from other parties in relation to particular offences, with court enforcement.
Entry without warrant to business premises and indeed residential premises (where a suspected offence) on notice. And assorted powers of access to information.
A definite strengthening of powers for enforcement.
Of course, enforcement has been a weak point of the current regime for many councils, so a lot of this may depend on both will and funding. We shall see.
And that is, broadly, that. This is the draft Bill. I expect there will be changes, tweaks and additions, possibly before second reading, and/or during its passage through Parliament. But the direction of travel is clear and this time not hobbled by rebellious Tory backbenchers. This is going to be the biggest change in English housing law since 1988 and I for one am thoroughly excited.