Counsel & Conversation | S2 E1: Renters’ Rights Act | Swinburne Maddison

Caroline Smith 0:00
Lewis, welcome to this special edition of Counsel and Conversation where I’m really pleased to have with me Lewis Brown, welcome Lewis. Lewis is a Managing Associate on our Dispute Resolution team and specialises in property disputes. So Lewis, it’s great to have you here today. I specifically invited you to come here today to talk about the Renters’ Rights Act, which of course, comes into force on the 1st of May, and there’s a huge amount to consider for both tenants and landlords. So thank you for coming in, I’m going to be asking you some questions about it today. I know you know all about it, so if it’s okay with you, let’s kick straight into that.

Lewis Brown 0:45
Of course, yeah, sounds good, thanks Caroline.

Caroline Smith 0:47
What is the Renters’ Rights Act and when does it start?

Lewis Brown 0:51
So the Renters’ Rights Act is a major shake up of legislation surrounding private residential lettings, and it applies to all residential tenancies that are governed by the Housing Act 1988. So the idea of it is to give tenants better security, offer fairer financial terms, and to improve the quality of housing as well, and the main provisions come into force as soon as the 1st of May this year.

Caroline Smith 1:18
Okay, so it’s imminent, so let’s step through it. If we can go really specific here, what happens to Section 21, No Fault Evictions.

Lewis Brown 1:28
So Section 21 notices will no longer be a thing after the 1st of May. So the last chance to serve a Section 21 notice would be the 30th of April. So the idea with the Section 21 in the past has been that the landlord doesn’t need to have a reason to evict a tenant, there doesn’t need to be specific fault on the part of the tenant, the landlord doesn’t have to point to any particular circumstances to say why they want the property back. So all of that is being lost and rather moving forwards, landlords will be relying upon Section 8 notices only.

Caroline Smith 2:02
Right and could you just quickly explain the difference between Section 8 and Section 21 just in summary?

Lewis Brown 2:09
Yeah. So both provisions are governed by the Housing Act 1988 and Section 8 gives various reasons as to why a landlord might want the property back, and we’re not losing Section 8, that’s going to stay, landlords are just being given more grounds or reasons to rely upon within the notice. So there’s changes there, with the Renters’ Rights Act. Section 21 that has been used up to now for tenancies that have come out of the fixed term and where the landlord simply just wants possession back and doesn’t need to give a reason. There might be fault on the part of the tenant, the landlord might have to give a specific reasons to why they want the property back, but that doesn’t need to be cited within the Section 21 notice itself.

Caroline Smith 2:54
So what will happen to fixed term tenancies in the new act?

Lewis Brown 2:59
So this is one of the other major changes under the Renters’ Rights Act. Fixed term tenancies are no longer going to apply from the 1st of May. So all tenancies from the 1st of May will become assured periodic tenancies, which means that they just run on and on indefinitely on like a month by month basis. So as we’ve had previously, landlords would very often give tenancies for a period of six months or a period of 12 months, but that’s no longer permitted under the Renters’ Rights Act.

Caroline Smith 3:29
So Lewis you mentioned that moving forward with the new act, that Section 21 will be no longer, what will the grounds be for serving a Section 8?

Lewis Brown 3:40
So a Section 8, we’re still going to have some of the grounds that we’ve always used. So we’re moving from 17 grounds that are available into Section 8 all the way up to over 30 grounds. So there’s certainly, there’s more reasons that a landlord can give as to why they want possession of the property back. One of the grounds which is changed slightly or significantly, depending on how you look at it, is Ground 1, which is where the landlord wants to take possession of the property back because they or a family member wants to live in the property for themselves. Under the old law, that was quite narrow, so it could only be the landlord or their spouse or civil partner who could move back into the property to qualify for that ground, but under the Renters’ Rights Act, family member is widened to children, grandchildren, parents, siblings, those living as though they are a spouse or civil partner with the landlord. So that certainly widened and gives the landlord more flexibility, I suppose, in terms of serving the notice and giving that reason why. The period for that, under the notice for the tenant to give possession, would be four months. So there is some grounds like that that have changed and then there are brand new grounds as well. So we now have new Ground 1a, which is all to do with the landlord selling the property. And again, the notice period for that would be four months. One thing to point out with this is that if the landlord does serve a Section 8 notice giving Ground 1a to get possession of the property back, they then can’t re-let the property for 12 months. So that’s to try and safeguard against the situation of landlords just using that kind of reason, or, you know, any reason they like, to try and get the property back and then just immediately re-let to new tenants of their choosing. So whilst the grounds are being widened, there are certain safeguards being put in place for tenants to ensure that landlords can’t just do what they want, and there’ll be no repercussions for that. Think one of the other grounds is changing is Ground 8, which is the mandatory ground for rent arrears. So currently, with Section 8, the landlord would just need to show that there were two months worth of rent arrears outstanding in order to qualify for that mandatory ground where judges don’t necessarily have discretion, but to make their possession order. Under the Renters’ Rights Act, if rent is paid on a monthly basis, it will now need to be three months worth of arrears. If the rent is paid on a weekly basis, currently to get the mandatory ground, it’s eight weeks, that’s moving up to 13 weeks. So we’re seeing longer periods where rent arrears are expected to fall due before the landlord then qualifies for that mandatory ground, and with the notice period that needs to be given under that Section 8 notice, if Ground 8 is being used, that’s moving up from two weeks to four weeks. So if rent is being paid on a monthly basis, we’re now having situations under the Renters’ Rights Act where landlords are being expected to wait, in essence, four months, ie three months worth of arrears, then four weeks for the notice to expire before they’re then able to issue a claim for a possession order. So it’s certainly lengthening the timeframes that landlords are expected to wait before they can start litigation.

Caroline Smith 7:22
Yes, it’s really interesting. I mean, what’s going through my mind is that, so if I’ve understood this correctly, that from a tenant point of view, you’re not tied in for any particular term, but you’re in a position where you just give eight weeks notice to leave. But actually from a landlord point of view, although there are a number of grounds to serve a Section 8, there are that is a sort of longer process, effectively. Is that right in terms of my understanding?

Lewis Brown 7:53
So from the tenants point of view, they would only need to give the two months notice to leave off their own accord. So that gives tenants a lot of flexibility, you know, they’re not then tied into a property for six months, twelve months, they can just leave when the like, provided they give two months notice. So that will certainly change how landlords behave with their property portfolios, they’ll need to manage void periods, be a bit more mindful of you know properties suddenly becoming vacant when they didn’t necessarily expect them to be vacant after a couple of months notice on behalf of the tenants, but you’re right, with the notice periods the variation to the ground, it’s going to take a lot longer for landlords to move through the possession process before they can start court proceedings and to get the court order for the tent to vacate.

Caroline Smith 8:50
So Lewis, obviously, we’ve talked about the situation in a sort of standard rental, and the fact that the fixed term will no longer be there, what would happen from a student perspective, where you know, obviously their study period is going to be a defined length of time. How will that work?

Lewis Brown 9:08
Yeah, so the Renters’ Rights Act has accounted for this within the legislation. So there is Ground 4a which can be used within a Section 8 notice where a landlord of students can give them four months notice, provided that notice ends between the 1st of June and the 30th of September, so as to keep things ticking over nicely in line with academic years. Now this only applies to student HMOs, houses in multiple occupation, which is defined as a property with students where there are three or more of them. So for purpose built student accommodation, like halls of residence, that falls outside of the Renters’ Rights Act, and any student property, whether where it doesn’t classify as a HMO that will just be dealt with like any other tenancy, so if there’s two students for example. So this is certainly an area where the government have been mindful to include an exception to the norm, in that there is this specific ground to remove with the four months notice.

Caroline Smith 10:18
But actually for a student that isn’t in an HMO property, then effectively, it just falls back to what we’ve just discussed about the eight weeks notice from a tenant point of view, or the landlord serving the four months notice.

Lewis Brown 10:31
Yeah, provided it’s the usual residential tenancy under the Housing Act 1988 as we know it now, it will be governed by the Renters’ Rights Act, and everything outside of ground foray would apply.

Caroline Smith 10:46
So continuing on the student theme, Lewis, what conditions might there be in terms of the 4a?

Lewis Brown 10:54
So it’s very important for landlords of student properties to be serving a specific notice at the outset of the tenancy to say that they intend to use Ground 4a in the future. Only if that’s done, can Ground 4a then be relied upon within a Section 8 notice. And interestingly, as well, Ground 4a can only be used if the tenancy agreement was signed less than six months before the tenancy agreement started. So this will see a real change in the market because when I was a student, and I think what’s happened since is the landlord signed the student tenants up nice and early, often in the November, ready for the following September. So you know, 11 months in advance. It will be interesting to see how landlords react to that, and whether they will take the risk and just sign tenants up anywhere in November time, as they always have done, without being able to use Ground 4a in the future in the hope that students, like is often the case, just move on at the end of the academic year anyway. But there are conditions for using Ground 4a and those need to be satisfied if landlords want to go down that route with the Section 8 notice.

Caroline Smith 12:13
So Lewis, how often can rent be increased under the new rules?

Lewis Brown 12:18
Yes so what we were finding under the old law was that landlords, year on year, would look to increase the rent, they would put that to the tenants, the tenants might not accept because the increased proposed rent could be seen as unreasonable and excessive, and then unfortunately, if the tenants weren’t agreeable, they would inevitably be served with a Section 21 notice. That’s what was quite often happening, unfortunately. So the Renters’ Rights Act is trying to get away from all of that and to give the tenants greater security. So what we have seen in tenancy agreements, very commonly in the past, up until now, are rent review clauses within tenancy agreements which landlords can rely upon. In line with the new legislation, those will become null and void as of the 1st of May, so even with existing tenancy agreements that are in existence now, those clauses can’t be relied upon, and rather all landlords will be able to rely upon from the 1st of May will be Sections 13 and 14, the Housing Act 1988. And this is a very specific mechanism for landlords to be able to increase rent under the tenancy after the first anniversary of the tenancy, so it can’t happen before, but after the first anniversary, the first 12 months, landlords can serve a notice in a prescribed form upon the tenants, giving them two months notice of a proposed rent increase, and the tenants can challenge that.

Caroline Smith 13:49
So how would a tenant even begin to challenge the rent increase?

Lewis Brown 13:55
So if the rent isn’t in line with a fair market rate, then tenants can challenge the rent that’s being imposed upon them by the landlord. So the process would be that the tenant applies to the land registration first tier tribunal for a judge essentially to make a decision. So the purpose of the tribunal is to determine what that value of a fair rent would be, and it’s quite important to note that if the tribunal were to come to a figure which actually exceeded the rent that was being proposed by the landlord, the landlord would actually be stuck with their own figure that they put within the notice that was served upon the tenant. And it’ll be really interesting to see how this plays out in practice, because there’s no real risk on the part of the tenant to challenge the rent increase that’s being imposed upon them. In the tribunal, the general principle is that, unless there’s unreasonable behaviour, each party would just pay their own costs. So it’s not as if the tenant can make a claim and then fail miserably and then be exposed to the landlord’s legal bill, that just wouldn’t happen unless the tenant was seen to be acting unreasonably, which is obviously a subjective question. So it will remain to be seen how swamped the tribunal is with this type of claim, but from the face of it, it would seem that tenants don’t really have a lot to lose by challenging any rent increase that’s imposed upon them, because in their view, you know why would they not? And another point of interest for landlords, and something which is quite important to bear in mind is that if the tribunal were to decide that the rent, as per the landlord’s notice, was fine and that was the rent to be applied, then that would only actually apply from the date that the tribunal makes the decision, so the old rent would carry throughout all the way up to the tribunal judge’s decision, which could be quite a long and considerable period of time.

Caroline Smith 16:06
So Lewis, in terms of from a landlord perspective, and when it comes to selecting a tenant, what are some of the considerations that they would have now?

Lewis Brown 16:16
There’s new discrimination wording within the Renters’ Rights Act of a nature that we haven’t really seen before. So there can’t be any blanket ban on landlords refusing to accept families or those on benefits. So this is to protect those groups of people from essentially having limited choices for properties that they can apply for and let. There are exceptions, of course, to this you know, if there is a retirement village, for example, a family would not be suitable in that kind of environment, and with those on benefits, if the landlord can establish that actually that tenant’s total income, benefits included, still wouldn’t be able to affordably meet the rent, which is expected to fall due weekly or monthly, then that would be a good reason for refusing that tenant to let as well. So there is this protection for groups of tenants now, but that doesn’t mean to say that the landlord would have to accept anyone that comes into that category, really, it would come down to numerous factors, the the type of the property, and also with failed reference checks as well.

Caroline Smith 17:31
So what about in terms of the rental amounts, and you know that being paid in advance, or what are some of the considerations there for a landlord?

Lewis Brown 17:43
So a landlord now cannot ask for more than one month’s rent in advance, and it’s also disallowed for a landlord to be accepting rent before the tenancy agreement has even started.

Caroline Smith 17:53
Right, okay, and then what about in terms of bidding and encouraging that sort of activity. Are there any changes there?

Lewis Brown 18:02
The Renters’ Rights Act prohibits that now rental bidding, so we can’t have these situations where tenants are competing against each other, and, you know, the highest sum wins, in essence. Rather now, landlords will advertise the property for let, they’ll have to give a specific figure as to what they’re looking for for that rent per week, per month, and they can’t invite or encourage any offers over that amount. So that’ll put an end to rental bidding wars, as we’ve seen it so far.

Caroline Smith 18:34
So what’s going through my mind now Lewis is from a landlord point of view, what are the implications if they break some of these new rules?

Lewis Brown 18:42
There will be fining powers of the local authority, and I think it’s likely that they’ll be clamping down on unscrupulous landlords who don’t follow these new rules that are coming into force. The fines for first time administrative offences, if you like, of the rules would be up to £7000. So for example, you know, we touched on a landlord using a Section 8 notice to evict a tenant in giving the ground of they were looking to sell the property, as part of that, the landlord wouldn’t be able to re-let the property for a further 12 months, as we discussed, if landlord goes against that, then that could well lead to a fine fine of up to £7000. If there are repeated breaches, repeated non compliance, which are seen as very serious, then the fines could range all the way up to £40,000. So it really is important for landlords to know what rules are applied to follow, and to ensure that they don’t fall into mistakes inadvertently.

Caroline Smith 19:48
So what about tenants who have pets? I mean, obviously some landlords will just specify no pets allowed, are there any changes there?

Lewis Brown 19:55
So firstly, under the Renters’ Rights Act, we now have the definition of what a pet is, and that’s defined as an animal that’s kept for companionship, personal interest, or ornamental purposes, or a combination of all three of those. So I suppose it is useful for us to have a definition, but I’m not sure if anyone really was asking beforehand what a pet was, I think it was self explanatory, but now that there is a massive change in this area, because landlords now can’t unreasonably refuse a tenant to have a pet. Beforehand, if a landlord didn’t want a pet in the property, that was their prerogative, and their decision was final. Now I suppose the landlord still does have the final decision, but they would need to show that their consent was not unreasonably withheld, if their decision is to be taken as lawful.

Caroline Smith 20:47
So what would be a reasonable request from a pet point of view, or an unreasonable request?

Lewis Brown 20:54
So it’s really a subjective question, really a subjective area, because it’ll be interesting to see what the courts make of this, but in the meantime, the government has issued some guidance as to what an unreasonable withholding of consent would be. For example, having a Great Dane in a small studio flat, for a landlord to refuse permission for that would probably be seen as reasonable, and some of the guidance specifically says that if another tenant in the property has an allergy to a certain type of pet, the landlord could withhold consent on that basis as well. And in addition, if it is illegal to even have that pet in the first place, for example, a crocodile in the flat of a house that is clearly a ground for the landlord to withhold consent to. So there still are provisions that protect a landlord, but it’s going to come down to a case by case basis.

Caroline Smith 21:45
What information must landlords give tenants by the 31st of May?

Lewis Brown 21:51
So all landlords with existing tenancy agreements must give the tenants the Renters’ Rights Act information sheet, which sets out a bit of a summary as to what the changes in legislation have been just to keep the tenant informed as to what their updated rights are.

Caroline Smith 22:08
So what would happen Lewis, if they didn’t issue that?

Lewis Brown 22:12
This is where the fining powers of the local authority come in, so that there could be a fine of up to £7000 for a failure in that respect.

Caroline Smith 22:19
Does that mean that existing contracts will have to be rewritten?

Lewis Brown 22:23
No, nothing like that needs to be done. All existing tenancy agreements can just stay as they are, even if they refer to assured short hold tenancies or fixed terms. The changes to the legislation will just apply to those tenancy agreements, and nothing needs to be redrafted or redrawn up.

Caroline Smith 22:42
What improvements are planned after May 2026?

Lewis Brown 22:47
So everything we’ve discussed so far is really in connection with phase one of the Renters’ Rights Act. Phase two, and then eventually phase three, will come at later points. So if we’re looking at phase two, for example, that involves the landlord’s database, which landlords will need to register with. It’s a new scheme designed to have more information about landlords and the properties publicly available, and that will allow tenants to choose landlords that have good credibility and good standing and ensure that they’re not choosing landlords who have had problems in the past with tenants, but that’s not expected to come into place until late 2026 so we’ll just have to see how things pan out with that.

Caroline Smith 23:30
Lewis that’s been really interesting and so much information. Just to wrap things up, what would you recommend or advise a landlord to do right now?

Lewis Brown 23:38
When thinking about one of the headline changes, this is all to do with Section 21 notices, and the window of time that we have to serve a Section 21 notice is rapidly vanishing. So as we mentioned, 30th of April is the last day to serve a section 21 notice. So if you are a landlord looking to take possession of a property, and you don’t necessarily have a specific reason that would fall within Section 8, and it’s really important to be thinking about serving a Section 21 notice. Moving beyond that, with Section 8 notices being the only option moving forwards after the 1st of May, it’s a really complex and technical area of law when drafting the notices to have to be really precise, really particular, there’s no room for error, really, so we can assist with that of course, very happy to have a conversation about tenancy portfolios, whether they be big or small, and just to work out what to do with next steps in terms of bringing tenancies to an end, if that, if that’s what landlords are wishing to do.

Caroline Smith 24:39
Yeah. I mean, I think what’s really clear to me is the amount of change. You know, it’s a huge amount of change, and you step through that for us which is brilliant, but I guess that is the advice, if you need more information the experts right here. Thank you, Lewis. I’ve loved talking to you today.