The Renters (Reform) Bill received its long-awaited second reading in the House of Commons on 23 October, over 5 months after being published (see our blog for a summary of the main proposals in the Bill). In this blog, we summarise the latest developments for our clients.

Abolition of "no-ground" terminations still going ahead

The progress of the Bill has been slower than anticipated, with concerns raised by various stakeholders that the main proposal to abolish section 21 "no-ground" terminations, a 2019 Conservative manifesto commitment, were being put on ice.

The headline coming out of the second reading was a reassurance that section 21 would be abolished... but not before the court process has been significantly improved with end-to-end digitisation. This announcement was met with criticism, as such improvements are realistically at least a couple of years away. However, as we highlighted in our article in the Law Society's Property in Practice magazine published on 25 September, the lack of court resources to deal with the anticipated influx of disputed cases under the regime is a major flashpoint. Whilst the inevitable delay in implementation may be disappointing for some, it is crucial that parties have confidence in the framework upon which they must rely to deal with their tenancies. This priority cuts both ways: landlords must be comfortable that they can obtain possession in a timely manner when legitimate grounds exist, but tenants need assurance that any challenges to annual rent increases will be dealt with swiftly (as all rent-review clauses will be banned and challenges to any section 13 increase must be referred to court).

In February 2023, the Levelling Up, Housing and Communities Committee (LUHCC) strongly recommended that the government introduce a specialist housing court as "the surest way of unblocking the housing court process" in its Fifth Report of Session 2022–23. The government's response, published on 20 October, made it clear that a specialist housing court was not under consideration. It has consulted on this point with the Ministry of Justice and members of the Judiciary, who agreed that the cost of introducing a new housing court would outweigh the benefits. Instead, the target areas for improvements in the courts include:

  1. digitising more of the court process to make it simpler and easier for landlords to use;
  2. exploring the prioritisation of certain cases, including antisocial behaviour;
  3. improving bailiff recruitment and retention and reducing administrative tasks so bailiffs can prioritise possession enforcement;
  4. providing early legal advice and better signposting for tenants, including to help them find a housing solution that meets their needs; and
  5. strengthening mediation and dispute resolution, seeking to embed this as a member service of the new Ombudsman.

Rent review clauses still banned

Despite calls for index-linked or stepped rent reviews (with a break period to allow tenants to challenge increases) to be permitted to allow certainly and financial planning for both parties, the government is staying firm on a ban for all rent review clauses. If the Bill is passed, rental increases will only be permitted via section 13 of the Housing Act 1988, again increasing the pressure on the court system to deal with any challenges.

The LUHCC suggested that data held by the Valuation Office Agency (VOA) could be used to determine rent increases and the VOA be given "initial responsibility for determining whether an increase is justified, with the tribunal serving as an appeals court." Alternatively, if that data is not suitable, it has suggested landlords could be required to declare rent through the new Property Portal to provide a bank of market data to allow a fuller availability of evidence for landlords and tenants facing/pursuing section 13 challenges.

However, the government maintains that the First-tier Tribunal is best placed to resolve any disputes as they have experts who can assess the true market value of a property, which is fact specific. They do not propose to intervene in that process.

Still no certainty of term for either party

One criticism of the reforms is that landlords have no certainty at all, as tenants may issue their two-month termination notice on the first day of the tenancy, increasing administrative burden and leading to potential letting voids. LUHCC recommended that tenants be unable to serve notice to terminate until they had been in the property for at least four months, giving landlords an initial period of 6 months certain income. However, this recommendation has been dismissed by the government.

Student accommodation rules to be revisited

Whilst purpose-built student accommodation is carved out of the reforms (such that fixed term tenancies may still be granted), concerns have been raised about privately rented student accommodation and the impact the reforms would have on that market once the certainty of section 21 terminations have been removed.

The government "recognises that the student market is cyclical and ... ensures a timely and robust supply of student accommodation." As such, their latest proposal is for non-purpose built student accommodation to be included within the reforms so that tenancies will be on the same statutory periodic basis as per the wider private rented sector, but include a new, specific ground of possession for student housing which can be used in line with the academic year.

Next steps

As Parliament was prorogued on Thursday 26 October, a carry-over motion was passed so that the Bill will progress to committee and report stages during the next Parliamentary session (date to be announced). Many eyes will be focused on the shape of the Bill once it passes through this next stage.

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