In May this year, the House of Lords proposed 300-plus amendments to the draft Bill. The
draft Bill is due to have a further examination by the House on 1 July, with further
examinations scheduled for 7 July and 15 July.
But what can we glean from the amendments and themes from the committee stage
debates? It cannot be denied that this Bill will be the most ambitious piece of legislative
change to the private rental sector in over 35 years. In broad summary the Bill is seeking to
abolish fixed term assured tenancies and assured shorthold tenancies. It will also impose
obligations on landlords and others in relation to rented homes and temporary and supported
accommodation.
We look at these briefly in turn: -
Fixed-term tenancies
This is a moot topic between the Government and the House of Lords, with the latter putting
forward multiple examples where the lack of a fixed-term tenancy could be counter-
productive. The Bill will provide tenants with increased flexibility, but this will leave landlords
with the only option of offering tenants a periodic tenancy rolling from one month to the next.
Landlords will also be prevented from serving section 21 notices (two-month notice) to a
tenant to vacate the property. A tenant will be able to serve a notice; however, the landlord
will need to prove a statutory ground in order to obtain possession. The most commonly
relied upon mandatory ground for possession is a specified amount of rent arrears.
However, the Bill will require a higher threshold of arrears to be established than under the
current law.
The new proposed ground 8 will require there to be at least 3 months’ rent arears both at the
date of service of the notice and the date of the hearing. Under the current law, there must
be at least 2 months’ rent arrears to rely upon this ground.
These revisions will present certain difficulties to landlords. Albeit the revisions to ground 8
bring these types of claims into line with mortgage repossession claims, it is almost certain
that mortgage lenders will have deeper pockets than most landlords. Furthermore, the loss
of a fixed term tenancy means the landlord (and indeed his tenants) loses the certainty that
their property will be rented for a certain period with the real risk that the tenant may serve a
notice to terminate their tenancy.
Rent reviews
While a landlord will be able to propose annual rent increases in line with the fair market
rent, this will need to be done by following a prescribed statutory process. The norm would
be for rent reviews to be incorporated into written tenancy, for rent increases to be
considered upon the expiration of the tenancy. However, given that fixed term tenancies are
to be abolished, the new regulations will require landlords to serve a statutory notice on their
tenant, giving at least two months’ notice of the rental increase. The tenants will have a right
to object and challenge the rent increases within the First-Tier Tribunal (Property) Chamber.
Once the Tribunal has determined the open market rent for the property, this will be payable
from the later date of determination rather than the date of the notice of increase.
This poses a clear problem to landlords as there is no clear disincentive on a tenant to
accept the new rent without first challenging it. This is because there will be no cost
sanctions levied on a tenant through challenging the proposed rent increase through the
FTT. Further, if a rent increase is upheld, the new rent will not be higher than the sum the
landlord proposed, and will not be backdated, so will only apply from a future date
determined by the tribunal. There are clear concerns therefore that the Courts will be
overwhelmed by tenants seeking to challenge proposed rental increases.
Increased regulation
Landlords will be required to register with a new property database. This will add a further
layer of administrative costs on landlords; however, the last database which was created by
Housing Act 2004 created a framework which has been worked well and is relied upon by
both tenants and landlords. No further detail has been released as yet as to how the
database will operate and what information is required.
We are keeping a close eye on developments in respect of the Bill and we will report as and
when these trickle through. In the meantime, if you require any further advice, please do not
hesitate to e-mail me at sean.kirk@johnfowlers.co.uk
draft Bill is due to have a further examination by the House on 1 July, with further
examinations scheduled for 7 July and 15 July.
But what can we glean from the amendments and themes from the committee stage
debates? It cannot be denied that this Bill will be the most ambitious piece of legislative
change to the private rental sector in over 35 years. In broad summary the Bill is seeking to
abolish fixed term assured tenancies and assured shorthold tenancies. It will also impose
obligations on landlords and others in relation to rented homes and temporary and supported
accommodation.
We look at these briefly in turn: -
Fixed-term tenancies
This is a moot topic between the Government and the House of Lords, with the latter putting
forward multiple examples where the lack of a fixed-term tenancy could be counter-
productive. The Bill will provide tenants with increased flexibility, but this will leave landlords
with the only option of offering tenants a periodic tenancy rolling from one month to the next.
Landlords will also be prevented from serving section 21 notices (two-month notice) to a
tenant to vacate the property. A tenant will be able to serve a notice; however, the landlord
will need to prove a statutory ground in order to obtain possession. The most commonly
relied upon mandatory ground for possession is a specified amount of rent arrears.
However, the Bill will require a higher threshold of arrears to be established than under the
current law.
The new proposed ground 8 will require there to be at least 3 months’ rent arears both at the
date of service of the notice and the date of the hearing. Under the current law, there must
be at least 2 months’ rent arrears to rely upon this ground.
These revisions will present certain difficulties to landlords. Albeit the revisions to ground 8
bring these types of claims into line with mortgage repossession claims, it is almost certain
that mortgage lenders will have deeper pockets than most landlords. Furthermore, the loss
of a fixed term tenancy means the landlord (and indeed his tenants) loses the certainty that
their property will be rented for a certain period with the real risk that the tenant may serve a
notice to terminate their tenancy.
Rent reviews
While a landlord will be able to propose annual rent increases in line with the fair market
rent, this will need to be done by following a prescribed statutory process. The norm would
be for rent reviews to be incorporated into written tenancy, for rent increases to be
considered upon the expiration of the tenancy. However, given that fixed term tenancies are
to be abolished, the new regulations will require landlords to serve a statutory notice on their
tenant, giving at least two months’ notice of the rental increase. The tenants will have a right
to object and challenge the rent increases within the First-Tier Tribunal (Property) Chamber.
Once the Tribunal has determined the open market rent for the property, this will be payable
from the later date of determination rather than the date of the notice of increase.
This poses a clear problem to landlords as there is no clear disincentive on a tenant to
accept the new rent without first challenging it. This is because there will be no cost
sanctions levied on a tenant through challenging the proposed rent increase through the
FTT. Further, if a rent increase is upheld, the new rent will not be higher than the sum the
landlord proposed, and will not be backdated, so will only apply from a future date
determined by the tribunal. There are clear concerns therefore that the Courts will be
overwhelmed by tenants seeking to challenge proposed rental increases.
Increased regulation
Landlords will be required to register with a new property database. This will add a further
layer of administrative costs on landlords; however, the last database which was created by
Housing Act 2004 created a framework which has been worked well and is relied upon by
both tenants and landlords. No further detail has been released as yet as to how the
database will operate and what information is required.
We are keeping a close eye on developments in respect of the Bill and we will report as and
when these trickle through. In the meantime, if you require any further advice, please do not
hesitate to e-mail me at sean.kirk@johnfowlers.co.uk