This week, the Renters Reform Bill, also known as the Renters Rights Bill, passed its third and final reading in Parliament and has moved to the House of Lords.
Amendments made in the journey through the House of Commons include limitations on rent in advance and an allocation of landlord fees to fund a private renters ombudsman.
The Labour Party’s manifesto promises major reforms, particularly around the abolition of Section 21 evictions, commonly known as “no-fault evictions,” and the enhancement of tenant rights through the broader Renters’ Charter.
In this blog, we will explore the potential impact of the abolition of Section 21, the introduction of extended legal protections for renters, such as Awaab’s Law, and changes to energy efficiency standards and leasehold reforms.
Key Amendments From the House of Commons
As the Renters Reform Bill progresses through parliament, several important amendments have been introduced, aiming to balance the interests of both tenants and landlords while addressing concerns raised by various stakeholders. Below, we outline some of the key changes and their potential implications.
Limiting Rent in Advance
One notable amendment focuses on limiting the amount of rent tenants can pay in advance. While the intention is to ensure fairer housing practices, this measure could inadvertently reduce housing options for financially vulnerable groups, such as pensioners, lower-income individuals, the self-employed, and overseas students. These groups often face challenges when passing referencing and affordability checks. Paying a larger proportion of rent upfront has historically provided a way for tenants to demonstrate their ability to sustain a tenancy, offering landlords reassurance about financial reliability.
Housing Minister Matthew Pennycook has clarified that landlords will still be permitted to request one month’s rent in advance, along with a security deposit of up to five or six weeks’ rent. He emphasised that referencing checks, affordability assessments, and guarantors should provide sufficient safeguards for landlords. However, this amendment raises concerns about its potential impact on tenant accessibility to private rental homes, particularly for those in non-traditional financial circumstances.
Key Points in the Renters Reform Bill
Abolition of Section 21 Evictions
The most prominent proposed change is the abolition of Section 21 evictions. Currently, Section 21 allows landlords to terminate a tenancy without needing to provide a specific reason. Under Labour’s proposed reforms, this option will be removed, offering tenants greater security in their homes.
This abolition is a cornerstone of Labour’s Renters’ Charter, which aims to address concerns that the current system leaves tenants vulnerable to unfair evictions, often driven by rising rents or disputes unrelated to the tenant’s conduct. By removing Section 21, Labour seeks to prevent exploitation and discrimination within the rental sector and give renters more confidence to challenge unfair rent increases or living conditions.
From a landlord’s perspective, this change could present new challenges. Without the ability to issue a no-fault eviction notice, landlords will need to ensure they have legitimate grounds for regaining possession of their properties. These grounds are expected to include non-payment of rent, antisocial behaviour, or breaches of the tenancy agreement.
While the intention is to offer more protection to tenants, there is a valid concern about the judicial system’s ability to handle the resulting disputes. The current system already faces delays, and Labour’s proposal would likely increase the volume of cases brought before the courts. As such, it is critical that the reforms include improvements to the judicial system, ensuring landlords can regain possession in reasonable timeframes when they have legitimate grounds to do so.
The Extension of Awaab’s Law to Private Rentals
Awaab’s Law was introduced in response to the tragic death of a young boy, Awaab Ishak, due to prolonged exposure to mould in social housing. The law currently applies to social housing and mandates strict timelines for landlords to address hazards such as mould, extreme temperatures, or carbon monoxide exposure.
Labour plans to extend this legislation to the private rental sector, meaning that landlords will be required to adhere to more stringent health and safety standards. Under Awaab’s Law, landlords must inspect potential risks within 14 days, provide a written report of the findings, and begin remedial work within seven days if the hazard poses a serious threat to tenant health. Urgent repairs must be completed within 24 hours, and all communications with tenants regarding repairs must be documented.
For tenants, this extension will likely result in better living standards and prompt action being taken when health hazards are identified. However, landlords will need to be prepared for the increased responsibility and potentially higher costs involved in maintaining these standards. This may require changes to property management practices, particularly for landlords managing multiple properties.
Energy Efficiency Standards: Labour’s Warm Homes Plan
Energy efficiency has long been a focus in the private rental market, with regulations requiring landlords to meet minimum energy performance standards. Labour’s Warm Homes Plan goes a step further, pledging to allocate £6.6 billion towards improving the energy efficiency of homes across the country. While the plan is not solely focused on rental properties, it includes proposals that could impact landlords significantly.
Labour aims to ensure that all homes, including rentals, meet a higher energy efficiency standard by 2030. While the exact target remains unspecified, it is anticipated that this could mean achieving an Energy Performance Certificate (EPC) rating of C or above. In comparison, the Conservative Party had set similar targets but proposed a longer timeline, with some of the goals being scaled back as recently as 2023.
For landlords, this change presents both an opportunity and a challenge. Those who invest in energy-efficient improvements could see reduced utility costs, which could make their properties more attractive to prospective tenants. However, the upfront costs of retrofitting homes to meet higher standards may prove burdensome, especially for smaller landlords. Securing private funding, as Labour has suggested, could ease this burden, but it remains to be seen how accessible these funds will be.
Leasehold Reform
Labour’s manifesto also includes a pledge to reform the leasehold system, which it describes as “feudal.” This could have significant implications for property ownership structures, particularly for landlords who own leasehold properties.
The specifics of Labour’s proposals are still emerging, but the overarching goal is to make property ownership more straightforward and equitable, particularly for those living in leasehold properties. While this is not directly related to the day-to-day management of rental properties, landlords who operate within the leasehold system may need to reassess their legal standing and obligations in light of these potential reforms. However, we can expect significant pushback from freeholders on this and for the reforms to be watered down as a result.
Implications for Landlords and Tenants
At the heart of Labour’s proposed reforms is the intention to enhance tenant protections. The abolition of Section 21, the extension of Awaab’s Law, and stricter energy efficiency requirements are all designed to improve living standards for tenants and offer greater security.
For tenants, these changes represent a significant shift in the balance of power within the rental market. The abolition of no-fault evictions means that tenants can feel more secure in their homes, while the extension of Awaab’s Law ensures that their health and safety are prioritised. Furthermore, energy-efficient homes will help reduce household expenses, offering long-term financial benefits.
However, the success of these reforms depends on careful implementation. Landlords must be given clear and fair grounds for regaining possession of their properties in legitimate circumstances. Additionally, the Court system must be able to process possession claims efficiently to prevent landlords from being stuck in lengthy legal battles. The government will also need to offer a reasonable transition period for the sector to adapt to these changes.
Landlords, particularly those who rely on buy-to-let investments, may need to review their business models and practices to ensure compliance with the new regulations. This could involve reassessing the viability of certain properties or making investments in energy efficiency improvements. In some cases, we may see a shift in the buy-to-let market, with some landlords choosing to sell properties rather than face the increased regulatory burden, something we have seen happening already. Though it was likely not Labour’s intention, the unintended consequences of these changes could lead to rent increases as supply shrinks.
Preparing for Change
We are here to support both landlords and tenants as they navigate these changes. Our Property Litigation team has a wealth of experience in advising on landlord-tenant matters, and we continue to provide guidance as the legislative landscape evolves. Whether you are a landlord concerned about how the abolition of Section 21 will impact your business or a tenant seeking advice on your rights under the new regulations, we are ready to help.
“We are focused on ensuring that both landlords and tenants are prepared for the upcoming changes in the rental market. These reforms represent a significant shift, but with the right guidance, we can help our clients navigate them successfully and protect their interests. Whether it’s understanding the implications of the abolition of Section 21 or complying with new energy efficiency standards, we’re here to offer practical, results-focused solutions.” – Daniel Stern, Head of Property Litigation.
While the full impact of these reforms remains to be seen, one thing is clear: the private rental market is on the cusp of a new era. Both landlords and tenants will need to adapt to the changes proposed in the renters reform bill, and our team will be there every step of the way to ensure that you are well-informed and prepared for the future.
Please contact us if you have any questions about how these reforms may affect you. Our team will assist you in navigating these changes and exploring solutions that work for you.
If you’d like to talk to a member of our team, fill out our online contact form or give us a call on 0330 111 3131.