I have just two standard buy-to-let rental properties and a student let property in England. I’m worried because one of my tenants whose tenancy ends next month has been playing me up for some time, paying rent later and later and ignoring my messages – he’s now a full month behind with his rent. I’m particularly worried about how student lets will fare under the new laws. There are also some signs that my buy-to-let problem tenant is not looking after the property. The garden is overgrown, and rubbish is piling up, and I hate to think what it might be like inside, says the reader.
Tom Entwistle responds:
The Renters' Rights Bill is set to bring significant changes to the private rented sector (PRS) in England, and as a landlord with two rental properties and a student let, you need to be aware of the key aspects of the bill as you are likely to feel its impact in one way or another.
Note: This article applies primarily to England and is not a full interpretation of the law; in fact, the Renters’ Rights Bill is not yet law at the time of writing and is still subject to change, though experts feel that most of the clauses are now set. Always seek professional advice before making or not making decisions. Use this guide as the starting point for your search for information, not an endpoint.
The question on many landlords’ minds as we are possibly only a matter of weeks or months away from the bill becoming law. All existing tenancies will convert to periodic tenancies from the date of implementation – “Implementation Day” that’s the day when fixed term tenancies will be abolished – the assured shorthold tenancy (AST) will no longer exist, and all tenancies will become assured tenancies (AT). These tenancies give more security of tenure to tenants.
As renting has become much more popular (nearly 20% of all dwellings in England), it has become much more of a political issue than it was in the 1980s, when the AST was introduced. Governments have been pressured into introducing more tenant friendly legislation because of the lobbying of powerful housing charities and the significantly increased voting power of the tenant base.
Most tenancies are trouble free, so the new legislation won’t have a great impact on most landlords. However, there is always a significant proportion of tenants/tenancies that go wrong for one reason or another. They’re the ones that will cause landlords more trouble than was the case under an AST where they can be summarily ended, though even so it can take up to 9 months on average to regain possession under Section 21.
Under the new rules however, with Section 21 gone, it will inevitably be more difficult, time consuming and expensive to remove a delinquent tenant. Problems will take up a lot more management time and all this is what worries most landlords.
The Renters’ Rights Bill, the government says, is not designed to dissuade small private landlords from entering the business, but it will likely end some of the flexibility and financial returns they once enjoyed. Politically, it reflects a permanent shift in favour of long-term tenant security. Bluntly, it means, if you're a small-scale landlord, you need to get your act together or exit. There will be no landlord winners—they’ll have to be compliant with stricter regulation, more professional in the way they operate, probably more hands on and more efficient, and if they are wise, highly selective in their holdings and the tenants they accept.
At this stage in the legislative process, it appears that the new rules will be challenging for student landlords, that’s assuming there will be no further amendments.
Under the new rules, all tenancies become open-ended periodic, where tenants can leave with 2 months’ notice at any time. This, even mid academic year, and no legal way to commit the student to stay until the end of academic year, or to pay a full years’ rent.
So, it will be impossible to rely on a full 12 months' rent, which is essential for marginal-yielding student properties, and there will be difficulties in coordinating group/joint tenancies as one tenant leaving early normally breaks a joint tenancy. So, landlords may have to let individual rooms, which destroys the traditional model of groups of friends signing a joint contract.
There will be difficulties with pre-letting for the September intake (common from February onwards and with foreign students), they could serve notice and disrupt the timing, the ban on taking rents in advance and limited guarantor protections will add to the uncertainty. So, managing short-notice terminations will increase costs, add void periods, and result in more advertising admin workload.
Provision is made for evictions under the new Ground 4A for HMO properties rented to students for when occupation by new students in the house in multiple occupation is required. These must be full-time students and 4 weeks’ notice is required.
This is where the house is required for a new group of students in line with the academic year when it is an HMO only. This ground cannot be used if the tenancy was agreed (signed) more than 6 months in advance of the tenancy commencing, that is in advance of the tenant moving in.
A worrying development, that has political implications, is that in anticipation of the new regime, there’s a definite trend for landlords to exit the sector. This is having the effect of increasing rents.
Many landlords have been choosing to sell up completely, or reduce the number of their rentals, rather than navigate the new rules. This is reducing rental supply and driving up rents. Industry specialists have forecast rents rising by around 19% by 2029. This could benefit landlords who stay the course, but it’s not a happy prospect for tenants.
Note: these are some of the key points and are not an exhaustive list.
Section 21 Evictions will be abolished, so the paper based "no-fault" eviction will no longer apply. You will need a valid reason to regain possession of your property, such as serious rent arrears, anti-social behaviour, selling the property or moving in yourself.
Under the bill there is an extended list of specific grounds on which tenants can be evicted. As far as rent arrears is concerned (ground 10), the mandatory threshold for eviction increases from 2 to 3 months’ arrears and the notice period increases from 2 weeks to 4 weeks.
Ground 11, persistent arrears, ground 12 breach of tenancy and ground 13, deterioration of property may assist your case, but there’s no guarantee a judge would agree to grant a possession order. You may also be criticised for being unaware of the internal condition by failing to instigate a property inspection schedule.
In future, when the bill becomes law, you will need exemplary evidence to convince a judge that an eviction is necessary using Section 8 instead of Section 13 of the Housing Act 1988, as amended. The cost of going to court (court fees) and legal representation, if you use a solicitor or eviction specialist, will mitigate against acting unless your case is clear cut.
The other concern is the amount of time you will be held in a queue if the courts become even more overloaded than they are at present – that has yet to be discovered after the new rules apply.
In your case one month’s rent arrears is unlikely to be considered serious enough to constitute a good reason for eviction under the new rules, whereas now, before the new rules apply, Section 21 will permit you to remove the tenant with some degree of certainty.
Periodic Tenancies – Fixed-term tenancies will be replaced with periodic ones, meaning tenants can stay indefinitely unless there is a legal reason to evict. The tenant will be empowered to leave giving just two months’ notice, while you will be confined to using specific grounds for eviction, should you require possession. If the tenant refuses to leave you will have to convince a judge that there is a valid reason to issue a possession order.
Re-letting Restrictions – If you use ground 1, re-occupation by the landlord or his family, or 1A, sale of the dwelling house, you cannot let the property again for at least 12 months. This means you’ll need to be certain that you or your close relatives are occupying or about your decision to sell the property, before making the decision to go to court.
More Stringent Safety Standards – New rules under the bill, such as Awaab’s Law and the Decent Homes Standard, will require landlords to meet the increasingly more stringent Energy Performance Certificate (EPC) and Safety (HHSRS) requirements. These will be tightened, pushing landlords to improve energy efficiency, address damp and mould issues, and other safety requirements within a fixed timeframe.
Restrictions on rent increases – Thankfully, the government does not support the introduction of rent controls, and nothing in the bill restricts landlords raising rents in line with market prices. Under the new rules all private rented sector rent increases will be restricted to once every 12 months and must be made using the statutory Section 13 process, as amended by the bill.
Landlords will be required to use a simplified Section 13 form, which will be published on the GOV.UK website, and serve this on the tenant. If the tenant accepts the proposed rent increase, they simply need to pay the new amount on the next rent day. But, a tenant can dispute the increase by applying to the First-tier Tribunal (property chamber) before the starting date of the proposed new rent, notifying their landlord of their intention.
Landlords will be well advised to increase rents in-line with market values on an annual basis. It’s something that tenants will come to accept but it will work against them long—term as many landlords refrained from regular increases under the AST.
Rent payments in advance – payments in advance of the start of the tenancy “the initial rent” will be allowed providing this is taken after the agreement is signed. This is in the “pre-tenancy period” and rent taken cannot exceed one month’s rent. The rent periods are to be restricted to one month and no more than one month’s rent can be taken at any one time. The first payment may be less than one month to align a payment date.
An end to blanket bans – landlords cannot automatically refuse tenants with children or those claiming benefits, and there’s a right for tenants to request pets. It means there is potentially a higher risk of taking on problematic tenants and an increased need for more stringent tenant selection and rent and legal insurance cover and referencing.
The Renters’ Rights Bill guidance says that the bill will, “take direct action to address rental discrimination practices in the private rented sector. It will address both overt discriminatory practices, such as ‘No DSS’ adverts, and situations where landlords or letting agents use other indirect practices in order to prevent someone entering into a tenancy.”
However, it also says that: “landlords and agents will continue to have the final say on who they let their property to and can carry out referencing checks to make sure tenancies are sustainable for all parties. They will be able to do this based on affordability, but not on the basis the prospective tenant has children or is in receipt of benefits.”
Property Ombudsman Scheme - The bill proposes a new, mandatory Private Rented Sector Ombudsman to address disputes between landlords and tenants. It is designed to offer a faster and more affordable alternative to court proceedings. The new ombudsman scheme will cover all private landlords and provide fair, impartial, and binding resolution to issues like property standards, repairs, and poor landlord practices.
Private Rented Sector Database and Portal - a new database of all landlords of assured and regulated tenancies who are legally required to register themselves and their properties on the database will be created. Landlords will be subject to strict penalties if they market or let out a property without registering it and providing the required information.
The idea is that the portal will provide a ‘one stop shop’ for landlords allowing them to access relevant government guidance on letting practices helping them to understand and fully comply with their legal obligations.
The database will be accessible by tenants, “increasing transparency and making the information available before they decide to rent a property and throughout their renting journey. This will allow them to take effective action to enforce their rights and be aware when they can escalate issues with their property to their local council or the Private Rented Sector Ombudsman,” says the guidance.
The database will also, “provide local councils with more data about private rented sector properties. One of the biggest and most time-consuming barriers faced by local councils is identifying poor quality and non-compliant private rented sector properties and who owns them. The database will provide a trusted and consistent intelligence source which will remove unnecessary, frustrating administration, meaning council staff will be able to focus on enforcement against criminal landlords.”
Mandatory membership in an ombudsman scheme - for which all private landlords in England with assured or regulated tenancies will be required by law to join, including those who use a managing agent. Tenants will be able to use the service for free to complain about a landlords’ actions or behaviours and landlords will be required to comply with ombudsman decisions.
Local councils will be able to act against landlords who fail to join, or against anyone who markets a PRS property where the landlord is not registered. This will include civil penalties of up to £7,000 for initial breaches and up to £40,000 or criminal prosecution for continuing or repeated breaches. Tenants will be able to seek rent repayment orders against their landlord if the landlord commits an offence by persistently failing to join the ombudsman service.
Strengthened rent repayment orders - and other fines and penalties are to increase. Rent repayment orders will be extended to superior landlords, doubling the maximum penalty and ensuring repeat offenders must repay the maximum amount. It means that landlords who rent out their properties for others to manage (typically rent-to-rent arrangements) will still be responsible for the failings of the management company, either jointly or wholly.
Rent in advance and guarantors – these are two common mitigation strategies for landlords, particularly in the student market. Under the new rules landlords will be limited to asking for one month's rent in advance, as well as a security deposit not exceeding 5 weeks rent. They will no longer be allowed to demand multiple months' rent in advance or rent upfront.
Guarantors will have more protection under the bill. A key change is that guarantors who are related to the tenant will no longer be liable for outstanding rent if the tenant dies. This aims to alleviate the burden on family members who might otherwise inherit a tenant's rental debt.
First, you will need to amend your agreements - to ensure compliance with the new rules your agreements will no longer be adequate as fixed term ASTs. No doubt more information on this will be available nearer the time.
You need to plan and decide if you want to stay in the buy-to-let business or you want to sell, given what has been said above. In the case of your problematic tenant, you may want to consider issuing a Section 21 notice now while you can still use this route to possession. The tenant will be far more difficult to remove once the new rules apply.
You need to assess your property’s condition and decide if it meets current and future energy efficiency (EPC) standards and the safety standards under the Decent Homes Standard. If not, what will be the cost to meet the new standards and avoid any penalties.
You need to consider your rents – do they currently reflect market levels and if not, can you make adjustments now before the bill becomes law.
The Renters’ Rights Bill will present challenges for landlords in England in the future, there is no doubt about that. But most landlords won’t be affected too much unless their properties fall behind with the required standards, or they get really challenging tenants.
For those landlords who can adapt and stay the course, buy-to-let investing can still be a rewarding occupation, tenant demand will still be there in spades and rent levels are still rising.
In your case I would suggest it might be prudent to go for possession of the property with your problem tenant using Section 21 before the new bill becomes law. It will be more difficult to evict afterwards.
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