The Renters Rights Bill which has just had its second reading in the House of Lords is set to make significant changes to the residential rented property regime in England. The Bill is a pivotal piece of legislation through which the Government aims to "provide tenants with greater security and stability", while benefitting landlords through "more straightforward regulation, and clearer and expanded possession grounds". However, many in the industry regard the Bill as one sided; significantly increasing protections and rights for tenants and in so doing significantly increasing risks, liabilities, and costs for landlords.
It is expected that the Bill will become law in summer or late autumn 2025, although there is speculation that it could receive royal assent sooner than this.
The provisions of the Bill are far reaching, the key provisions to note being:
• The removal of fixed term Assured Shorthold Tenancies ("ASTs"); all tenancies will be periodic with rental periods of no more than 1 month/28 days. Tenants will have the right to live in the property until they decide to end the tenancy, upon giving just 2 months' notice. All existing ASTs will transition automatically to periodic tenancies.
• The abolition of no fault evictions which allow landlords to terminate a tenancy and obtain possession of their property at the end of the fixed term on 2 months' notice ("Section 21" notice), without having to provide a reason or demonstrate fault. Abolition of section 21 will mean possession can only be sought by landlords under a section 8 notice route. This route requires that certain grounds are met before possession can be granted and if the tenant fails to vacate then court proceedings (including at least one possession hearing) will be necessary.
• An amendment to the ground for possession for rent arrears by increasing the mandatory threshold for rent arrears from 2 to 3 months and increasing the notice period to 4 weeks. In practical terms this means that tenants will be in arrears of 4 months' rent before court proceedings can be issued for possession.
• The introduction of a new ground of possession including where the landlord wishes to sell the property, although this cannot be used within the first 12 months of the tenancy, effectively giving the tenant a 1-year protected period at the beginning of the tenancy. A landlord also needs to be sure of their intention with this ground, as they cannot re-market or re-let the property for rent for a further 12 months after recovering possession.
• A limit on rent increases - the Bill removes a landlord's ability to rely on a contractual rent review clause in tenancy. Rent increases are to be limited to once a year and any increase must be capped at the market rent (which could be upwards or downwards). Landlords must first serve notice of the proposed increase (in a prescribed form), which tenants have the right to challenge at a tribunal. To reflect this new role for the Tribunal, the Bill proposes to reform how the Tribunal works by i) ending the ability for the Tribunal to order the tenant pay more than the rent proposed in the notice, ii) ending the backdating of rent increases and iii) giving the Tribunal the power to defer rent increases by a further 2 months in cases of undue hardship. The Bill makes it significantly more likely that tenants will challenge proposed increases. This is because tenants will no longer risk no fault eviction if they refuse to agree to proposed rental increases and will no longer risk the Tribunal imposing a rent that is higher than the rent the landlord has sought.
The Bill will not apply to all housing arrangements, including:
I. Tenancies for a fixed term of more than 7 years
II. High rent properties: prime residential property commanding an annual rent in excess of £100,000.
III. Service occupancies: accommodation for employees who have to live in a particular property in order to do their jobs, such as live-in nannies, or on-site security guards.
IV. Company lets: properties rented by businesses for their employees to use, such as employees temporarily working in the UK.
For more information and advice on the extent of the changes to be introduced by the Bill and how this may affect you, either as landlord or tenant, please contact Amanda McNeil, Head of Real Estate Dispute Resolution, at amanda.mcneil@howardkennedy.com.
Additionally, on 24 May 2024 the Leasehold and Freehold Reform Act 2024 (LAFRA) received Royal Assent. LFRA marks a significant step in the ongoing reform of leasehold and freehold property law in England and Wales. It introduces fundamental changes to the valuation methodology and the legal process with a view to making it cheaper, easier, fairer and more transparent for leaseholders to extend their leases and buy their freeholds.
Many of the provisions are yet to be enforced but one provision took effect on 31 January 2025; the abolition of the two-year ownership rule for lease extensions of houses and flats under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended) (1993 Act) and the right to acquire the freehold of houses under the Leasehold Reform Act 1967 (1967 Act). Previously, leaseholders of both houses and flats were required to have owned and been the registered owner at the Land Registry, of their property for at least two years before they could extend the lease of their house or flat or purchase the freehold of their house. This condition has long been a source of frustration for leaseholders, especially those who wish to secure the long-term value of their homes but find themselves restricted by the two-year ownership threshold. The abolition of this two-year ownership rule will allow leaseholders to extend their leases or purchase the freehold immediately upon acquiring the property.
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