Real Estate Blog: Upcoming Rental Reform in the PRS Market - Part 1

A White Paper on Renters Reform was published in June 2022. With Michael Gove back as Secretary of State for Levelling Up, Housing and Communities, it looks set to be taken forward with a change in law during 2023.

In the first part of this blog series, Real Estate Partner Alice Dockar focuses on the most notable change for landlords proposed in the Renters' Reform Bill - abolishing Section 21 'no fault' evictions in the private rented sector. Under the current law, landlords have the ability to terminate a tenancy at two months' notice without a requirement to provide a reason for such termination where the tenancy is a periodic tenancy. These are the so called 'no fault' Section 21 evictions.

Although many tenancies in the private rented sector do commence as fixed term assured shorthold tenancies, they often later become periodic tenancies (automatically) if they are not pro-actively renewed at the end of the initial fixed term by the parties. Whilst these periodic tenancies offer more flexibility to both landlord and tenants because they effectively operate as rolling rather than fixed term contracts, under statute, they also give a landlord the ability to end the tenancy on two months' notice with a Section 21 eviction notice. 

Under the new proposals, a landlord will only be able to terminate a periodic tenancy on a “reasonable circumstances” basis. Whilst the detail is still awaited, it is already clear that it will be reasonable for a landlord to terminate a tenancy where it wishes to sell the property or move into it for personal family use.However, one key point that will require clarity is what evidence of intention will be required to be demonstrated by a landlord to be able to exercise its termination right on such grounds.

Conceptually there are synergies with the grounds on which landlords can refuse the renewal of a commercial lease under section 30(1) of the Landlord and Tenant Act 1954. The logistics and timescales involved in any evidence-based process will need to be proportionate in the circumstances for this new approach to operate effectively and efficiently and to be acceptable to landlords seeking to utilise it.

The intention is also that there will be more controls for landlords in respect of rent arrears as eviction will become mandatory where a tenant has been in at least two months' rent arrears three times within the previous three years, regardless of the actual arrears position at hearing. This factual approach to the default by tenant on rent payments will provide more certainty to landlords.Please look out for part 2 of this series, where Alice looks at two elements of the proposals in the Renters' Reform Bill - (1) adopting the Decent Homes Standard in the private rented sector and (2) introducing a new Property Portal - which, whilst being well intentioned in offering greater transparency for tenants, may create exposure for landlords that in fact destabilises the PRS market.

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Alice was also recently interviewed on this topic by Tim Clark at Property Week.