The proposed Renters (Reform) Bill and how it will impact private renters and landlords?
The UK property market is still seeing stagnation. From house prices expected to fall until 2025, fluctuating numbers of first-time buyers, housing demand and landlords leaving the market due to affordability. And how could we forget the constant rise in interest rates? With so many factors impacting the market, it can be argued the last thing many landlords want to see is the proposed Renter's (Reform) Bill.
The UK rental market is not as strong as previous years, and with 11 million private renters and 2.3 million landlords in England. According to the UK government website, these groups of people need to be safeguarded against further challenges to renting property.
Some industry insiders believe that under the current tenancy laws, the rental property legislations give tenants a lack of security towards their rented homes, especially with Section 21 ‘no-fault eviction’ clause which allows landlords to evict their tenants without giving reason.
Generally, tenants have 2-months’ notice to leave the property before a landlord can apply for a court eviction to have them removed from the property.
While the rental property is an asset owned by the landlord, there should be a duty of care toward tenants. In the past there have been reports of some landlords using Section 21 as a way of evicting tenants and claimed to be unjust, for example when a tenant attempts to negotiate rather than accepting a proposed rent increase, there has been a history of landlords turning to the ‘no-fault eviction’ as a way to remove tenants from the property.
What are the proposed renting reforms?
The Renter’s (Reform) Bill was introduced to Parliament on the 17th of May this year, as an effort to deliver ‘safer, fairer, and high-quality homes’ to tenants across the UK.
Headlines of the proposed bill:
Illegal for landlords and letting agents to refuse rental properties to those who may receive benefits or have children.
Abolishing section 21 no-fault eviction.
Creating a national landlord portal which provides renters with information needed regarding all available rental properties, in order to help them make informed decisions before entering a new agreement.
Introduction of a government-approved ombudsman covering all private landlords who rent out property in England, regardless of whether the landlord uses a letting agency or not. Primary aim of this is to allow tenants to file a complaint against a landlord. An independent investigator will probe any allegations, with the potential to order landlords to pay compensation of up to £25,000 if found guilty of wrongdoing.
Introduction of new grounds for eviction of tenants for landlords who genuinely want to sell their properties, occupy or for their close family to take up residence.
Tenants to have legal right to keep pet/s in their rental home and landlords cannot refuse on unreasonable grounds.
Landlords are only permitted to increase rent once per annum and must give a minimum of one month's notice.
How does the renter reforms affect landlords?
While these reforms provide tenants with some advantageous changes, it does provide some benefits for landlords.
Landlords will be further supported to evict tenants who are constantly in areas with monthly payments or behave in an 'anti-social' manner.
The new Privately Rented Property Portalwill help both landlords and tenants, as this will give greater detail when searching for new properties and agreements. This should encourage suitable tenants and landlords to connect and agree on longer-term deals where both parties will have shared mutual benefits and understanding.
While the Renters reform Bill will allow requested permission for tenants to have pets in their homes, there must be written confirmation proving the tenant has the acquired insurance for their pet and must also be willing to pay the landlord reasonable costs to cover any damage that is caused by the pet.
Finding the balance to protect tenants and landlords
While the aim of the Renters (Reform) Bill is to provide tenants with protection, the National Rental Landlords Association has raised concerns, that it may unfairly penalize landlords.
The National Residential Landlords Association claim the Bill lacks vital detail on how effective it will be for landlords to recover their properties when they have genuine intent to sell or allow for close family members to move into their rental properties.
Furthermore, as pointed by Ben Beadle, Chief Executive of the National Residential Landlords Association, the Government should consider concerns around landlords who let to students who typically have 12 month fixed-term contract to coincide with the academic year. Fixed-term tenancies would be replaced with rolling tenancies, meaning tenants pay rent weekly or monthly with no fixed end date. This could result in landlords not being able to guarantee a property to be available for the academic term-time.
Without the ability to plan around the academic year, landlords and students may not have the certainty that properties will be available when required. Therefore, this should be something taken into serious consideration as it could impact the student segment of the rental market.
With the Bill still being discussed in parliament, there is the potential for change for a more rounded piece of legislation. We should all be in agreement that everyone deserves a safe, clean secure, comfortable property they can call home, but for the landlords who are already facing a challenging time, should they be the ones on the back foot? For now, landlords have enough to contemplate.
How can a specialist lender like West One help?
Specialist lenders like West One can offer much needed solutions and navigate through cases using their manual approach to underwriting, meaning no matter how complex a case gets, borrowers are provided with suitable finances catered to their needs.
At a time when affordability and rental yields are two of the biggest challenges for landlords, West One look to provide solutions through product and criteria innovation. Whether lowering, minimum property value to £90k, which supports the north of England to mortgage product fees which increases affordability, due to a lower payrate.