Renters' Rights Act Update - January 2025

The Renters' Rights Bill is expected to become law in Spring 2025. It'll abolish Section 21 evictions and introduce a single system of periodic tenancies.

We are grateful to our friends at Goodlord for supplying an excellent update below on the current progress of the Renters’ Rights Bill and a reminder of all it entails.

The changes to come will mark the biggest change in residential letting legislation for decades, but landlords should be reassured that, for those whose properties are already properly managed, there is little to fear from the new legislation. Quay Living will be doing its best to keep its landlord clients up-to-date as the Bill progresses. There have been concerns expressed by landlord groups (more red-tape and costs are rarely welcome) but our evaluation of the Bill is that, once the dust settles, the practical impact upon the vast majority of landlords will be modest. Whilst tenancies will be open-ended, tenants will still move when their work or family life require it. Rents will only be reviewable once a year, but they will still be reviewed to open market value and Quay Living will be maintaining detailed evidence of comparable lettings to ensure we have the most favourable evidence to back-up future rent reviews.

There has certainly been an uptick in small landlords choosing to sell in the last few months, rather than continue letting, and Quay Living has acted on a number of those sales instructions. However, residential letting is a long-term investment and the long-term fundamentals of strong demand, limited supply and capital growth remain. Ironically, the law of unintended consequences could see the new legislation itself improve investor returns – since any reduction in the supply of letting properties will inevitably push rents higher. Combine this with the probability of imminent interest rate reductions, possibly as soon as next month, and the outlook for residential investors is anything but gloomy!

The Goodlord Team Update: 17 January 2025

The Renters’ Rights Bill is the most significant reform the private rented sector (PRS) has seen since the Housing Act 1988. Introduced to Parliament on 11 September 2024, the Bill has wide-ranging implications for landlords, tenants, and letting agents alike.

What is the Renters' Rights Bill?

The Renters’ Rights Bill is a piece of upcoming legislation designed to deliver “long overdue” reforms to the Private Rented Sector (PRS). Its primary goal is to give tenants more security to stay in their homes and more freedom to leave substandard properties.

The Government believes this is necessary because: “While the majority of landlords provide a good service, the private rented sector currently provides the least affordable, poorest quality and most insecure housing of all tenures.”

The Bill will:

• Abolish fixed-term assured shorthold tenancies (ASTs) - as a result of this, all tenancies will become periodic
• Limit rent increases - the shift to periodic tenancies means Section 13 notices will be the only way for landlords to raise the rent; these can only be served once per year
• Abolish Section 21 evictions - landlords will no longer be able to serve “no-fault” notices to regain possession of their properties
• Expanded Section 8 possession grounds - the Government is adding and updating both mandatory and discretionary grounds due to the abolition of Section 21
• Ban rental bidding wars - landlords and agents can’t accept offers above the advertised price
• Introduce a landlord ombudsman - this will help resolve disputes between landlords and tenants impartially
• Create a private rented sector database - designed to compile information about landlords and properties and provide visibility on compliance
• Apply the Decent Homes Standard - all rental properties must meet minimum quality standards
• Prohibit discrimination - landlords can’t refuse tenants on benefits or with children

The Renters Reform Bill is the predecessor of the Renters’ Rights Bill, explaining why they both look similar.

The former was conceived by the Conservative Government towards the end of their term, but was abandoned as a Labour victory at the ballot box became increasingly likely. It proposed to:

• Abolish Section 21, but not before reforming the court system to deal with the increased volume of Section 8 notices
• Introduce more robust Section 8 grounds for possession for landlords to account for the abolition of Section 21
• Apply the Decent Homes Standard to rental properties
• Limit rent increases to once per year
• Prohibit discrimination against families or benefit recipients

The latter was proposed by the new Labour Government, building on the above by:

• Introducing a landlord ombudsman
• Banning rental bidding wars
• Creating a private rented sector database
• Strengthening enforcement

The Renters’ Rights Bill will also introduce Section 21 without court reform and apply Awaab’s Law to the Decent Homes Standard.

When will the Renters' Rights Bill become law?

Parts of the Renters’ Rights Bill — including big ticket items like the abolition of Section 21 — are expected to become law by the end of Spring 2025. Other parts of the Bill may be staggered or delayed, depending on how the Government responds to pressure from advocacy and lobby groups, as well as critiques from the Lords.

The 3rd reading of the Bill happened on January 14, 2025, marking the end of the Commons stage. The Bill then passed its first reading in the House of Lords on January 15 and the 2nd reading is scheduled for February 4. It will then need to pass the Committee, Report, and 3rd reading stages in the Lords, before the Government considers amendments and it reaches Royal Assent. The earliest the Bill is likely to become law is two months after it passes Royal Assent.

Did the Government make any amendments during the 3rd reading?

The Government made several amends in the 3rd reading, including:

• Limit rent in advance - landlords will be banned from charging more than one month’s rent upfront
• Ombudsman fees - landlords will contribute to a national database, with fees directly funding the ombudsman
• PRS database clarifications - landlord and managing agent’s name, address, and contact details will be included as well as enforcement action taken out against them and previous eviction notices served to tenants
• Restrictions on advance rental agreements for students - students can no longer be locked into rental agreements more than six months in advance
• Protections for bereaved guarantors - guarantors will no longer be liable for rent payments following the death of a tenant

Despite pressure from Labour backbenchers and Green MPs, the Government once again rejected calls to introduce rent controls.

Renters' Rights Bill: Key changes explained:

While we've touched on all the key changes proposed by the Renters’ Rights Bill, here are the ones that are set to have the biggest impact on letting agents.

What will happen to tenancies?

The Renters’ Rights Bill will convert all fixed-term assured shorthold tenancies (ASTs) to periodic tenancies overnight. Any fixed-term tenancies you sign now will be affected by this when the Bill becomes law.

In other words, a three-year tenancy signed in February 2025 would instantly become periodic if the Renters’ Rights Bill was passed in April 2025, replacing the fixed term.

Tenancy reform is one of the Government’s biggest priorities and they believe that this move will “empower tenants to challenge bad practice without fear of retaliatory eviction”.

Despite this, Goodlord data revealed that tenants actually prefer fixed-term tenancies. According to the State of the Lettings Industry report, 58.5% of tenants prefer fixed-term, renewable tenancy agreements, while 29.7% prefer rolling, open-ended agreements.

How will this impact rent increases?

In the current system, landlords can raise the rent in several ways, including rent review clauses, renewing fixed-term tenancies, and mutual written agreements during the tenancy. However, due to the abolition of fixed-term tenancies, Section 13 notices will be the only way to raise rent, which you can only serve once per year.

Will Section 21 be abolished?

The abolition of Section 21 “no-fault” evictions is one of the Government’s flagship rental reforms. Although letting agents and landlords appreciate the convenience of Section 21 notices, the Government feels that tenants are getting a raw deal.

“Uproot[ing] renters from their homes with little notice and minimal justification” is something they want to end as early as possible.

What will happen to Section 8 notices?

When the Renters’ Rights Bill becomes law, serving Section 8 notices will be the only way landlords can evict tenants. As a letting agent, you need to be able to advise landlords on which mandatory and discretionary grounds they can cite to evict a tenant from their property.

After all, citing incorrect grounds will result in the courts rejecting your application, further delaying the eviction process.

At a glance: Further reforms proposed by the Renters' Rights Bill:

There are a range of other reforms the Renters’ Rights Bill proposes that you should know about…

Rental bidding ban:

Bidding over the rental asking price will no longer be allowed when the Bill becomes law. While the Government clarifies that most landlords don’t encourage rental bidding wars, it aims to “crack down on the minority of unscrupulous landlords who make the most of the housing crisis by forcing tenants to bid for their properties.”

Awaab’s Law:

Awaab’s Law has already been introduced into the social housing sector as part of the Social Housing (Regulation) Act and will expand into the PRS as part of the Renters' Rights Bill.

It means landlords must follow strict timescales to inspect and repair hazards, such as damp and mould. The Government has claimed that the introduction of this law will “ensure that all renters in England are empowered to challenge dangerous conditions”.

Pets in lets:

The Renters’ Rights Bill will give tenants the right to request a pet both before and during a tenancy. The Renters’ Rights Bill will ensure that landlords must consider and can’t unreasonably refuse a tenant’s request for a pet.

Landlords and letting agents can request insurance to cover potential damage from pets if needed.

Digital private rented sector database:

A new digital database will provide visibility on who landlords are and any historical banning orders they've received so tenants can make more informed choices.

Landlord Ombudsman:

The Bill introduces a new landlord ombudsman, offering a fair and impartial resolution service to settle disputes without the need for court involvement.

Illegal for landlords to discriminate against tenants who receive benefits:

The Bill will outlaw blanket bans on tenants with children or those on benefits, ensuring fair access to housing.

This article is intended as a guide only and does not constitute legal advice. Visit gov.uk for more information.

Renters' Rights Bill