Renters’ Rights Act in force but not yet implemented

The Renters’ Rights Act has finally received Royal Assent, following a long and drawn-out legislative process. The Act, which includes revisions to the Housing Act 1988, will have a significant impact on the current assured shorthold tenancy regime for both landlords and tenants.

Crucially however, the actual date for implementation of the new regime is still unknown. The Government have previously indicated that “sufficient time” will be given for the sector to respond to the changes, and for the publication of the necessary statutory regulations and guidance. A transition period of 6 months from Royal Assent has been suggested by many in the sector as appropriate, but no further indications as to timing are currently available.

Once fully in effect, the changes effected under the Act will apply retrospectively, and will govern both existing assured shorthold tenancies and new tenancies. It is therefore essential for landlords to make the most of the pre-implementation window to get to grips with and prepare for the introduction of the new regime. Key provisions are outlined below.

Periodic tenancies

Assured Shorthold Tenancies (ASTs) have, to date, been the default form of tenancy for residential lettings. Under the new regime, all existing ASTs will automatically convert to assured periodic tenancies, and all new residential tenancies will take effect as periodic tenancies, which will continue until terminated. It will no longer be possible to grant a tenancy for a fixed term and any fixed term previously agreed between the parties will no longer be enforceable.

Tenants will have the protection of an initial 12-month period within which they cannot be required to vacate (save where in breach of their tenancy agreement) and will have the right to terminate the periodic tenancy at any time by providing the landlord with a minimum of two months’ notice. This change is designed to give tenants both the security to establish a home and the flexibility to leave if their circumstances change. However, it also reduces certainty for landlords, who will no longer be able to rely on a guaranteed rental income for a fixed period. In practice, a tenant could move in and serve notice immediately, leaving the landlord with only two months’ rent and the need to quickly find a replacement tenant.

Abolition of Section 21 evictions

Landlords will no longer be able to terminate a tenancy using the “non-fault based” Section 21 procedure. Instead, landlords will have to satisfy one of the mandatory or discretionary Section 8 statutory grounds for possession, which have been expanded to allow landlords to recover possession where they intend to sell or move into the property. If the relevant Section 8 grounds are disputed court proceedings will be required inevitably making it harder for landlords to obtain possession and leading to additional costs and delays in obtaining possession.

Mandatory Section 8 grounds

Landlords will retain the mandatory right to retain possession and bring a tenancy to an end in a limited number of circumstances. The most relevant mandatory grounds are noted below:

• Sale: The landlord may end a tenancy on giving the tenant at least 4 months’ notice if it intends to sell the property or occupy the property itself but this will not be exercisable within the first year of the tenancy.
• Significant arrears: The landlord may end a tenancy on giving the tenant at least 4 weeks’ notice where the tenant has at least 3 months’ rent arrears at both the time of the notice and the possession hearing. This is an increase from the threshold of 2 months’ of rent arrears under the old regime.
• Conviction: Where the tenant has been convicted of severe anti-social behaviour the landlord can begin possession proceedings immediately.

Discretionary Section 8 grounds

Landlords will retain the right to retain possession and bring a tenancy to an end in a limited number of circumstances, subject to the discretion of the court. The most relevant discretionary grounds are noted below:

• Alternative accommodation: Where suitable alternative accommodation is made available a tenant may be given 2 months’ notice to vacate.
• Arrears: Where a tenant is in arrears and or has persistently delayed rent payments the tenant may be given 4 weeks’ notice to vacate.
• Breach: Where a tenant is in breach of the tenancy agreement (except for payment of rent) and / or has caused the deterioration of the property a tenant may be given 2 weeks’ notice to vacate.

Rent review

Rent review provisions (if any) in existing tenancies will be of no further effect under the new regime. Instead, the landlord will be permitted to review the rent once each year, to the open market rent, using a revised Section 13 procedure which will allow the tenant to challenge the proposed rent at the First-tier Tribunal (FTT).

The FTT may decrease the rent, but cannot increase it from the sum proposed in the landlord’s notice. If challenged, rent will not be backdated and will not be payable at the revised rate until the date of determination by the FTT. This will take away the ability for the parties to agree terms for rent review (such as an easily calculated annual index linked review, upwards only rent review or agreed percentage review) payable from an agreed date.

Advance rent payments

Landlords will not be able to require tenants to pay more than one month’s rent in advance and can only require advance rent to be padi during a “permitted pre-tenancy period” (IE after the agreement is signed but before the start of the tenancy).  Any payments requested or made outside of these requirements will be deemed “prohibited payments”. Rent will be payable monthly (rather than quarterly or other frequency).

Regulation

Landlords will be required to register on a newly created private rented sector database, and will be regulated by a private rented sector landlord ombudsman. Landlords will be required to comply with decent homes standards and hazards such as damp and mould must be dealt with within a suitable timescale. These changes should not unduly concern reputable landlords save for the anticipated cost and administrative burden associated with registration.

Rental discrimination and rental bidding

Landlords and their agents will continue to have the final say as to who a property is let to, and referencing checks may still be undertaken, but decisions must be made by reference to ability to pay the rent, rather than, for example, whether an applicant has children or is in receipt of benefits.  Landlords will not be permitted to ask prospective tenants for “best offers” when renting a property. An asking rent must be published, and landlords will not be permitted to encourage bids above this sum.

Pets

Landlords will not be able to unreasonably withhold consent to a request from a tenant to have a pet. Whilst attracting many of the headlines, this change is perhaps not so significant as landlords will still be able to refuse consent where reasonable (for example with regard to the nature of the property and / or the type of pet). However, where consent is given, landlords are not able to require that the tenant provides insurance to cover any potential damage.

Implementation

As noted above, notwithstanding that the Act has Royal Assent, the provisions are not yet in force and we anticipate a short period for landlords and tenants alike to familiarise themselves with the new regime before it comes into force on a single date likely to be Spring 2026, although it is possible that implementation could be phased.

Once fully in force, the revisions will take retrospective effect, and will apply to all existing assured shorthold tenancies as well as new tenancies. The advantage of this approach is that it will avoid the disruption and confusion that would perhaps have been inevitable if a two-tier strategy had been implemented with new tenancies operating under the “new” regime and existing tenancies left to run under the “old” regime. However, the disadvantage with this approach, for landlords in particular, is that tenancy agreements in place today, on terms agreed by all parties, including the soon to be prohibited stepped rents, fixed or stepped rent review, fixed terms and / or options to break will, if still in place at the implementation date, migrate to the new regime without the previously agreed contractual terms.

Points to consider ahead of implementation

The combined result of the changes outlined above, is that it will be significantly harder for landlords to obtain possession of the property should a tenant wish to stay in occupation and contractual terms in existing tenancies such as rent review, agreed fixed terms and provisions prohibiting pets will be unenforceable and will instead be replaced with the statutory provisions outlined above.

Landlords with existing ASTs in place have a final opportunity, pre implementation, to review current tenancy agreements.  Where a tenant is frequently in rent arrears or is undesirable (for whatever other reason) landlords may elect to make use of the Section 21 no fault eviction process now (where possible) rather than find themselves stuck with an undesirable tenant under the anticipated new regime.

Landlords entering into new tenancy agreements should be mindful of the forthcoming changes.  It will be more important than ever to ensure that appropriate references and tenant checks are undertaken before entering into what may be a long-term landlord and tenant relationship.