23 May, 2023
In what may be the most important legal change to tenancies in England since 1988, the Renters (Reform) Bill ('the Bill') was introduced to Parliament on 17th May 2023.
Whilst we're likely to see some changes before the Bill becomes law, we know that Registered Providers (RPs) will already be thinking about the potential impact of the Bill and what this may mean for them. With this in mind, Jenna Tym and Paul Gorton have reviewed the Bill, as it stands, to highlight the top ten points for Registered Providers to take away.
The main change brought by the Bill is the abolition of assured shorthold tenancies ('ASTs'). Whilst RPs may no longer be able to offer new Starter Tenancies, we believe RPs will still be able to operate a 'probationary period' at the start of a new tenancy by adopting a different policy in respect of new tenants, such as use of mandatory grounds for possession where rent arrears accumulate in the first year of the tenancy. RPs may also consider not granting contractual succession rights, the right to mutual exchange or the right to assign the tenancy until after the first year.
It will also no longer be possible for RPs to offer fixed-term tenancies. If you currently use these, a review of your policies will be needed.
The Bill leaves the basic procedure for rent setting in place, but renumbers some of the key sections. RPs will need to update their templates to reflect the changes.
The Rent Policy Statement governing how much RPs can increase rents by each year remains in effect. ?
Ground 8 is also changing - arrears due to backdated payment of benefits will be ignored. There is also a 'new' Ground 8A, which can be used where a tenant has been in more than 2 months' rent arrears on 3 separate occasions over the last 3 years.
Also - the Notice Period for Grounds 8, 8A, 10 and 11 will be 4 weeks beginning on the date of service of the NSP. This is an increase on the existing 2-week notice period for Grounds 8, 10 and 11.
Ground 14 will be amended. Rather than showing that behaviour was 'likely' to cause nuisance and annoyance, RPs will need to show that the tenant has engaged in behaviour 'capable' of causing nuisance and annoyance. This brings the definitions of ASB in possession proceedings and injunction proceedings broadly in line with each other, but whether this will be a significant or just a semantic change is yet to be seen. Ground 14 remains a discretionary Ground, and as the Court's discretion to make a possession order is unaffected by the Bill, we think this change, in practice, will be minimal.
The Bill also reduces the notice period when using Ground 7A (the mandatory Ground for serious anti-social behaviour) so that proceedings can be issued as soon as the notice is served.
There are presently many situations where RPs grant ASTs because of a real need to recover possession quickly and easily. The Bill responds to this by providing new, specialist mandatory grounds for possession. For example, there are new grounds for possession where a landlord intends to use accommodation as supported accommodation or where supported accommodation comes to an end (whether due to lack of funding or the tenant no longer needing the support, etc).?
Another change to be aware of is the proposed change to Ground 7 (when a tenant has died and there is no successor) as the period to issue proceedings is increasing from 1 to 2 years. This is a welcome change as allows families time to grieve and removes some time pressure to resolve a succession request or offer alternative accommodation.?
The 'elephant in the room' remains the efficiency of the court process itself. While the Bill doesn't address this directly, the Government says that it is committed to reform of the process, including prioritisation of certain cases, such as ASB.
As the court made clear in Midland Heart v Richardson (2008), shared ownership leases are, at law, assured tenancies. This has meant that a shared owner could have a possession order made against them in the same way as a regular tenant, except that, upon the landlord recovering possession, the shared owner lost all the equity they had built up in the property.
The Bill provides that shared ownership leases will no longer be assured tenancies, and so RPs will have to deal with rent arrears by shared owners in the same way as arrears with other leaseholders.? The rules on termination of leases for rent arrears are complex and you should seek advice on what changes will be needed to your conveyancing and enforcement processes.
There has been a lot of publicity about the new right to request permission to keep a pet (whether as a 'companion' or for 'ornamental purposes'!!), but this does not apply to social housing tenancies. That being said, we think it's possible that the Regulator of Social Housing may direct RPs to include an equivalent right, so RPs should be prepared to update their pet ownership policies.
Like permission for pets, there are many other parts of the Bill that expressly say they don't apply to 'a tenancy of social housing'.
However, if you hold stock that doesn't meet this definition (e.g. if you let any properties at market rates in the Private Rental Sector) you may be caught by some of the requirements just as a PRS landlord is.
The short answer is: we don't know when the Bill will become law. Whilst there are calls for a general election in May 2024, the Government appears to be planning a general election in Autumn 2024 and so we would hope that the Bill will finish its journey before then.
After the relevant sections of the Bill come into force, there will be a grace period. We don't yet know how long this will be for. During the grace period, no new assured shorthold tenancies can be created, but existing ones will remain as assured shorthold. After the expiry of the grace period, even ASTs created before it will become fully assured unless a valid section 21 notice has been served and has not yet expired.
RPs should also bear in mind that there is a risk that a fixed-term tenancy granted today might continue after the grace period, and so become a fully assured tenancy. The longer the fixed term, the more likely that becomes. RPs should therefore consider the consequences of this when considering issuing a new FTT and update their policies accordingly.
For more information contact Jenna Tym in our Housing & Regeneration department via email or phone on 01772 220213. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
Learn more about our Housing & Regeneration department here