On the 16th of June 2022 the Department for Levelling Up, Housing and Communities (DLUHC) published a white paper called "A Fairer Private Rented Sector".
This white paper is part of the government’s plan for establishing standards in the private rented marketplace (or, Private Rented Sector) and, essentially, "fundamentally reform the private rented sector and level up housing quality in this country" called the Landlord and Tenant (Reform) Bill, aka, the Renters Reform Bill.
Since its release, housing market experts have offered their points of view for and against the white paper. We’ll be referring to a reliable source to provide you with a better understanding of this white paper—Dentons.
One of the biggest multinational law firms in the world, Dentons has gone through the white paper and clarified its 12-point action plan. We’ve prepared a shorter and more digestible summary of what the white paper says, and what it means especially for landlords and property investors like you.
This is Part 1 and presents the first six points of the white paper.
Introducing A Decent Homes Standard For The Private Rented Sector
The first point laid out by the white paper is the establishment of Decent Home Standards (DHS) for the private rented sector.
These standards are expected to help lessen the number of homes that are below standard and derelict or unsafe for accommodations by 2030. It is also intended to be the standard for identifying which ones are good landlords, and which ones are not.
These standards will cover making sure the residential properties are proof against the most severe health and safety hazards. Landlords and property investors will also be obliged to ensure that their properties do not fall into disrepair.
However, this is a two-edged sword: On one hand, the new standards will help raise the profiles of their properties. On the other hand, making the upgrades and improvements may become a burden especially for the older properties.
Rules Covering Quality Improvements To Residential Properties
This second point relates to landlords and property investors of older residential properties, especially those found in areas identified as requiring massive improvements in terms of quality, health, and safety.
In this, the government will be devolving authority to local councils to enforce the standards and work with landlords. However, Dentons has found this to be vague because the white paper does not outline how the landlord or property owner may make improvements if the tenant is still renting the property (especially in cases where needed improvements require the owner to take possession of the property.
Likely, this will be a sticking point for new property investors and a key reason why investing in new build property is a much better direction to take.
Replacement of Section 21 "No Fault" Evictions With A Simpler Tenancy Structure
This point is the cause of so much opposition because it, essentially, pulls the rug out of landlords and property investors by taking away Section 21 "no-fault" evictions.
What is the reason for taking it away and replacing it with purely periodic renting where tenants may opt to continue or terminate the contract on two months’ notice?
While the intention of giving tenants more flexibility and control over their renting is well and good, it doesn’t have any positives for landlords. The white paper states that this change allows landlords to address the needs of their tenants and “recoup the costs of finding a tenant and avoid lengthy void periods.”
Looks good on paper and seems to be in line with clearing out the “bad” landowners who might want to evict their tenants out of spite or revenge. But how will that affect the other landlords, the good ones?
New Grounds For Possession
This new rule strengthens Section 8 and supports landlords who want to regain possession of their property.
It allows landlords to end the tenancy as long as they have valid grounds for taking back possession when necessary. The new grounds include:
- Sell their property and/or let their close family members move into the property. Only applicable after the first six months of a tenancy.
- Repeatedly falling behind rent payments, amounting to at least two months’ rent. The notice period may be reduced to four weeks.
- Criminal behaviour or serious antisocial behaviour. The notice period may be decreased to a shorter period to speed up eviction. Also, the white paper contends whether further guidance would be needed to help both the landlords and tenants involved resolve issues at an earlier stage rather than allow things to escalate.
So going forward landlords will always need to provide a valid ground for regaining possession, and evidence would be best to have at hand (especially for the third ground). Don’t forget to ensure that evictions must be properly dealt with and not haphazardly.
Rule Changes For Rent Reviews
Limitations to the rent reviews will include:
- Rent increases will be limited to only once per year;
- The minimum notice of rent increase will be two months;
- Rent review clauses will now be abolished;
- The tenants’ ability to challenge excessive rent increases has been improved through the First Tier Tribunal by preventing the landlords from increasing rent beyond the amount that they initially asked for; and
- The rent increase amount that landlords can ask for will be limited through the Landlord and Tenant (Reform) Bill, aka, the Renters Reform Bill.
Dentons notes that insufficient rent is not sufficient grounds for terminating a tenancy nor constitutes breaking the rental contract. On the other hand, the white paper does not propose any cap on rental amounts that can be charged for new lettings.
New Ombudsman To Oversee PRS
The white paper proposes a new ombudsman that will oversee all private rented sector-related issues.
All landlords and property investors with buy-to-let and/or build-to-rent properties are required to join.
The goal of this new rule is to provide fair, impartial, and binding resolutions for many issues, as well as a quicker, cheaper, and less combative process for resolving issues.
The ombudsman "will have powers to put things right for tenants, including compelling landlords to issue an apology, provide information, take remedial action, and/or pay compensation of up to £25,000".
While these new rules may seem restrictive, the white paper is intended to raise the profiles of residential properties, set standards for the marketplace, and allow both landlords and tenants greater leeway to manage and amicably resolve issues.
How it will play out in a real setting is something we look forward to seeing.
For now, if you have questions about these first six points, the current regulations in place for PRS, or anything related to off plan and new build property investments, book a chat with us today or call us on 02079236100 and let us know how we can help. If you want to read the next six points, here's Part 2.