The Renters’ Rights Bill – More concerns for landlords

The Renters’ Rights Bill has once more shifted significantly in favour of tenants and increased concerns and uncertainty for professional landlords across the private rented sector.

The majority of the recent changes introduced to the latest version, including the abolition of advance rent payments which has been heavily criticised by landlord bodies, have been voted through the Third Reading in the House of Commons. Given the political nature of this Bill, such an outcome was not surprising, despite resistance from landlord bodies and Opposition MPs.

The Bill will now pass to the House of Lords to be debated on 4 February 2025 with the Government remaining confident it will receive Royal Assent by summer 2025 or indeed earlier. Landlords on the other hand will be relying on push-back from the House of Lords and hoping for a softening of the ever-more tenant friendly legislation.

For an overview of the position so far and the key headlines of the Bill, please see our previous Law-Now available here.

Amendments to the Bill

In advance of the Third Reading of the Bill, the Government announced a number of proposed amendments to the Bill. These included that:

1. Landlords would be prohibited from requesting that tenants pay multiple months’ rent in advance. Instead, the legislation will only allow a landlord to request a tenant pays in advance for each rental period, i.e. monthly rent payable in advance on a specific day of the month. 
   
   This prohibition is intended to apply to both tenancies and licences and will be unlawful even if the tenant voluntarily offers to pay advance rent.
    
2. Landlords will be restricted from demanding that a tenant provides a guarantor in certain circumstances, including where the tenant has paid a tenancy deposit, a tenant has paid one month’s rent in advance (i.e. the new maximum rent payable) or if their income is sufficient to pay rent on a reasonable assessment. Guarantors’ liability will also be capped at six months’ rent and they will no longer be liable for rent after the death of a tenant.
    
3. The new possession ground 4A, which is intended to allow private landlords to recover possession from former students, will not be available if the tenancy was entered into more than six months before the commencement of the tenancy.

The intention of these amendments is to protect tenants from having to “magic up eye-watering sums up front” and safeguard students from being forced to commit too early to housing.

Landlords are concerned that the practical effect of these combined changes will severely prejudice lower income groups, as well as international workers and tenants who may not satisfy traditional affordability criteria. This inflexibility is likely to result in tenants who might otherwise have been eligible for renting but who will not now be regarded as suitable for certain properties. There is also a growing risk that landlords will become more risk averse given the lack of financial security and the significant costs and difficulties associated with problematic tenants.

Third Reading in the House of Commons

Unsurprisingly, these concerns were raised both before and during the Third Reading. The National Residential Landlords Association advised that “…those who will suffer most are those the Government most wants to help” and that “Expecting to landlords to take on high levels of risk without practical assurances is not a sustainable solution.”

Likewise, the Shadow Minister for Housing apologised to the private rented sector for the upcoming changes by the Government and asserted that the amendments would “make the bill so much worse for prospective tenants”.

In contrast, a number of MPs asserted that the Bill does not go far enough and proposed new amendments, including further restrictions on the use of guarantors and the introduction of rent controls. These were however rejected by the Government (as they have been before) on the basis that they would cause harm to landlords and tenants by reducing housing supply and discouraging investment.

Surprisingly, the Government did not take this opportunity to clarify the ongoing uncertainty regarding student accommodation. The explanatory notes to the Bill state that purpose built student accommodation is to be exempt from the provisions of the Bill by incorrectly asserting that such entities cannot grant assured tenancies. That is not consistent with the existing statute and the Bill itself is silent as to any such exemption. As a result, there remains uncertainty as to exactly what will fall under the definition of purpose built student accommodation. This distinction will be particularly vital given the drastic difference in protection given to tenants who will or will not be covered by the Bill. We understand the British Property Federation continues to lobby for clarity on this point and, at the time of writing, it is understood this exemption will instead be introduced by secondary legislation.

Despite these concerns however, the majority of these amendments were voted through by the House of Commons and included in the revised version of the Bill. The proposed amendment outlined above to introduce limitations on when a landlord can request a guarantor was not voted on at this reading, but the Government was clear they remain open to discussing these possible restrictions at a later date.

Next Steps

The Bill will now be passed to the House of Lords to be introduced for its first reading. This stage is largely a formality and the principal time where the members of the Lords will have an opportunity to debate the Bill is at the second reading on 4 February 2025. 

In the meantime, landlord bodies are continuing to lobby on various points associated with the Bill and the Government has expressed that they will continue to work with stakeholders and affected parties who are concerned by the changes to be introduced. A fundamental aspect of these consultations, as referenced by the Government in the Third Reading, is to work with the Courts to try and assuage fears that they will be overwhelmed following the implementation of the Bill. No certainty has yet been provided as to exactly what steps or funding is available however.

While there remains a possibility of a significant push-back from the House of Lords, landlords should not rely on it. When debating the previous Government’s Renters Reform Bill, the consensus taken by the Lords was that it wasn’t perfect but they would not unduly hold up the passing of the Bill. There may therefore be a similar approach taken for this Bill, leaving much of the detail to be provided as secondary legislation.

Time is therefore running out for landlords to familiarise themselves with the anticipated changes to the private rented sector and to begin preparing for the new regime.