What is the Renters Reform Bill and what does it mean for letting agents?
Ahead of the Conservatives’ election win in December, the party’s election manifesto included a section called a ‘Better deal for renters’ which included several measures intended to shake up the rental sector.
Since then, these pledges have been confirmed in the Queen’s Speech – during which a new government outlines its parliamentary plans – and incorporated into the Renters’ Reform Bill.
According to the Ministry of Housing, Communities and Local Government (MHCLG), the reforms are designed to ‘provide increased security for tenants and ensure good landlords can flourish and continue to provide the homes the country needs, improving the lives of people across the country and delivering a rented sector that works for the country’.
Below, we take a closer look at what’s included in the Bill and when these policies could come into force…
What’s included in the Renters’ Reform Bill?
Section 21 to be scrapped
An announcement which caused shockwaves in the rental industry when it was first announced in April 2019, the scrapping of Section 21 remains high on the government’s agenda, but we are no closer to finding out exactly when it will happen.
The plan is to remove Section 21 from the Housing Act 1988 and replace it with a bolstered Section 8.
The existing system allows landlords to regain possession of a property without providing a reason. However, this is what the government is aiming to outlaw.
A beefed-up Section 8 will only allow landlords to regain possession if they provide a ‘concrete, evidenced reason already specified in law’.
The plans to remove Section 21 remain largely unpopular with the rental industry. The main issues raised by professionals is the impact it could have on the courts system – which is already unpopular – as well as the difficulty in landlords wanting to repossess their property for any reason not covered by Section 8.
Access to rogue database to be strengthened
Another provision of the Renters’ Reform Bill is to extend access to the government’s database of rogue landlords and property agents.
This blacklist keeps a record of every landlord or letting agent who has received a banning order, been convicted of a banning order offence or received two or more Civil Penalties within 12 months.
It was implemented in April 2018 as part of the Housing and Planning Act 2016 but has been dogged by controversy ever since.
The database is maintained by local authorities but is currently unavailable to tenants, professional bodies, employers, landlords and letting agents.
It has also been criticised for containing just four rogue landlord entries after its first year of operation.
In October 2018, a representative of then-Prime Minister Theresa May confirmed plans to make the database open to the public had been hatched. This was followed by a consultation on how the blacklist could be improved.
It’s argued that making the database public would help consumers to avoid rogue operators and employers to have crucial information about applicants available to them if necessary.
Lifetime deposits for tenants to be introduced
One of the main challenges for renters looking to move between rental properties is having to raise a new security deposit before receiving their existing one back from their previous landlord.
Alongside the Tenant Fees Act, the government is aiming to reduce moving barriers for tenants by introducing a lifetime deposit system.
It’s been suggested that the new system would mean tenants hold a digital certificate with details of their security deposit. This certificate would then be presented when they move, and the money would be transferred between their old and new landlords.
There have been few details from the government so far and commentators have been quick to question how lifetime deposits would work if a landlord wants to make deductions for damage or missing items.
There could also be contractual issues when considering how shared tenancies in Houses in Multiple Occupation (HMO) are constructed.
The benefits include lower moving barriers, which could keep demand high and encourage further investment in the rental sector.
Letting agents will currently be waiting to hear more details from the government on how lifetime deposits could work in practice as it will be of utmost importance that their clients’ investments are offered a similar level of protection to what they get now.
What happens next?
The Renters’ Reform Bill currently has no timetable for when it will be introduced. The latest update from the Ministry of Housing, Communities and Local Government (MHCLG) is that it will be introduced to Parliament ‘when time allows’.
It’s important to remember that the Tenant Fees Act took almost three years to be implemented after it was first announced. That said, the government has made it clear it is keen to scrap Section 21 as soon as it is possible to do so.
Over the coming months, it will be important for letting agents to monitor the progress of the Bill and any updates provided by MHCLG.