But experts warn that while the bill intends to make renting fairer and more secure for tenants, which is to be welcomed, the unintended consequences could lead to higher rents, restricted choice for those the law has been put in place to protect, and fewer landlords.
A survey carried out by Family Building Society revealed that four out of five brokers believed the act would accelerate the exit of landlords and that rents would increase across the board.
In part two of our lowdown on the Renters’ Rights Bill, we spoke to industry experts about the impact the law will have on landlords, tenants and the wider market.
Read part one on what’s changing and when for a breakdown of the bill’s main changes.
A ‘year-long’ wait for rent
With an end to no-fault evictions, landlords will need to use one of the updated Section 8 grounds for repossession, such as rent arrears or anti-social behaviour, providing evidence in court to prove that it applies.
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Court capacity, however, is already stretched. According to the latest Ministry of Justice figures, the average mean processing times for private landlords from making a claim to gaining possession of their property was 33.8 weeks, the equivalent of almost eight months. Critics argue that the courts will struggle to cope with an even higher workload.
Mark Evans, Law Society president, wants the government to clarify what kind of evidence landlords will have to provide to invoke the updated grounds for repossession and is calling on more support for the court system.
He said: “For this act to be successful, the government must now invest in the courts to ensure they can handle the expected rise in contested hearings. Court reform and modernisation is crucial if the Renters’ Rights Act is to help both tenants and landlords.”
On top of this, landlords must wait longer under the new law before they can issue an eviction notice.
Louisa Sedgwick, Paragon Bank’s managing director of mortgages, said: “The bill will see the time landlords have to wait to issue a Section 8 notice extended from two months to three. And after doing so, they will also have to give four weeks’ notice, up from two weeks, before taking the case to court.
“This could leave landlords without rent for over a year. For many, this is unsustainable, especially when rental income is needed to meet their own financial commitments, so could act as a significant barrier to investment in rented homes at a time when demand is high.
“Overall, it’s vital that tenant protections are strengthened, but that can’t come at the cost of discouraging investment in the sector.”
Clive Chalkley, partner and head of real estate litigation (UK) at law firm Gowling WLG, adds that landlords could suffer further financial instability.
“Tenants will have the right to challenge [rent] increases through the tribunal, and payments will only adjust once a decision has been reached – a process that may slow rent adjustments in practice.
“These changes could affect investor confidence in the short-to-medium term as the market adapts to a new framework,” he added.
Greater need for contingency planning
With tenants handed increased powers to challenge and appeal rent increases and eviction decisions, landlords should put in place a strategy to reduce the likelihood of getting into disputes and make provisions to continue the payment of mortgage and maintenance costs.
Thomas Jeniec, associate at Winckworth Sherwood, said: “Automatic rent review clauses will be void, meaning landlords can only raise rents once a year through issuing a Section 13 notice – and tenants can challenge any increase for free at the First Tier Tribunal.
“With decisions likely to take many months, landlords could see rental income levels frozen while facing rising mortgage and maintenance costs. Given these risks, landlords should act now to benchmark rents against the market, documenting their evidence carefully.”
Some landlords, he adds, might consider keeping rent increases slightly below market rates to avoid the costs and risks associated with disputes.
Jeniec also advises landlords to familiarise themselves with the new, stricter requirements for gaining possession under Section 8, by ensuring all evidential paperwork is ready in advance.
“The new laws will almost certainly see more eviction challenges from tenants, meaning it will take even longer than it does currently to get a possession order from the courts. With this in mind, landlords would be wise to develop contingency plans for mortgage payments and maintenance costs during disputes and consider whether they require landlord insurance to cover any increased expenses they may incur,” he said.
Limiting access to housing
Paying rent in a lump sum upfront at the start of a tenancy has long been commonplace in the international student market or for tenants with a poor or no credit history.
With the practice now banned, Sedgwick fears some tenants could be barred from the rental market.
Accepting rent in advance, she says, provides landlords with a level of reassurance, helping them manage financial risks and maintain cash flow while giving them the confidence to rent to a wider range of tenants, including the self-employed and those relocating from overseas or in receipt of benefits.
For tenants, it can improve their chances of securing a property particularly when competition is high, and it can also offer greater stability for those with irregular income.
“Removing the option to accept rent in advance could actually make it harder for some tenants to secure a home and reduce landlords’ willingness to let to those who can’t prove that they can afford rental payments using traditional methods.
“We must be careful not to undermine a system that, when used appropriately, benefits both sides of the rental relationship,” she noted.
Putting an end to rental bidding could also have a limiting effect, Sedgwick warns.
Paragon does not support pitting tenants against each other to push up rents, but by banning it altogether, the bank said tenants may see costs increase anyway as landlords raise rents at the outset to reflect the true level of demand.
Renters, meanwhile, will have fewer opportunities to negotiate.
“As a result… brokers may find that conversations around yield, voids and tenant demand become more nuanced as landlords adapt to the new framework,” added Sedgwick.
Question mark hovers over bill’s financial burden
It’s not yet known what the financial fallout of the bill will be and who will be expected to pay for it.
Gavin Richardson, managing director of Mortgage Finance Brokers, said that while there was nothing in the bill that directly impacted mortgage rates and lending, his conversations with lenders pointed to an “almost” business-as-usual approach.
“We don’t know yet who will be responsible for ensuring landlords issue the correct tenancies on all their properties, are registered, and have all their properties on the new digital property portal.
“We’ll have to wait and see whether these changes trigger increased mortgage costs due to increased admin in the underwrite,” he said.
Brokers, he adds, would continue to support their landlord clients, but it is still unclear regarding the financial impact landlords could be facing and they may have to adapt to any “repercussions” should they occur.
Jill Carey, property litigation partner at law firm Freeths, says some landlords thought the legislation had “swung the pendulum too far the other way” and were fearful of its financial implications.
“Key concerns expressed by landlords include the potential exposure to significant expenditure to comply with energy-efficiency requirements, rent caps, and the replacement of the Section 21 ‘no-fault’ possession procedure with much tighter restrictions. Such a substantial change in the law is likely to require many landlords to take advice to ensure that they do not inadvertently fall foul of new regulations,” she said.
Confusion and disputes over pet ownership
The act introduces a statutory right for tenants to request permission to keep a pet, with landlords required to consider such requests and only refuse on “reasonable grounds”.
While this has been widely welcomed by renters, the practicalities remain unclear, says Hayley Bruce of legal firm Irwin Mitchell’s residential property team.
The new framework aims to implement changes but fails to clearly define what constitutes a “reasonable refusal” or how consent should be handled. This, said the firm, will result in ongoing uncertainty for landlords and tenants.
Irwin Mitchell says the act also lacks clarity regarding whether landlords’ consent for pets must be provided in writing or if verbal approval is equally acceptable, which can lead to disputes over proof of agreement. There is ambiguity about whether policies apply to all pets or only to certain types such as dogs, cats, or smaller animals, leaving both parties unsure about which animals may be allowed under the revised guidelines.
Bruce said: “Britain is famously a nation of pet lovers – so it’s important that government gets this part of the act right. The lack of clarity around enforcement, coverage, and refusal grounds could lead to more confusion than confidence. Strong guidance is urgently needed to ensure pets can be accommodated fairly and responsibly in rented homes.”
Increasing number of empty homes
Scott Clay, director at Together, said: “One of the unintended consequences of the Renters’ Rights Bill could be the increased risk for landlords who find themselves unable to sell their property.”
If a landlord wishes to exit the buy-to-let (BTL) market for financial reasons but an offer they’ve received on their property falls through and they cannot find another buyer, they will be unable to re-let the property for 12 months under the new rules – which means it must sit empty.
Clay added: “This scenario can cause a multitude of issues. Not only does it mean financial strain for landlords, especially those relying on rental income to cover mortgages or other costs, but it also contributes to a growing number of empty homes at a time when housing demand is at a critical high.”
Together wants the government to provide a “clear and fair roadmap” to help landlords navigate such reforms so that responsible landlords are not penalised.
