Renters (Reform) Bill

3.5 Much of that will depend on whether the courts are adequately reformed and resourced to ensure the Bill has the confidence of investors. Responsible landlords need to have confidence that the Bill’s measures will not hinder their ability to repossess a property swiftly and efficiently for legitimate reasons such as rent arrears and anti-social behaviour.

3.6 Without this, we believe that the Levelling Up, Housing and Communities Committee prediction that ‘pressures on the courts will be exacerbated by the repeal of section 21, as landlords will seek to regain possession under section 8, especially in the case of rent arrears and antisocial behaviour’ will ultimately prove correct. Further court delays risk exacerbating the existing supply and demand imbalance, reducing choice for tenants and leading landlords to exit the sector.

3.7 The Law Society warns that the increased court caseload will also leave many tenants without the necessary/adequate legal support given the existing barriers in accessing legal aid for housing-related cases. As the Society’s President noted, without "immediate investment" to improve access to legal aid support, "the bill’s commitment to progress and reforming the rental market will be in vain."

4.0 Clause 1 – Advance payments of rent

4.1 As currently drafted, Clause 1 appears to prohibit landlords from taking rent payments of more than one month in advance. This is presumably to prevent landlords from introducing fixed terms by the back door by having very long rental periods. However, if this is indeed the intended purpose, this legislation may inadvertently lead to unintended and undesirable outcomes.

4.2 Where tenants have poor or hard to assess credit histories, such as people from overseas, landlords will first seek to obtain a UK-based guarantor (so that any debt can be enforced if needed) or then, if not available, seek upfront rent payments, usually covering six or twelve months in advance. This is done to mitigate risk against someone with an unknown or riskier background. If this is not possible, those tenants are likely to find themselves excluded from the sector.

4.3 Given that the Government has also suggested that it is not their intention to restrict payment mechanisms in this way, an amendment to the Bill is needed to clarify the point as outlined in Annex 1.

5.0 Clause 5 – Statutory procedures for increasing rent

5.1 The Government has introduced provisions requiring that rent increases can only be done by a statutory mechanism. This removes the ability for landlords and tenants to agree new rents between themselves and could place increasing and unnecessary strain on the tribunal’s capacity to decide on rent levels.

5.2 Removing this ability to negotiate a new rent would undermine the ability of landlords and tenants to have a mature relationship of give and take and is unnecessary as landlords can no longer use the threat of section 21 to force a rent increase.

5.3 The amendment proposed in Annex 2 would restore the ability of landlords and tenants to agree a rent increase but provides the safeguard that this agreement must be in writing and signed by both parties.

5.4 If the Government is intent on tying rent increases exclusively to a statutory procedure, then steps must be taken to ensure that the tribunal is appropriately resourced. The Government should look to provide accurate, up-to-date figures on local market rates so that tenants understand whether challenging the proposed new rent is likely to be successful or, in some cases, whether it may be detrimental as the tribunal is able to set a higher rent where relevant.

6.0 Clause 7 - Clarification needed on pets in rented homes provisions

6.1 The NRLA recognises the importance of pets in providing companionship for many tenants. We support the Bill’s principles, which will give tenants the right to request permission to have a pet in their property, a request that landlords must consider and cannot unreasonably refuse.

6.2 However, as currently drafted, Clause 7, Section 16B of the Bill does not make clear that a request should be made for each individual pet. Without clarification on this point, there is a danger that a landlord's approval for one pet might be misconstrued as an endorsement for any number and type of pets, even when the accommodation may be unsuitable for a specific type of pet.

6.3 We welcome the Bill’s provision to amend the Tenant Fees Act 2019, allowing landlords to require tenants with pets to have insurance to cover the additional risk of property damage. However, requiring tenants to pay a monthly insurance fee could potentially result in higher costs for tenants than a one-off ‘pet deposit premium’. As such, the Bill should be amended to allow such a deposit premium to be charged where it is more cost effective for the tenant.

6.4 To address this, we propose amending Clauses 7 and 8 in the bill to allow a landlord to take an increased deposit amount where they have consented to the tenant’s request for a pet. In addition, the amendment would make it clear that permission for each pet should be sought separately. Our proposed amendments are set out in Annex 3.

6.5 In addition, when the Government publishes its guidance on the pet-related clauses, it needs to provide clear information on circumstances where a landlord can legitimately refuse a tenant’s request to have a pet and offer guidance on various potential scenarios, including:

· Resolving conflicts in shared housing, specifying whose rights take precedence when one tenant wants a pet, and another opposes it.

· Addressing situations where a property is unsuitable for a certain type of pet, such as accommodating a large dog in a small flat without a garden.

· Clarifying the course of action when a freeholder, rather than the landlord as the leaseholder, rejects a pet request for a property.

7.0 Clause 10 - Clarifying the grounds for possession for the sale of rental properties and reoccupation

7.1 As written, Clause 10, subsections 3 and 4 prohibit landlords from reletting or remarketing a property for three months following the tenant’s specified departure date in a repossession notice, where the ground relates to a landlord’s intention to sell or reoccupy the property.

7.2 The NRLA believes that a three-month prohibition on reletting the property after utilising Grounds 1 or 1A is appropriate. This is broadly in line with the time it takes to market the property for sale. Any longer would likely exacerbate the existing supply and demand imbalance.

7.3 However, we note that the prohibition applies to the period after the notice expires, and it is not clear whether the restriction continues to apply if the landlord needs to use the courts to regain possession. Given the length of time it currently takes the courts to progress a possession claim, this could potentially allow a landlord to relet or remarket a property before possession hearings have concluded.

7.4 In view of this, for the purpose of the sale and occupation grounds (grounds 1 and 1A), the Bill should explicitly state that the three-month ban on reletting or remarking a property should begin when a landlord has actually regained possession of the property. This amendment is set out in Annex 4.

8.0 Clause 14 - Giving certainty to landlords whilst maintaining flexibility for renters

8.1 As it stands, once a tenant signs a contract for a property, the Bill will enable them to give two months’ notice to exit the tenancy at any point. This change raises the concern that landlords will never have the assurance that tenants will remain in the property for more than two months at a time.

8.2 Without a minimum tenancy period, landlords cannot be certain that they would be able to cover their preparation and lettings costs, currently averaging between £3,000 and £4,000 per tenancy. The actual costs vary depending on whether a letting agent is used to source new tenants. It also risks tenants using the PRS as an alternative to more expensive short term lets like those offered by AirBnB, with all the associated risks.

8.3 The LUHC Committee rightly notes that: "A reasonable balance needs to be struck between security of tenure for tenants and a degree of certainty for landlords."

8.4 Furthermore, the lack of a fixed minimum term could undermine lending in the sector. UK Finance has previously noted: "Most lenders tend to avoid short-term tenancies and often require that their landlord customers impose a minimum six-month initial fixed period on the tenancy. This helps to reduce the risk of missed mortgage payments which are more likely to occur where a landlord offers short tenancies."

8.5 In addition to the potential difficulties for landlords, it should be noted that service of a notice during a periodic tenancy by one tenant will end the tenancy agreement for all tenants [6] , even if the other tenants do not consent to ending the tenancy. In houses in multiple occupation, this may mean that the other tenants are required to leave the property much earlier than anticipated.

8.6 In view of this, we are calling for an initial six-month period before tenants can end their tenancy with two months’ notice. This mirrors the Bill’s provisions, which restrict landlords from using the planned repossession ground to sell a property until at least six months into a tenancy agreement. Such a change would not only provide greater stability but also reduce financial risks for landlords. This could be achieved via the amendment in Annex 5.

9.0 Clause 67 - Gradual implementation to prevent a cliff edge

9.1 We want to prevent a spike in the service of Section 21 notices before tenancy agreements are converted to the new regime, as happened in Wales on the implementation of the Renting Homes (Wales) Act 2016.  We are concerned that the lack of certainty around implementation dates and the lack of substantive court reform may exacerbate landlord concerns around the Bill, driving up possession claims in the short term.

9.2 The Ministry of Justice notes in data from the first quarter of this year [7] : "In Wales the Accelerated procedure for claims, orders and warrants increased by 236%, 249% and 275% respectively when compared to the same quarter in 2022. In comparison Accelerated procedure for claims, orders and warrants in England increased by 16%, 46% and 95%. This large increase in Wales could be the effect of landlords exiting the sector due to the Renting Homes (Wales) Act that came into effect on 1st December 2022 with more changes set to come in from June 2023."

9.3 Should a similar increase happen in England, the courts will not be able to cope, particularly where more cases are contested and require significantly more of the court’s time. Even now, it takes a mean average of 28.6 weeks for a private landlord claim to move from claim to repossession [8] . That is simply too long when rent arrears are building up or an anti-social tenant is harming the lives of neighbours and other tenants. This is why we have continually stressed that court reform must be in place and that the courts must be adequately resourced before Section 21 is removed [9] .

9.4 The NRLA is not alone in recognising the importance of court reform. In its report on the private rented sector earlier this year, the Levelling Up, Housing and Communities Committee warned that it was "not clear whether the Government fully appreciates the extent to which an unreformed courts system could undermine its tenancy reforms." [10]