Legislation set to overhaul private rented sector

The Renters' Rights Bill is set to become law by this summer, with a big impact on property professionals and private landlords. 

While it has been suggested that the bill will lead to the collapse of the private rented sector, this claim is probably overblown. However, the new legislation will still significantly change the way properties are managed.

However, this is likely to be far less important than the connected change that eliminates all fixed-term tenancies. This means assured shorthold tenancies will cease to exist, and all tenancies will be periodic from the start.

Consequently, tenants will be able to give two months' notice at any stage, but the landlord will only be able to recover possession for a reason that matches the specific grounds for doing so. 

While these have been expanded to cover more varied circumstances, such as sale by the landlord and occupation by a landlord's children, they are not as open-ended as they were under section 21 as each case will need to fit into a specific ground. Landlords will also need to provide evidence that any ground for possession is fulfilled.

There are several implications for property professionals. For a start, record-keeping will become even more important in managing property to furnish such evidence. 

Significant training will also be necessary to ensure property managers understand the scope of the new grounds and any limitations or qualifications on their use – especially given that negligent or malicious use of a ground that is not applicable will be an offence. 

Block managers will need to adjust their expectations as well because prohibitions in long leases to prevent renting on open-ended tenancies will be ineffective. 

Valuers will need to consider how to value properties subject to tenancies that cannot be terminated easily. However, landlords will have a ground for possession if they wish to sell.

Finally, surveyors who are directly involved in letting property will need to review fee structures because these are often partly based on renewal of tenancies, which will no longer take place.

Once enacted, the bill will also extend the Decent Homes Standard (DHS) to private rented property, operating under the Housing health and safety rating system. 

How this will take effect will have to be set out in subsequent regulations; but there is likely to be an increased need for skilled surveyors to assess compliance with the DHS, especially as landlords are likely to have to certify that they meet the standard.

The government also intends to extend Awaab's law from the social to the private rented sector, which requires early investigation and prompt resolution of certain types of disrepair – especially damp and mould growth – across the social and private sectors. 

This will also require further consultation and regulation, and there is again likely to be an additional requirement for surveyors to assess the causes of damp at short notice to come up with treatment and prevention plans.

Notices will need to be served two months ahead of a prospective increase rather than one, and need to be used in every case where such an increase is sought. Any clause or other mechanism in a contract that purports to increase rents will be void, and the use of such clauses will be an offence.

Landlords will only be able to agree a rent increase with a tenant if they have already served such a notice and the agreed sum is less than that specified on the notice.

If the tenant refuses that arrangement, they will be able to go to the First-tier Tribunal (FTT) free of charge to contest the requested sum as being above market rent. 

The FTT will not be allowed to set a rent more than that specified on the notice which disincentivises spurious application at present and will also not backdate any increase as they do now.

Given that tenants will be motivated to appeal so as to delay the date of rent rise, the valuation that underlies the increase proposed by a notice will need to be accurate and convincing, so the tenant agrees the sum proposed by the landlord rather than going to the tribunal.

Likewise, when there is an appeal to the FTT it tends to assess rents by considering comparable properties – ultimately a valuation exercise, in which surveyors should be experienced and where they can add value.

As well as restrictions on rent increases, all adverts for property to let must include a rent. Prospective tenants will be allowed, but cannot be encouraged, to bid up to that value; however, bids above that value cannot be sought or accepted.

Therefore it will also be important for valuers to get the advertised price right. The sweet spot will be at the upper end of what tenants will bid, without being so high it discourages them.

Where landlords do advertise a price above the market rate, a tenant will also be able to apply to the FTT in the first six months of their tenancy to reduce the rent on the basis that it is above the going rate. 

They will also have to join a redress scheme to allow for complaints from prospective, current and future tenants. Both measures will create additional costs.

It is likely, though, that property managers will be able to upload landlord data automatically, so they will need to ensure they have computer systems that can interface with whatever mechanism the government ultimately enables for this.

Another new stipulation is that tenants will be able to request permission to keep pets, and landlords will only be able to deny them if the next landlord up the chain of ownership refuses permission or a court has decided that there is a reasonable basis for doing so.

Block managers will need to stay aware of the case law and changing attitudes on reasonableness, as assessing the reasonableness of tenant requests will be a crucial management decision.

A clear understanding of the proper valuation for any property will be important as will a justification for it.

Finally, thorough knowledge of the new legislation and the basis on which possession can be sought will be important for dealing with problem tenants.