How are rental tenancies changing?
ASTs will be abolished and all tenancies will move to periodic, with tenants able to give landlords two months’ notice
The introduction of a new minimum introductory period at the start of a tenancy and the changes to student tenancies are two of the highlights following the third reading of the Renters (Reform) Bill.
A key amendment to the Bill is Clause 15, which will require tenants to give two months’ notice to leave a rental property, but only after they have been there for four months, effectively creating a minimum six month tenancy by default.
This amendment is a significant change to the previous draft of the Bill, which abolished fixed term tenancies, allowing tenants to serve a notice to quit at any time from day one of the tenancy, potentially turning long term tenancies into short term lets.
The existing draft of the Bill includes a specific ground for possession for HMOs. As Suzanne Smith explains in her blog post for The Independent Landlord, The latest news on the Renters Reform Bill, a new amendment extends the student ground for possession to all student properties, not just HMOs, removing the requirement in the new ground of possession of a student house for the house to be an HMO and for the students to be joint tenants.
This amendment would mean that the ground for possession for student properties could also be used for properties occupied by just one or two students, which would not otherwise be considered as HMOs, so long as they meet existing requirements which stay the same.
Despite the amendment to the Bill that student housing will be given a new ground for possession so student landlords can retain the annual cycle of student tenants, a coalition of higher education and student housing organisations have called on the Government to make further changes to the Bill.
In letters to the Government and the Labour Party SAPRS (Student Accredited Private Rental Sector), said the Bill must be amended to make sure there is parity between purpose-built student accommodation and private student housing to avoid worsening the student housing crisis, provided that landlords sign up to an approved code of conduct with quality standards and protections for students.
Note: this section was published following the second reading of the Bill on 23 October 2023
During the second reading of the Renters (Reform) Bill, the Secretary of State, Michael Gove, acknowledged that there are issues with the existing proposal that would affect the student market.
Abolishing Assured Shorthold Tenancies (ASTs), making all tenancies periodic and introducing a blanket two month notice period for tenants would cause problems for landlords of student properties. Currently they can issue tenancy agreements for a 12-month fixed term, to make sure the property remains tenanted for the whole calendar year, not just the academic year.
This is important because if students are able to give notice at any time, for example if they fall out with their housemates or drop out of their course, and leave the property, it would be difficult for the landlord to find students that need accommodation in the middle of the academic year.
The Government has recognised concerns that the existing Bill would cause major problems in the student sector not only for landlords, but a proposed ban on fixed-term tenancies could penalise students amid an already heightened rental crisis in many cities. In response to these concerns, a new ground for possession for student landlords will be proposed.
The details of the ground for possession are not yet known, but the Government is now working closely with the NRLA, who have been campaigning on action needed on student lets since the Bill was first published in May. The NRLA are proposing two amendments:
Firstly, a mandatory ground for possession, which would provide landlords with a legal basis to regain possession of their properties when needed.
Secondly, a moratorium on tenants serving notice to provide some certainty for landlords and tenants alike. The moratorium period would guarantee a minimum length of tenancy while keeping things flexible for tenants.
The final detail of the proposed ground remains to be seen, but we will update this article again as more details emerge. Read on for more background to the current proposals on the abolition of Assured Shorthold Tenancies (ASTs).
Note: this section was published following the introduction of the Bill to Parliament on 17 May 2023. Since then, as noted above, due to the introduction of a new minimum introductory period a the start of the tenancy, most tenancies will have a minimum six month period, relieving some of these initial concerns.
One of the less discussed pieces of reform within the Renters (Reform) Bill is the abolishment of Assured Shorthold Tenancies (AST), a key plank of the private rented sector now for 35 years.
Created in 1988 and widened in scope a few years later, it has become the most common category of residential tenancy.
And a legal format that millions of landlords and tenants have become used to signing.
But campaigners have argued that ASTs give too little security to tenants within the private rented sector, and ministers appear to agree.
Despite the Government’s own English Housing Survey revealing recently that average tenures have risen to 4.1 years.
Also, common sense dictates that the vast majority of landlords want their tenants to stay as long as possible, assuming they behave reasonably and pay the rent on time.
Nevertheless, the Government wants to introduce blanket ‘periodic tenancies’ and abolish both ASTs and the less common Assured Tenancies. It says:
This will provide greater security for tenants while retaining the important flexibility that privately rented accommodation offers. This will enable tenants to leave poor quality properties without remaining liable for the rent or to move more easily when their circumstances change, for example to take up a new job opportunity.
Tenants will need to provide two months’ notice when leaving a tenancy, ensuring landlords recoup the costs of finding a tenant and avoid lengthy void periods, it is claimed.
But these proposals have caused widespread alarm among student landlords operating ‘shared houses’.
A group of landlords recently flagged up their concerns, saying:
At the moment we sign agreements with our students that last between nine and eleven months and we’re both tied into that. But under the proposals, students will be able to give two months’ notice at any time.So as a landlord you will only have two months’ certainty in the contract which, because of the dynamics of the market, means finding a replacement will be very difficult and, because of the expense of additional referencing and guarantor referencing, will make it less attractive.
Also, tenants may also then give notice prior to the holidays, or it may persuade more student tenants to drop out of their courses because there will be no financial consequences.
The group said:
This will put more pressure on their housemates who will then have to fill the room or pay more rent.
Given these concerns, it’s likely that there will be a change to the draft proposals over the coming months, to make sure there isn’t a sudden exodus of student landlords, as noted above in our update following the second reading of the Bill.
Many university cities are already suffering from a significant lack of appropriate rental stock and if more landlords sell up, there could be a very real crisis.
For the rest of the market, landlords of ‘single let’ properties shouldn’t be impacted too much by the change.
Even though they will be losing the security of the first six months’ rental commitment from tenants, in reality, the vast majority of tenants wouldn’t leave in that time anyway – not unless there was something wrong with the property or their circumstances unexpectedly changed.
With this being one of the biggest changes proposed in the Bill, it’s likely to be strongly debated we've already seen during the second reading that a new ground for possession for student landlords is to be proposed, so it’s certainly one to keep an eye on.
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