How Will the ‘Fairer Private Rented Sector’ White Paper Affect Me as a Landlord?

The Private Rented Sector accounted for 4.4million households (or 19% of the population) from 2020-2021, a number that has doubled since the early 2000s. 

With increased house prices and the cost of living crisis affecting people’s ability to save, coupled with younger people choosing the freedom of renting over being tied down by ownership, the demand for private rentals keeps growing, and rental increases are at a 13-year high. Yet the number of rental homes has halved since 2019. 

Why Are Landlords Selling Their Buy-To-Lets?

So, what’s making Landlords sell their Buy-To-Lets? And have they done the right thing?

One factor is the current housing shortage: with current house prices, many have chosen to sell to owner-occupiers for an immediate lump sum of profit. Private rentals are key to keeping roofs over people’s heads, and the shortage will push rental prices higher, however, qualitative data also shows that concern around risk, finances and viability prompted sales. 

What Is The Fairer Private Rented Sector White Paper?

Maybe people are worried about the latest White Paper concerning the rental sector…

But is this uneasiness justified?

It is important to realise that a White Paper is not legally binding – by definition, it is a policy document produced by the Government to set out their proposals for future legislation and only in the draft stage. Providing a basis for further consultation and discussion with interested or affected groups and allows final changes to be made before a Bill is formally presented to Parliament – means that you can challenge elements that you disagree with.

Government figures show that 1.6 million people are living in dangerously low-quality homes, in a state of disrepair, with cold, damp, and mould, and without functioning bathrooms and kitchens. Therefore, as an extension of the ‘levelling up’ initiative, the overall focus of the Whitepaper is improving the standard of private rented homes and giving renters clearer rights.

We’ve read the paper so that you don’t have to and selected the main points that would affect the Landlord of an Off-Plan or New Build property (our specialist area). If you have tenanted property that is older, we would recommend reading the white paper yourself.

Which Parts Will Concern Landlords?

Let’s start with proposed changes that could have a negative impact on landlords. 

The paper makes a proposal to abolish Section 21 ‘no fault’ evictions and deliver a simpler, more secure tenancy structure. A tenancy will only end if the tenant ends it or the landlord has a valid ground for possession, empowering tenants to challenge poor practices and reducing costs associated with unexpected moves.  The paper advocates moving all tenants who would previously have had an Assured Tenancy or Assured Shorthold Tenancy onto a single system of periodic tenancies; the idea is that with a single tenancy structure, both parties will better understand their rights and responsibilities and that removing Section 21 will level the playing field between landlord and tenant, empowering tenants to challenge poor practice and unjustified rent increases, as well as incentivising landlords to engage and resolve issues. Selling the property is an exception to this rule, but cannot be used within the first 6 months of the tenancy.

Additionally, tenants will be given the right to end the tenancy at any time, with two months’ notice.  Most tenants are unlikely to want the inconvenience and costs of moving out within what would have been a typical 6-12 month fixed term – unless there is an extremely good reason to.

“If the landlord and tenant adhere to their responsibilities, longer tenancies benefit both parties. It provides tenants with the stability of knowing they can stay in the property, while landlords do not have to worry about their property being vacant.”

Additionally, a limit to the number of times you can raise the rent is being proposed. Rent increases are limited to once per year, end the use of rent review clauses, and improve tenants’ ability to challenge excessive rent increases through the First Tier Tribunal. The notice period for rent increase would also double. However, this may not be as scary as it sounds: “vague” rent reviews may be banned, along with fixed rent increases, but rent increases related to predictable factors or reflecting market changes are acceptable. The White Paper also seems to leave open the possibility of having a rent adjustment mechanism within the tenancy agreement.

Legislation to make it illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits and explore if similar action is needed for other vulnerable groups, such as prison leavers. They propose support for landlords who let to people on benefits – time will tell what that support looks like. However, there is nothing in the wording to suggest that taking those tenants is mandatory; you are just not to advertise that you don’t take them. Ultimately, you still have the final decision on who you let to. 

Tenants would be given the right to request a pet on their property, which the landlord must consider and cannot unreasonably refuse. This would be alongside amendments to Tenant Fees Act 2019 so landlords can request that their tenants buy pet insurance to cover any damages caused.

A new ombudsman will be established for landlords. Membership will be mandatory for all private landlords who rent out property in England – regardless of whether they use a letting agent. Penalties will be as high as £25,000 and the Ombudsman’s decision will be binding on landlords. Landlords can also be banned for repeat offences. This aims to provide fair, impartial, and binding resolution to many issues and be quicker, cheaper, and less adversarial than the court system. 

Furthermore, they plan to introduce a new Property Portal to make sure that tenants, landlords and local councils have the information they need. The portal will provide a single ‘front door’ for landlords to understand their responsibilities, and tenants will be able to access information about their landlord’s compliance. In our view,  increased clarity about rules and regulations will only make compliance easier.

What Are Positives For Buy To Rent Landlords?

Some definite positives are proposed, such as the plan to reform grounds for possession to make sure that landlords have effective means to gain possession of their properties when necessary. This will expedite landlords’ ability to evict those who disrupt neighbourhoods through antisocial behaviour and introduce new grounds for persistent arrears and sale of the property. Likewise, the proposal that the Ministry of Justice and Her Majesty’s Courts and Tribunal Service (HMCTS) will target the areas where there are unacceptable delays in court proceedings will make decisions much quicker.

Overall our take is: you need to be aware, but you don’t need to be worried.