Review of the Renter’s Rights Bill – what it means for HMO landlords
It should come as no surprise that the previously put-to-bed Renter’s Reform Bill has been reignited by the Labour government, and just like it’s predecessor, much of the proposed legislation is a cause for concern within the Private Rented Sector (PRS).
Now titled the Renter’s Rights Bill, there are around 80 additional clauses, which are expected to pass into law by the summer of 2025.
The proposals most relevant to landlords include:
- The abolishment of Section 21 evictions
- Changes to grounds for possession under Section 8 and required notice periods
- Restricting rent increases
- Introduction of periodic tenancies
- Prohibiting blanket bans
- Mandatory landlord and compliance database
- Applying ‘Awaab’s Law’ to the sector
- Strengthening of local authority enforcement
Of biggest concern is how many of these proposals will directly impact the HMO market, which operates very differently to single tenancy buy-to-lets.
The removal of Section 21 eviction notices and restriction of rent increases are not such a worry - there are a limited number of cases where our Franchise Partners have needed to issue Section 21 notices and rent increases have always been fair, never more than once a year, if that, or only when a room becomes vacant, and in line with local market comparables.
PPP properties are also already very high-quality, surpassing minimum standards, fully compliant and licensed, with robust management in place. As such, the introduction of a mandatory Landlord database is welcome news.
However, the other legislation, if passed, is not necessarily suitable for HMO properties.
Changes to the Grounds of Eviction under Section 8
The removal of Section 21 notices will mean that landlords need to issue a Section 8 should they wish to evict a tenant on a ‘fault’ basis. The grounds under which this can be done are also changing, and there are some additional ones being introduced.
The new mandatory rent arrears ground will require three months’ arrears unlike the previous two, and four weeks’ notice instead of two, once the Bill comes into force.
If a landlord wants to sell, this cannot be exercised in the first 12 months of the tenancy, and the notice period to tenants must be at least four months. In addition, a landlord may not re-let the property for 12 months from the notice date or they will risk a fine of up to £7,000.
Although the new mandatory ground 4A will be retained in the Renters’ Rights Bill, only full-time students living in HMOs have been specified, not tenants in professional HMOs and it comes with a four month notice period.
The most common case for serving a Section 8 in HMOs will be as a result of anti-social behaviour and recognition should be given to given to the direct impact this has on the other tenants, and in cases of arrears. The amended grounds under Section 8 must be fit for purpose with clear direction, to address this.
Prohibiting blanket bans
We wholly agree that discriminating against tenants with pets, children or those on benefits is not acceptable. In a shared property though, there are relevant circumstances where landlords can’t reasonably consent to pets and children.
The former would cause problems for other tenants, and Landlords, who may have phobias or allergies, as well as reduce the appeal of the property to many tenants. It’s also unfair to the animals themselves resulting in them being left in rooms often un-attended while the tenant is at work.
The latter is not appropriate in an HMO and there is the consideration that Licensing restricts the number of residents permitted to live in the property, including minimum room sizes which an HMO Landlord must comply with, and the element of shared communal areas.
Removal of fixed term tenancies
The Bill will end fixed term Assured Shorthold tenancies which will be replaced with periodic tenancies, and the tenant will need to give two months’ notice to end the tenancy at any point.
Although this was proposed before, the main difference in the revised Bill is that, to end a tenancy, tenants can give 2 months’ notice to the landlord at any time during the tenancy, as early as day one.
This not only removes any security of medium to long-term income for landlords in any buy-to-let property but also security of tenure for tenants, which seems to contradict the purpose of the Bill.
As all our professional HMOs are fully furnished, it’s not unusual to receive specific tenant requests, e.g., for additional bike sheds, or secure storage. But if that tenant were able to leave on two months’ notice at any time, it’s unlikely our landlords will risk the additional investment.
What’s next?
The Bill is now at Committee Stage, and we urge the government to listen to representatives of compliant Landlords and Tenant bodies, to acknowledge that one rule for all is not enough when applied to HMOs, and to recognise the fundamental role that well managed HMOs fulfil within the private rented sector.
