Last week, the Renters Reform began its passage through the House of Lords. The bill, which, once it becomes law, will be known as the Renters (Reform) Act 2024, underwent its second reading on 15 May. Manjit Kataora, Director of Legal and Compliance at Foxtons, shares an update for our landlords and tenants.
Update: Sunak's surprising announcement of a general election had a big impact on the outcome of this bill. See what you can expect to happen with future Renters Reform legislation in our article: 'Wash up' round up: Leasehold Reform and Renters Reform
No amendments were formally tabled at this stage (this is quite normal) but the parliamentary debate that took place was notable because of the criticisms centred on the absence of provisions enabling lengthier fixed term tenancies where landlords and tenants both want one. Such pragmatism is welcome and will come as no real surprise to those who know how the industry works and the security that landlords and tenants each need from one another.
The bill had a difficult conception, and its early adolescence has proven equally troublesome. One of the key criticisms following first publication was the notion that consenting landlords and tenants would be unable to agree to a fixed term tenancy if that is what they both want. On the current draft it is positively illegal for them to do this. Their Lordships’ criticism about this was all the more notable because it came from across the political divide, - i.e. from Conservative, Labour and Crossbench peers (the latter so-called because they are not affiliated to any particular political party).
Media outlets that reported on the bill (especially in its earlier stages) almost invariably focussed on the abolition of so-called no-fault evictions under Section 21 of the Housing Act 1988. Government is on record as committing to outlawing these notices by the general election, but the bill as passed to the Lords last week reflects no such commitment. Instead, no-fault evictions are set to be outlawed only following further regulations which themselves cannot be passed before the Secretary of State has published a report into the court system’s ability to cope with possession cases in a post reform world. That is sensible because it reflects the need to have a judicial system that can cope with the workload being forced upon it. Leaving aside for a moment the point that not many landlords with a good tenant actually do serve no-fault eviction notices, one can at least say that the abolition of no-fault evictions reflects a party manifesto commitment, therefore this aspect more naturally has a place in the reforms. By contrast however, the abolition of fixed term tenancies was never a manifesto commitment. It is entirely understandable for the House of Lords to call out a feature of the bill that neither reflects a party pledge, and ignores what landlords and tenants need from each other in the real world.
Nor were their Lordships’ views on this based on some misty-eyed view of the past. Rather, they were based on actual tenants’ concerns. Probably the clearest example of this came from Lord Cromwell, who quoted a tenant as having said: “There is absolutely no way I would be willing to sign up for less than a one-year fixed initial term. I do not want the prospect of having at last found a place I can afford and having to move on a shorter period than that”. Yet on the bill as it is currently drawn, this tenant along with thousands of others will effectively have no option but to do so.
Advocates of the abolition of longer fixed terms will counter-argue that the Commons has already inserted into the bill a concession under which a tenant’s notice cannot be served before month four of a tenancy and cannot end before month six. Whilst this creates a de-facto fixed term (there are provisions that allow tenancies to be ended more quickly if the property is not maintained) it does not explain why, if a six-month term is allowed, a twelve-month term (for example) should not also be available where the parties both want one.
The law does not exist in a vacuum; it must sit within reality. One of the key intentions of the bill is to ensure security of tenure for tenants. But is it really the case that, in a competitive market, tenants are no more likely to leave a well-managed letting in a post rental reform world than they are now, merely because the law allows them to? Moving home is disruptive to employment, young children’s schooling and communities. Why not then, allow both sides to have the assurance of a longer fixed term if they both want to?
Much in the bill is to be welcomed. Higher standards in the rental sector are in everyone’s interests. Lengthier fixed terms would give tenants peace of mind because they can be certain about where they can live for a defined length of time. Landlords too, would have the security of knowing that they have an income stream for a known period. Both elements are necessary for a healthy, functioning rental sector. Surely that is in everyone’s interests as well.
This article is part of our Landlord Essentials series, where our experts delve into the big questions for London landlords. If you have a question on letting your property in London, ask a Foxtons expert. If you want help making your property a success, get in touch with Foxtons lettings team.
