In more detail

New tenancy structure in England

At present, residential tenancies in England governed by the Housing Act 1988 may be fixed-term (for a specific period of time) or periodic (on a rolling basis). Many are assured shorthold tenancies, for a term of say one or two years. If the tenancy is not proactively ended by the landlord or tenant when the contractual period expires, the tenancy automatically continues on a periodic basis, but the landlord retains its rights to terminate at the end of each period of the term. (See Strengthened protections against eviction below for more detail.)

The Bill will abolish all new fixed-term assured or assured shorthold tenancies, meaning that any new residential tenancies that are granted will be periodic from month to month. They will not have a fixed term after which the landlord can seek to end the tenancy.

The Bill, once enacted, will also change existing tenancies. It will remove the fixed term from any assured or assured shorthold tenancies already in place when the Bill is brought into law, bringing them into line with new tenancies and making them periodic from month to month.

Certain tenancies cannot be an assured tenancy or an assured shorthold tenancies: for example very high-value tenancies with an annual rent of more than GBP 100,000 per year; or a letting to a company. These are instead common law tenancies, and fall outside of the statutory regime. The position in relation to these tenancies has not been changed by the Bill.

Strengthened protections against eviction

Under the current law, landlords have the right to end the tenancy and require the tenant to move out after a fixed-term assured residential tenancy has expired.

To do this, they must serve (usually) two months' advance written notice on the tenant (section 21 Housing Act 1988), and meet certain other fairly complex statutory criteria. As noted above, the landlord must proactively take this step, otherwise the tenancy continues on a periodic basis (with the landlord retaining its rights to terminate).

If a landlord wishes to end an assured tenancy or assured shorthold tenancy at a different time, it has to give a specific reason for requiring possession of residential premises from their tenant and ending the lease. The permitted reasons are set out by statute.

The Bill changes this position in a number of ways. Firstly, it removes s21 from the Housing Act 1988. This means that tenants will be able to give two months' notice to leave a tenancy, but landlords will only be permitted to terminate the tenancy if they can demonstrate certain reasons for doing so (such as occupation of the property, non-payment of rent, persistent breach or redevelopment of the property for example).

Secondly, the permitted reasons for ending a tenancy have been adjusted, and some of the time limits related to these have been extended.

For example, at present, it is possible to regain possession of premises if the landlord wishes to undertake substantial redevelopment. The Bill amends this so that the landlord may only give this reason for possession where the tenancy has been running for at least six months (subject to some exceptions).

For rent arrears, the current position is that a court may terminate the tenancy if a tenant owes more than two months' rent when the landlord takes proceedings. The Bill increases this to three months' rent.

For student accommodation, new provisions are included which would allow landlords to guarantee vacant possession of properties rented to students after the end of the academic year, provided that the landlord gives written notice before the tenancy is entered into.

There are also other changes including those relating to rent-to-buy agreements, and possession where a superior lease ends.

Control of above-market rents

The Bill allows landlords to make annual rent increases, to the market rate, on two months' advance notice (which aligns with the two-month notice period for a tenant to end a tenancy, as noted above). The Bill stops short of introducing rent caps, or rent controls, but it does give tenants a right to appeal excessive above-market rents, through the courts.

The Bill also contains proposals to end rental bidding wars, in which tenants are pitted against one other to see who can offer the highest rent. Landlords must publish an "asking rent" for the property, and will be prohibited from inviting, encouraging or accepting offers of rent that are above this price. This seems to be inspired by the current position in jurisdictions such as New Zealand.

Rent repayment orders and local authority enforcement

Rent repayment orders are an existing sanction available where a landlord has committed an offence such as illegal eviction, or failing to comply with an improvement notice. An order can require repayment of up to 12 months' rent. An order could not previously be made against a superior landlord, but the Bill ensures that an order can be made against both immediate and superior landlords. Additionally, the maximum amount payable is doubled under the Bill, to two years' rent. Where the landlord is a corporate entity, liability is extended to directors who consent to or connive in the offence.

"Awaab's Law" and the Decent Homes Standard

"Awaab's Law" was introduced for properties in the social rented sector by the Social Housing (Regulation) Act 2023. This followed the tragic death of Awaab Ishak following exposure to mould in the social housing his parents rented, which the landlord had failed to remedy. Awaab's Law requires social landlords to rectify health hazards in rented properties within specific timeframes. The Bill extend Awaab's Law to properties let under tenancies and licences in the private rented sector.

The Decent Homes Standard sets minimum standards that social housing is required to meet, including requirements for services, facilities, and repair. The Bill brings the majority of the private rented sector within the scope of the Decent Homes Standard, and gives the government powers to set and adjust that standard (amongst other things, this may include specified energy efficiency requirements).

Protections for tenants with children or who receive benefits

The Bill makes it unlawful for landlords to discriminate against tenants who have children or receive benefits, for example by refusing to rent to those people or by requiring higher rents or larger tenancy deposits.

Private Rented Sector Database

The Bill also makes reference to the new PRS Database, which will be operated by the Secretary of State or person so designated by the Secretary of State. The Database will contain entries about existing or prospective residential landlords, dwellings let or to be let under a residential tenancy, and residential landlords that been banned, convicted or penalised for a breach of the Bill or as a result of other regulatory action.

What's next?

The Bill will inevitably see some changes as it passes through Parliament, and we will report on these as they become finalised. However it is clear that the new UK government has demonstrated its intention to re-balance the rented residential property sector in favour of tenants, and to simplify some tenancy legislation that is perhaps unduly complex due to its piecemeal introduction.

None of these changes leave the UK out of step with much of continental Europe, but a market that has become accustomed to a more landlord-friendly status quo may take some time to adjust. If you have any queries, please do not hesitate to get in touch with your usual Baker McKenzie contact.