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These changes are currently going through Parliament and are scheduled to pass through to Royal Assent as early as late Spring / Early Summer this year. It is not anticipated that there will be any dramatic changes to the current proposal between now and when the Bill comes into effect, so here are the keys points:

 

Abolishing Section 21:

 

Currently landlords can serve 2 months’ notice on their tenants (during a periodic agreement, two months prior to their fixed term ending) under Section 21 for a mandatory, no-fault possession.

 

Section 21 Notices are being withdrawn which will effectively mean tenants will have security of tenure and landlords will be unable to recover possession of the properties unless there has been a breach under one of the Prescribed Clauses or they are looking to move into the property or sell.

 

End of Fixed Term Tenancies:

 

Leading on from the abolishment of Section 21, as tenants effectively have security of tenure, Fixed term tenancy agreements will also be a thing of the past, with all tenancies either starting or being converted into Periodic Tenancy agreements from day one.

 

This means a tenant can serve their landlord two months’ notice at any point to move out, with notice to expire on the last day of the rental period. Effectively therefore, in theory, a tenant could move in on day one and serve their landlord with two months’ notice to vacate.

 

End of Rent Review Clauses:

 

Often tenancy agreements have annual rent review clauses, which typically increase rents in line with RPI. As there will no longer be fixed term tenancy agreements, there will also no longer be rent review clauses within. The only way landlords will be able to serve a rent increase on a tenant will be via a Section 13 notice.

 

A Section 13 Rent increase notice will only be able to be issued with a minimum period of 12 months between rent increases. The Notice period for increasing a tenant’s rent is going up from one month to two months and there is a cap that the rent can be increased to, which will be at market rate.

 

Tenants will, however, be able to contest any rent increases via the First Tier Tribunal.

 

No More Rent in advance payments:

 

Where sometimes tenants are moving from abroad, may be students, or just cannot afford the monthly rent, landlords and agents have been able to take 6 - 12 months’ rent up front as security to cover the rent. Under the new proposals, advance rental payments will not be permitted, unless specifically requested by the tenant. The landlord and agents will not be allowed to request or suggest the tenant pays a lump sum upfront. 

 

The Bill goes even further to state that the first month rental payments cannot be collected until after the tenancy agreement has been executed. Therefore, technically, the tenant can sign their tenancy agreement for the property, not pay their rent and the landlord/ agent will still need to hand over the keys, and the tenant will start their tenancy in arrears.

 

Landlords Selling/ Moving in:

 

 There will be a new possession clause under Section 8 which will allow landlords to serve notice for possession on the Grounds that they require their property back as they are selling or looking to move in.

 

Landlords will need to serve 4 months’ notice, and the tenants would need to have been in occupation for at least 12 months from the date the possession notice is due to expire. Therefore, if a tenant moves in on day one and the landlord looks to sell their property, they cannot serve notice for possession until month eight to expire on month twelve.

 

If the sale of the property is unsuccessful, the landlord will not be able to relet their property until after 12 months from the date they have recovered vacant possession.

 

These changes are happening, and it is likely to be as early as late Spring/ early Summer with an unspecified lead time from Royal Assent to coming into law. However, when these new laws do come into force, this will affect all new tenancies and existing tenancy agreements from the start of the contract and there will be no transition period for existing tenancy agreements.

 

If you would like more information and advice on the above points, please get in touch with Duncan Bannister.