Article by Michael Ellis, a Partner in the Property & Commercial Litigation team at Wilsons Solicitors LLP
In May 2023 the government introduced the Renters (Reform) Bill (“the bill”), but in October last year the bill was put on ice, with the government announcing that “implementation of the new system will not take place until we judge sufficient progress has been made to improve the courts. This means we will not proceed with the abolition of section 21, until reforms to the justice system are in place.”
Those reforms seem a long way off, but on 11 February 2024 (and in response to pressure from campaigners claiming that the bill is inadequate) Michael Gove re-affirmed the government’s intention to ensure that residential “no-fault” evictions will be abolished by the time of the next general election.
The bill, which will apply only in England, will prohibit landlords from using section 21 notices to bring residential assured shorthold tenancies to an end. The result is that assured shorthold tenants will have greater amounts of security of tenure, as it will not be possible for landlords to evict tenants on “no fault” grounds. Should landlords want to regain possession from assured shorthold tenants they will instead have to rely on limited statutory grounds. Those grounds are divided into ‘discretionary’ and ‘mandatory’ grounds (the former meaning that the court has a discretion not to order possession even if the ground is made out and the latter meaning that the court has no such discretion and must order possession if the ground is satisfied). The bill also proposes further changes, including limiting rent reviews to one per year and banning landlords from prohibiting pets, as well as a whole raft of other changes. (The bill will entitle a landlord to obtain possession if he intends to sell the property or grant a long lease.)
How will this affect the rural market?
The rural rented market is a broad church of different types of tenancies and occupational agreements, all offering varying degrees of security to tenants. In addition to assured shorthold tenancies (which make up the vast majority of residential tenancies across England), tenants may also be occupying properties under Rent Act tenancies, assured (non-shorthold) tenancies and assured agricultural occupancies. All of these already afford tenants security of tenure above the level provided by assured shorthold tenancies. At the other end of the spectrum, many farm or estate workers occupy their properties under simple licences or service occupancy agreements, neither of which afford much at all in the way of security of tenure.
While both landlords and tenants will likely want security and stability, it is also the case that many landlords offer accommodation to their workers and they will want flexibility in the event the employment comes to an end and they need the property to house other workers. The bill anticipates this issue, and a new mandatory ground for possession has been proposed which will allow landlords to obtain possession if the accommodation is required to house seasonal or agricultural workers.
Like with any other property sector, residential landlords do not want vacant properties, and tenants understandably will want as much security as possible. The bill aims to rebalance the current system so that it is more in favour of tenants.
The reasoning behind this is that tenants should not be forced to move due to no fault of their own.
The current system has allowed landlords to serve notice on tenants the sole purpose of which has been then to offer a new tenancy at a significantly inflated rent. This results in those tenants either having to agree to the new rent, or having to move, and shoulder the burden (both in terms of costs and disruption that comes with that).
What should landowners and managing agents be doing now?
The abolition of section 21 will undoubtedly shake up the market, but whether it impacts estate and farming landlords as severely as other landlords remains unclear.
Many private landlords in the private rented sector have expressed an intention to sell when the bill becomes law (and indeed many are already doing so now). This has brought with it the unintended consequence of there being fewer rental properties available on the market, which has driven rents up even further.
The position with estate landlords is likely to be somewhat different, as they are much more likely to want to hold on to their housing stock, to maintain the ability to diversify, secure investment income and to give themselves flexibility in the event they need accommodation to house farm workers (whether temporarily or otherwise).
Property owners should be advised to consider auditing their property portfolio as soon as possible, to enable them to make any changes that might be necessary before the bill becomes law.
Considerations during such an audit might include:
- Determining whether current tenants could be moved to other properties (for example, it might be more desirable to put farm workers in properties otherwise occupied by non-workers, and vice versa)
- Assessing whether landowners’ property stocks are compliant with legislation (for example, checking whether their properties meet energy performance thresholds, and that all regulatory requirements been satisfied, such as gas safety checks) and whether any works might need to be carried out to ensure those properties are fit for habitation (bearing in mind many old farm cottages may not benefit from modern building construction methods and may be more prone to damp and inadequate insulation and heating)
- Ensuring rental levels are at an appropriate level (it is worth checking whether they can be reviewed).
Ultimately, landlords will likely want their rented properties to remain occupied, to avoid vacant periods (and the corresponding council tax liability that comes with it). This is more likely to be achieved by providing tenants with habitable and secure accommodation, so that those tenants know they are being looked after, and who in turn will be less likely not to pay the rent, raise fewer issues or disputes, and will require less management. Adopting such an approach can only improve relations between landowners and tenants.
Michael Ellis is a Partner at Wilsons Solicitors LLP