The imminent implementation of the Renters (Reform) Bill promises to significantly reshape the landscape of the rental sector. Landlords, tenants, and agents are anxiously waiting to see what the Bill’s full implications will be. Today, we delve into the all-important topic of rent increases, one of the main focal points of the proposed legislation.
Previously, landlords had a significant edge when it came to rent negotiations. The presence of Section 21 notices, known as “no-fault evictions”, provided them with considerable leverage. If a tenant refused a proposed rent increase—even if it was above the market rate—the landlord could deploy a Section 21 notice, reclaim possession of the property, and scout for another tenant willing to pay the demanded amount.
However, with the Bill set to abolish Section 21 notices, landlords will be losing this significant advantage. The government’s guidance on the Renters (Reform) Bill clarifies the future of rent hikes. As per the Bill, rent increases will be channelled through a singular mechanism mirroring the current Section 13 process. In practical terms, landlords will have to provide their tenants with notice, equivalent to at least a rental period, if they wish to elevate the rent.
Tenants will have the right to challenge this proposed increase if they believe it does not reflect the current market rate. If a disagreement persists, the matter can escalate to the First-tier Tribunal (FTT), which will rule on the appropriate rent for the tenancy.
While the Section 13 process is not new to the industry, its application post the Renters (Reform) Bill will be a stark contrast to its current state. Without the looming threat of Section 21 notices, tenants will have little to no deterrents against challenging proposed rents. This could lead to a notable surge in cases reaching the FTT. With the potential uptick in disputes being directed to the FTT, the system could become overburdened. Delays are inevitable, making it problematic for landlords who, despite following all procedures correctly, cannot apply the increased rent while the application remains under review.
Two critical concerns emerge from this:
Cost Recovery: Can landlords recoup the costs incurred during the dispute at the FTT? Chances look slim unless the tenant’s behaviour was patently unreasonable.
Handling Volume: The FTT could be swamped with cases. Will there be an interim rent arrangement like with commercial leases? Will a new streamlined process emerge to alleviate the pressure?
As we anticipate the Bill’s enforcement, landlords need to be proactive, adapting to these impending changes. While challenges lie ahead, it’s essential to stay informed and prepared.
If you would like further information or advice on the above, please contact Will Oakes in the Litigation Team at 01206 239764 or email email@example.com.