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Rental Market shake up - October 17th 2024

With property prices hitting a two-year high and rents up by around 8% over the past 12 months, it should be a good time for buy-to-let landlords. However, the new Renters’ Rights Bill, which abolishes no-fault evictions in England and generally gives tenants more rights, is scaring some landlords away.

No-fault evictions

No-fault eviction, known as a section 21 eviction, currently means a landlord can easily obtain possession of their property without giving a specific reason. The change means a landlord will need valid grounds for regaining possession:

  • If the tenant is at fault – antisocial behaviour, damaging the property, significant arrears – the landlord can give notice at any point in the tenancy.
  • In the case of arrears, the mandatory threshold is to be increased from two to three months of arrears, although there will also be grounds for obtaining possession if a tenant is repeatedly late.

A landlord can gain possession if they want to move in or sell a property, but this right will not be available during the first 12 months of a tenancy. Four months’ notice will have to be given.

The new rules will apply to all tenancies from the same date, with existing tenancies immediately converting to the new system. A similar tenancy regime is already in place in Scotland.

Periodic tenancies

There are many other proposed changes, but the removal of fixed-term tenancies will be of particular concern to landlords. Currently a tenancy typically runs for 6 or 12 months after which the contract is either renewed or switched to a periodic tenancy.

The change will mean all tenancies are periodic, running from month to month. This may be a problem for landlords accustomed to the guarantee of six months’ rent to cover the outlay on a new tenancy.

Shorter notice period

Although tenants will generally be protected during the first 12 months of a tenancy, tenants will only need to give two months’ notice before leaving. When the previous government’s version of this legislation was being considered, landlords pointed out that tenants could use such a short notice period to obtain cheap holiday accommodation.

If it becomes difficult to evict tenants, landlords will need to be more careful than ever in their selection process.

Minimum EPC

To further complicate matters for landlords, at the 2024 Labour Party conference the recently scrapped target of all rental property achieving an energy performance certificate rating of ‘C’ was resuscitated (this time by 2030). Currently, the minimum required rating in England and Wales is ‘E’.

Although well intentioned, the policy is built on shaky foundations:

  • Firstly, the EPC algorithm is widely considered to be out-of-date and unreliable.
  • Secondly, around a third of rental properties were built before 1919. Many have solid walls and will be difficult to bring up to a ‘C’ rating.
  • And thirdly, even if landlords want to improve property, there is a shortage of tradespeople to undertake the work.

Landlords are likely to improve properties to meet the ‘C’ rating if it is practical because it will make their properties more attractive to tenants. Grants for upgrades will be available from 2025 if a property is situated within an eligible postcode or has low-income tenants.