Member Article

The Renters (Reform) Bill was given its first reading in May 2023 after five years of consultation and refinement.

The Bill seeks to provide greater flexibility and security for residential tenants in England by imposing additional restrictions and obligations on private landlords. The reforms also look to improve the leasehold system through increased regulation, digitisation and standardisation.

A noticeable omission from the Bill, however, is an exemption for private lettings to students.

One of the ways it does this is by making all assured tenancies periodic - abolishing fixed term contracts and the Section 21 ‘no-fault’ eviction process.

Under the draft legislation, in order to regain possession of their property, landlords must use the Section 8 process for ending a tenancy - specifying grounds for eviction - while tenants are only required to give a minimum of two months’ notice to end the agreement.

Purpose-built student accommodation (PBSA) is specifically exempt from the rules on assured tenancies. The Bill will not apply as long as the PBSA provider is registered for government-approved codes. This permits universities to continue to let PBSA to visitors and non-students during academic holidays.

However, private lettings to students are not exempt and are expected to move to the single periodic system.

Analysis from the National Residential Landlords Association reveals that there are some 850,000 bedspaces for students in the private rented sector. These tend to be let on a July-July annual cycle and often on 12-month fixed-term contracts.

The Bill could pose challenges for landlords of private student property, with uncertainty over whether they can regain possession of properties in time for the next academic year. Tenants could also serve notice before the year is up or stop their tenancy beginning before the academic year, with significant financial and operational implications for landlords.

This could lead to some landlords instead choosing to seek professional, longer-term tenants – as has happened in Scotland, where most tenancies, including private student lets, became open ended under the Private Housing (Tenancies) (Scotland) Act 2016.

Research from the Scottish Government indicates that this has resulted in some private landlords moving away from the student market, with domestic students now often struggling to secure an affordable residence within a reasonable commute of their education centre.

At the same time as the Renters (Reform) Bill is being brought forward in England, the Scottish Government is now focusing specifically on reforming the PBSA market - launching a review in 2021, which on its publication could lead to major legislative changes. This includes the possibility of providing rights to terminate student leases on 28 days’ notice to match the Scottish private residential tenancy, and for a rent control mechanism.

Whether the Renters (Reform) Bill will be amended in its progression through Parliament to tighten the exemption for PBSA is uncertain.

For now, as an alternative to changing sector, landlords of private student property in England may respond to the proposed changes by electing to let each individual room in a property under a separate tenancy, rather than one agreement for a whole house.

Though this approach will mean an additional administrative burden – particularly if it triggers houses in multiple occupation (HMO) licencing obligations - it could be a way for landlords to minimise risk and avoid losing all tenants where only one party has served notice to quit.

The ultimate aim of the Bill is to protect tenants. The National Union of Students has warned against the government making any changes that would water down the protection of students as a class of private renters. The proposed introduction of the Property Ombudsman and Portal could also support this, whether or not the Bill is amended.

There are clearly many factors left to consider and it is important to remember that the Bill is only draft legislation and likely to be amended.

Both the Rt Hon Michael Gove and Housing Minister, Rachel Maclean MP, have commented that this is an area that the government could look at amending or changing, especially in relation to the concerns raised by landlords operating in the student sector and more widely.

Residential landlords should follow the Bill’s progression closely, with it heading for a second reading and into the committee stage next.

Simon Foster is a real estate litigation partner at Shoosmiths

 

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