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Remote Work Meets Real Estate: Legal Insights on Home Office Conversions
Jessica Rice
This Bill, which was originally introduced by the previous government as the Renters’ Reform Bill, seeks to level-up the perceived current imbalance between residential landlords and tenants by bestowing on tenants greater rights and security. But critics argue that the proposed reforms go too far in favour of tenants. So, what are the current key reforms affecting private residential tenancies?
Tenancy status
- No more assured shorthold tenancies. All existing and future tenancies that would otherwise have been ASTs will become assured tenancies.
- No more fixed-term tenancies. Instead, these will become periodic and will run in alignment with the frequency with which rent is paid (“the rent period”)
- The new legislation will override any clause in a superior lease that requires:
- any subletting to be granted on a fixed term AST so that the intermediate landlord is not in breach of the covenants in the superior lease
- the intermediate landlord to deliver up the property free of any such subtenant so that failure to do so will not constitute a breach of the superior lease
Rent
- Tenancies must provide for the rent to be paid monthly, or for any period up to 28 days. It will no longer be possible to agree provisions for rent to be paid every quarter or every 6 months
- Any terms to the contrary will be of no effect and the default position is that the rent is payable monthly, calculated from the first date of the tenancy
- Landlords can increase rents once per year and increase notices served under s13 have to provide at least 2 months notice specifying the proposed new rent
- If a tenant wants to challenge the proposed new rent it must apply to the FTT to do so which can only determine a new rent up to the amount specified in the notice
- Landlord and tenants can still agree new rents between themselves and agree a variation of the tenancy to reflect this but landlords can no longer insert stepped rents into tenancies
- Landlords cannot require tenants to pay more than one month’s rent in advance
Possession
- A new Schedule 2 is inserted into the Housing Act 1988 specifying the grounds for possession. This includes a new ground where a landlord intends to sell its interest in the building
- Section 21 notice (no fault evictions) are banned
- Break clauses in existing ASTs that transition into assured tenancies under the new regime will be of no effect
- Landlords must register first with the Private Rented Sector Database in order to obtain a possession order (unless grounds 7A and 14 are being relied on)
- Where a Section 8 notice is served relying on breaches of the tenancy, the following time frames will apply and a new s8 form will have to be served:
| Mandatory grounds Grounds 7A & 14 |
Criminal offences, illegal use, nuisance and anti-social behaviour
|
Possession proceedings can be issued immediately
|
|
Mandatory grounds Grounds 1 1A 1B
2, 2ZA, 2ZB, 2ZC, 2ZD
|
Landlord seeks occupation for itself or specified family members Landlord intends to sell or grant a long lease for more than 21 years or to a rent-to-buy tenant; and in both cases the tenancy has been running for at least 1 year. Mortgagee exercises power of sale; A superior landlord has served notice to terminate the intermediate landlord’s own tenancy within 12 months or the intermediate landlord’s own tenancy is due to expire within 12 months; person has become the landlord of the tenant due to the expiry of the intermediate tenancy within the past 6 months Private student accommodation where the property is a HMO Landlord wishes to redevelop or carry out substantial works and acquired its interest in the property before the tenancy was granted and the tenancy has been running for at least 6 months; RSL requires possession of interim alternative accommodation that was provided to tenant whilst refurbishment works were undertaken Statutory notices have been served that require possession (eg prohibition notice, banning order, planning notice, improvement notice) or revocation of a HMO /selective licence |
Possession proceedings cannot be issued before 4 months from the date of service of notice
|
|
Mandatory grounds Discretionary ground |
Property is required for a minister of religion; or for a landlord’s agricultural worker; or for a social housing landlord’s employee; an employment contract (not service occupancy agreement) with private landlord has ceased (this is a mandatory ground);
|
Possession proceedings cannot be issued before 2 months from date of service of notice
|
|
Mandatory grounds
Discretionary grounds 11,
|
Property is required for supported accommodation; use of property as supported accommodation has ceased; use of property for local authority housing has ceased;
rent arrears:
• of more than 13 weeks if rent is paid weekly/fortnightly
• of more than 3 months if rent is paid monthly
and any arrears due to unpaid universal credit are to be disregarded;
there has been persistent delay in payment; Tenant’s employment with landlord (other than under a service occupancy) has ended |
Possession proceedings cannot be issued before 4 weeks from date of service of notice
|
|
Mandatory grounds
Discretionary grounds 12, 13, 14ZA, 14A, 15, 17, |
Student accommodation providers (not education providers) where tenancy is for fixed term up to 12 months and landlord gave notice that possession might be sought on this ground and within the year before the grant of the tenancy the property was used for student accommodation Illegal occupiers due to immigration status
Tenant has caused disrepair or deterioration Tenant convicted of an indictable offence Domestic violence where landlord is a RSL Tenant has damaged landlord’s furniture Landlord induced to grant tenancy by tenant’s false statement |
Possession proceedings cannot be issued before 2 weeks from date of service of notice |
- Those landlords who do not have genuine grounds to rely on but serve s8 notices leave themselves open to a fine
Tenant characteristics
- Landlords cannot refuse to grant tenancies because tenants are in receipt of housing benefits but they can still undertake tenant referencing and make decisions based on affordability
- Landlords cannot refuse to grant tenancies to those tenants simply because they have children or pets but are permitted to take a pragmatic approach where a property might not be suitable e.g. due to its size
- If a tenant requests a pet, a landlord cannot unreasonably refuse that request but can require the tenant to pay for the reasonable cost of insurance to cover any damage caused by the pet
- An example where it might be reasonable to refuse a pet is if any superior lease prohibits pets in the property
Property conditionS
- A Decent Homes Standard is being introduced which presumably will enhance and codify the existing fitness for habitation regulations, with the details of that still to be published
- Awaab’s Law which is already in place for social housing landlords will be introduced to all private landlords and imply terms into tenancy agreements requiring landlords to address safety issues such as damp and mould within a fixed timescale. The details are to be published
Termination by tenants
- Tenants can serve notices to quit at any time giving 2 months’ notice of their intention to vacate
- Such notice can be withdrawn before the termination date if both landlord and tenant agree
Registration requirements
- A new Private Rented Sector Database is being introduced to which landlords (including those with Rent Act tenancies) will have to register themselves and their properties
- Landlords will be precluded from obtaining possession orders unless they have registered and paid the fee
- Where selective licensing applies, landlords will still be required to hold the appropriate licences
- Landlords will also have to sign up to the Private Rented Sector Landlord Ombudsman scheme (see below)
Complaints and penalties
1. Ombudsman - A new Private Rented Sector Landlord Ombudsman (PRSLO) is being introduced and it will be mandatory for all private landlords (including those with Rent Act tenancies) to sign up and pay a registration fee
Its role will be to investigate tenant’s (not landlord’s) complaints and it can order landlords to undertake remedial works or pay compensation
2. Local authorities - Enforce statutory breaches against landlords by imposing civil fines of up to £7,000 e.g. for failing to sign up to the PRSLO or advertising a property for rent if landlord is not registered with the PRSLO.
3. Criminal sanctions - If landlords refuse to comply or commit repeated breaches, they can be prosecuted and fined up to £40,000 and those who refuse to sign up to the PRSLO may be ordered to repay rent
4. Rent repayment orders - The situations where RROs can be ordered is being extended to include superior landlords and company directors and the time period for seeking an RRO by a tenant or local authority is doubling from 12 to 24 months. As is the maximum rental amount that can be ordered to be repaid which is increasing from 12 to 24 months
If you have any questions about any of the issues covered in this blog, please contact Claire Lamkin, Marisa Abrahams or Peter Paul in our Real Estate & Construction team.
About the author
Claire is a Property Litigation partner within the Real Estate and Construction team providing advice, representation and support across the full spectrum of property matters including commercial and residential disputes. She acts for both landlords and tenants, landowners and developers as well as HNW individuals and is able to advise in insolvency situations where there are properties involved.
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