Renters (Reform) Bill: Rent reviews but not as we know them

Just to note, the Bill is working its way through Parliament, so the provisions are liable to change. This ebriefing sets out the position as of today’s date (24 May 2023).

Current position

To understand the context of the changes, it is first helpful to consider the current position.

For periodic assured and assured shorthold tenancies, there are three ways in which rent can be changed:

1. a contractual provision – this is a provision in the tenancy agreement that allows the rent to be changed by the landlord. This provision must be considered fair to be enforceable. Usually, the change in rent can be implemented by notice (a letter setting out the new rent);
2. under section 13 of the Housing Act 1988 – in summary, this applies where there is no enforceable contractual rent review provision within the tenancy agreement. The landlord must send notice by way of a prescribed form 4. There are specific requirements about the timing of the notice and it only applies to increases. The tenant has a right of appeal to the First-tier Tribunal (Property Chamber) (the FTT) under section 14 of the Housing Act 1988: the FTT will determine the market rent for the property and that rent would then take effect; and
3. by agreement between the landlord and tenant – for obvious reasons, not a route a landlord would want to rely on.

Section 13 does not apply during a fixed-term tenancy.

An assured shorthold tenant also currently has the right to challenge the rent set at the beginning of the tenancy within the first six months of the tenancy.

Proposed changes

The Bill sets out changes to sections 13 and 14 of the Housing Act 1988 and inserts new sections 13A, 14ZA and 14ZB.

The Government’s guide to the Bill sets out that the key change in this regard is that all rent reviews will now operate under a statutory procedure.

However, having considered the provisions of the Bill this only seems to be the case for tenancies that are not a ‘relevant low-cost tenancy’. There are also further different provisions depending upon whether the tenancy is a ‘relevant low-cost tenancy’ or not.

In all cases, the rent increase will need to take effect at the beginning of the tenancy: e.g. on a Monday if the tenancy runs Monday to Sunday.

Relevant low-cost tenancies

The Bill sets out a new definition of ‘relevant low-cost tenancy’ as:

• a tenancy of social housing (as defined in the Housing and Regeneration Act 2008) where the landlord is a registered provider of social housing (an RP). So this is not all tenancies operated by RPs; and
• any other tenancy described in regulations by the Secretary of State.

For ‘relevant low-cost tenancies’:

• a contractual rent review provision in a tenancy of social housing granting by an RP will still be applicable – this would still need to be fair to be enforceable;
• alternatively, the landlord may serve notice under the new section 13A. In that case:
  • the landlord must give at least one month’s notice;
  • the notice of increase must be in a prescribed form. A new prescribed form will be published replacing the existing form 4;
  • rent can be increased within the first year (except for an assured agricultural occupancy). This is a welcome change which overcomes the current hurdle in section 13 that then means RPs need to have a contractual rent review provision in the tenancy agreement to have a consistent rent review date across their stock (commonly the beginning of April) if they want to increase in the first year; and
  • thereafter rents may only be increased every 52 weeks (or 53 weeks if the last increase took effect more than six days before the anniversary of the date on which the first increase took place).

The rent set out in the notice will then apply unless the tenant applies to the FTT before the date the increase is due to take place or the landlord and tenant agree to a different amount.

Where the FTT makes a determination, the rent will take effect on the date set out in the original notice (unless that date would cause the tenant undue hardship, in which case the FTT may set the date which must be no later than the date of its determination).

Other tenancies

For other assured tenancies, increases must be under section 13 of the Housing Act 1988 (as amended) unless the landlord and tenant agree on a different amount. For increases under the amended section 13:

• the landlord must give at least two months’ notice;
• the notice of increase must be in a prescribed form. A new prescribed form will be published replacing the existing form 4;
• rent cannot be increased until 52 weeks after the start of the tenancy – giving certainty for tenants of rent levels within the first year (with slightly different provisions for assured agricultural tenancies); and
• thereafter rents may only be increased every 52 weeks (or 53 weeks if the last increase took effect more than six days before the anniversary of the date on which the first increase took place).

The rent set out in the notice will then apply unless the tenant applies to the FTT before the date the increase is due to take place or the landlord and tenant agree to a different amount.

Tenants will also have the right to challenge the rent set at the beginning of the tenancy within the first six months (but not where there has already been a determination).

Where the FTT makes a determination, the rent will take effect on the date set by the FTT, which must be no earlier than the date of the application.

Comment

As drafted, the Bill does provide some concessions to RPs that recognise the practicalities of landlords operating rent reviews across thousands of properties. However, it will be important for RPs to have clear processes in place to distinguish non-social housing, where different provisions and timescales will apply.

For other landlords, the significant change is the required use of the statutory process and the longer two months’ notice period. If a tenant does challenge the rent, any rent increase would be further delayed until the date of the application at the earliest. So careful planning will be required here.

In all cases, landlords should continue to monitor changes here and be particularly alert to the publication of any new prescribed form.

This element of the Bill is quite technical, so we will likely see cases litigating the meaning of some of the provisions in due course.

You may also be interested in

Renters Reform Bill webinar – Part one

View

Renters Reform Bill webinar – Part two

View

If you have any questions about the proposed changes, or rents generally, please get in touch with Emma Hardman.

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