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Renters’ Rights Bill: what is happening to statutory rent increases?
Will social landlords be affected by the changes to rent increases in assured tenancies? Samantha Grix, a partner at Devonshires, explains
Samantha Grix is a partner at Devonshires
When it comes to statutory rent increases for assured tenancies, the Renters’ Rights Bill proposes to treat private rented sector (PRS) tenancies, social housing tenancies and tenancies provided by a registered provider of social housing (RP) differently.
The provisions that apply to the PRS will apply to RPs in respect of any market rent housing stock they operate. With this being the case, RPs will need to take note of the regime as applicable to the PRS, as well as the provisions that apply to social housing stock.
All PRS tenancies will be subject to the provisions of Section 13 of the Housing Act 1988 when increasing rents. Contractual clause increase mechanisms will be prohibited in the PRS so PRS landlords are going to have to grapple with the technicalities of Section 13 pretty swiftly upon the bill passing into law.
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The mandatory implementation of Section 13 in the PRS and loss of contractual clause mechanisms mean that rent increases will not be permissible within the first 52 weeks of a tenancy, so landlords may have to wait up to 23 months to increase rents if they want their increases across their stock to be aligned.
PRS landlords will be required to give two months’ notice of an increase, which is an increase from the current regime that requires one month’s notice.
“The good news with Section 13A is that RPs may continue to use contractual clause mechanisms to increase the rent”
The bill proposes a new Section 13A of the Housing Act 1998 which will apply only to low-cost tenancies that are provided by RPs. It is noted that the bill excludes housing which complies with the definition of low-cost accommodation pursuant to Section 69 of the Housing and Regeneration Act 2008, but where the landlord is not a RP. This will also exclude a proportion of social housing providers that are not RPs, but will have to adhere to the administratively burdensome provisions of Section 13 by default.
The good news with Section 13A is that RPs may continue to use contractual clause mechanisms to increase the rent. Contractual clause increases are far easier to manage from an administrative standpoint and allow RPs to easily maintain their first Monday in April increase schedule.
Where RPs do use Section 13A, they will have to provide one month’s notice of the increase, which maintains the status quo.
There seems to be an attempt to align rent and tenancy periods in the respect of duration, but the drafting is far from clear in respect of commencement date of each period. This needs addressing given the immediate implementation of the legislation when it comes into force and the administrative nightmare that comes from implementing statutory rent increases at the commencement of a tenancy period.
Surely commencement at the start of a rent period makes far more sense?
It would be remiss to not mention Section 14 and Section 14ZB as proposed in the bill. The first-tier tribunal (FTT) will have jurisdiction to assess the validity of Section 13 and Section 13A rent increase notices rather than this being sent to the county court for determination. This seems like a sensible change.
“The cost and administrative burden for RPs cannot be underestimated”
However, what is concerning is that the bill allows for the FTT to determine when the new rent shall come into effect upon determination, which could be up to two months after the determination. This means that the rent increase for an individual tenant may take effect months after the intended date (commonly 1 April) and that tenants’ rent will then be totally out of sync with the RPs (or PRS landlords) increase regime for their stock. Given the size of some RP portfolios, this is just unmanageable.
The cost and administrative burden for RPs (and those who are not RPs but provide social housing) cannot be underestimated. When speaking to the National Housing Federation about the proposals in the bill, it said: “If rents had to be increased individually at different times throughout the year, this would create a huge administrative burden on social landlords, many of which have a large housing stock (over a hundred thousand homes) and currently change rents in bulk, and work with systems that operate in this way.
“However, this would also be difficult for smaller providers too who do not have the administrative capacity to deal with rent increases throughout the year. Housing associations would have to change their systems entirely.”
Given the above issues, we have to hope that amendments are made to the legislation before it is enacted to prevent the unintended cost and administrative consequences for RPs.
The second reading of the bill is due to take place on 9 October, so further developments we be with us shortly. Watch this space.
Samantha Grix, partner, Devonshires
