Rent Reform Bills – Practical implications on property sales and lettings
The radical nature of the Renters’ Rights Bill. Rent caps and Sales Price caps.
Apart from abolishing fixed term contracts (ASTs) and outlawing the use of section 21 as a means of regaining possession, Landlords are starting to realise that this Bill also introduces Rent Caps by the back door. Or whatever you want to call it ‘Rent Suppression’ (phrase coined by David Smith) or ‘Rent Controls’
All rent increases can be appealed at no cost or repercussion for tenants through the First Tier Tribunal, who will make the ultimate decision. This could be a lengthy process and whatever the decision it won’t be back-dated. So a Landlord may in effect only get a partial rent increase and only 4-6 months of any incremental increase rather than an expected 12 months.
This removes the ability for a landlord to assess and determine the rental amount for their own asset or let market forces prevail e.g. if it is too high in the 1st place a tenant can choose to live elsewhere.
In addition to Rent Capping, the labour Government are also Capping or controlling what price Landlords can sell their properties for.
A Landlord needs to serve a specific notice to sell (Section 8 Ground 1b Notice-corrected from a typo) and only after a 12 month minimum occupation and the Landlord has to serve 4 months notice they intend to sell.
This can mean a 16 month wait before a Landlord can sell unless the notice is served within the 12 months’ period.
There is a further Restriction period – from the date a Landlord serves the notice and lasts a full 12 months from the date of expiry (up to 16 months) before a landlord can re-let their property if they change their mind.
In reality a Landlord might try to sell for several months and not succeed and decide to re-rent. But they can’t do this otherwise they may receive a civil penalty up to £7k if it is a 1st offence or up to £40k for subsequent contraventions. (For both landlord and agent).
Oh and there’s a Rent Repayment Order attached to this as well.
This means that a Landlord’s decision about how to price the property is restricted.
Those landlords spooked by the former Renters’ Reform Bill decided to sell but have returned to the rental market owing to a sluggish sales market.
Under the new order they cannot do this. This will create more financial hardship for Landlords and more problems with supply of rental properties in the rental market.
There is currently a housing crisis. The Renters’ Rights Bill will make this worse.
This in effect will force Landlords into quick fire sales at commensurate keen selling prices – almost forcing a landlord into a ‘repossession sale pricing’ scenario.
The Renters’ Rights Bill delivers price caps on both rent and sales prices.