Influential committee backs crucial changes to proposed end of fixed term tenancies

The single biggest concern to student PRS sector is the proposed end of fixed term tenancies which is included in the rental reform bill being progressed by the Department for Levelling Up, Housing and Communities (MHCLG), under the leadership of Michael Gove. You can read more about the proposals here.

A report from the Levelling Up, Housing and Communities Committee has backed key proposed changes to government plans, including making all student tenancies exempt from plans to make very tenancy open ended. The government had previously acknowledged that this will cause problems in the student sector, but only planned to apply an exeption to purpose built student blocks.

The committee was established in October 2020 and is responsible for examining the expenditure, administration and policy of the MHCLG. The committee is chaired by Clive Betts MP and comprises 10 members from across the political spectrum. 

The report has been issued to ministers who will now have to decide whether or not to adopt the changes proposed by the committee. The government are now fully aware of the consequences of the intended proposals and have been given viable alternative options, so, let’s hope good sense prevails!

Summary of the recommendations for tenancy reform:

• Tenants unable to give 2 months’ notice until 4 months into a tenancy, meaning minimum tenancies of 6 months
• Fixed-term tenancies to be retained for the entire student housing sector, but, landlords must signed up to an approved government code of conduct.
• Landlords should not be able to use the ‘sale’ and ‘occupation’ grounds for eviction within the first 12 months of a tenancy
• Landlords must give four, rather than two, months’ notice to tenants if they intend to use the ‘sale’ and ‘occupation’ grounds for eviction.
• Landlords will not be able to market or re-let the property for six months, rather than three, in the case of eviction under the grounds of ‘sale’ and ‘occupation’.
• Make landlords attempt to sell a property with sitting tenants for six months’ before an eviction notice can be served.
• The government should introduce a specialist housing court, or significantly increase the court’s ability to process possession claims quickly BEFORE abolishing section 21.
• Make existing ground 14 (ASB), a mandatory ground, meaning judges will have to approve eviction if a threshold of evidence for ASB is met

The report also makes recommends that the Government “…review the impact of recent changes to taxation rules in the buy-to-let sector, with a view to making changes to make it more financially attractive to smaller landlords. If it is not willing to do this, it should at least be much clearer about what role it wants the private rented sector to play in the wider housing mix and, in particular, whether it values the involvement of landlords with very small portfolios.”.

Other recommendations cover housing standards and enforcement, a lack of affordable new homes, and increases in housing benefits.

The full recommendations for tenancy reform:

“The abolition of fixed-term tenancies, combined with the abolition of section 21, would undoubtedly give tenants greater security of tenure. We understand the argument that fixed-term tenancies should remain available where both parties want them, but in practice, given the current shortage of private rental properties, this would likely result in tenants having fixed terms forced on them. A reasonable balance needs to be struck between security of tenure for tenants and a degree of certainty for landlords. We therefore recommend that tenants be unable to give two months’ notice to leave until they have been in a property for at least four months. This will give landlords the legal certainty of at least six months’ rent at the start of a tenancy.

The one exception is the general student PRS market. The abolition of fixed-term contracts could make letting to students considerably less attractive to private landlords and so ultimately push up rents or reduce the availability of student rental properties, at a time when the market in many university towns and cities is already very tight. The exemption for purpose-built accommodation will only make the situation worse by potentially forcing students into that side of the market, which is already more expensive and less appropriate for students beyond the first year of study. We recognise, however, that some landlords might seek to abuse the exemption by letting to non-students and thereby circumventing the tenancy reforms. The Government should retain fixed-term tenancies in the entire student housing sector but require all landlords letting to students to sign up to one of the existing government-approved codes of conduct. In the longer term, the Government should consider replacing the existing codes with a single national code. It should also consider ways of preventing or deterring landlords from abusing the exemption, including by introducing financial penalties for those who do not let student accommodation primarily to non-students.

We recommend that the Government:
– increase from six months to one year the period at the start of a tenancy during which the landlord may not use either ground;
– increase the notice period from two months to four months, to give tenants time to save up for moving costs and find alternative accommodation;
– increase from three months to six months the period following the use of either the sales ground or the occupation ground during which the landlord may not market or relet the property; and
– in the case of the sales ground, encourage landlords to sell with sitting tenants—for
example, by requiring the property to be advertised for sale with sitting tenants for
six months before an eviction notice can be served.

Before section 21 can be repealed, landlords must have confidence in their ability to regain possession under section 8, especially in the case of rent arrears and antisocial behaviour. The biggest obstacle to this is the capacity of the courts. We continue to maintain that the best way to improve the housing court system is to establish a specialist housing court, and we do not think the Government has given a satisfactory reason for rejecting this proposal. We are concerned that the Government does not fully appreciate the extent to which an unreformed courts system could undermine its tenancy reforms.

We strongly recommend that the Government introduce a specialist housing court as the surest way of unblocking the housing court process. Whether it does this or not, it is absolutely essential that the Government significantly increase the courts’ ability to process possession claims quickly and efficiently and in a way that is fair to both landlords and tenants. This must involve prioritising and fast-tracking all possession claims in respect of rent arrears and antisocial behaviour. In consultation with landlords, the Government should also agree how quickly the courts need to be processing possession claims before landlords can have confidence in the system, and then commit to meeting this target before abolishing section 21. It should also collect and regularly publish data on its progress towards meeting this target.

A properly functioning courts system should resolve most of the issues with the process of seeking possession under section 8, but further adjustments to the discretionary ground for possession in respect of antisocial behaviour are also necessary. As currently designed, the discretionary nature of this ground will make it more difficult to prove antisocial behaviour, as residents might be less likely to give evidence if the outcome is uncertain. Whilst we recognise the argument for giving the courts discretion when someone’s home is at stake, we think the impact of antisocial behaviour on communities and landlords, and the compensating abolition of section 21, justify making this ground mandatory. The Government
should make existing ground 14 mandatory and issue guidance to the courts setting out the precise definition of antisocial behaviour and the circumstances in which they must grant possession. It should also publish equivalent guidance to landlords and tenants on what constitutes antisocial behaviour and the evidential threshold required to prove it in court.