The Renters' Rights Act came into force on Friday, marking a significant shift in tenant protections amid warnings that private landlords have rushed to exit the rental market to avoid the new powers for tenants. The new law bans no-fault evictions and abolishes fixed-term contracts, with other elements such as decent homes standards and a rental ombudsman still pending implementation.
Landlords Exit Market
Law firms have reported a surge of landlords opting to sell their properties, driven by concerns that the end of fixed-term contracts could leave them powerless to evict problem tenants. Thackray Williams, a London-based law firm, noted a wave of last-minute selling instructions from landlords in the lead-up to this week. Landlords fear the new rules will make regaining possession of their property more difficult and expensive.
Under the new act, all rental agreements will automatically become rolling from Friday, with tenants required to provide only two months' notice for moving out. This reduced flexibility is causing many landlords to rethink their investment strategies, especially as other factors contribute to reduced cash flow and increased administrative responsibilities, according to Mustafa Sidki, a contentious construction litigation partner at Thackray Williams.
Impact on House Prices
The influx of housing stock onto the market could weaken house prices, warned Claire Josef, a conveyancing partner at Thackray Williams. She anticipates increased instructions for her conveyancing team as landlords put their properties on the market, which could negatively impact property prices, particularly in areas with traditionally strong rental sectors.
Demand for Rental Flats May Decline
Property experts caution that the Renters' Rights Act could damage demand for flat developments, with build-to-rent construction potentially grinding to a halt. Audit firm RSM noted that housing developments are becoming more favorable for developers as landlords retract from the market and shrink their portfolios in response to increasing regulation.
The National Residential Landlords Association described the new laws as the biggest shakeup to the private rental market in nearly 40 years. Chief executive Ben Beadle expressed hope that the act will root out rogue and criminal landlords who undermine the reputation of the responsible majority.
Stricter Tenant Criteria
Because the new laws make it harder for rented properties to change hands, some property lawyers warn that landlords will become more selective about tenants. This could mean that renters on lower incomes, who may be perceived as less dependable, could miss out, according to Legal for Landlords. Sim Sekhon, chief executive of the advisory service, noted that while the act aims to create a fairer rental market, landlords losing certain safeguards will likely mitigate risk through stricter affordability criteria.
Coventry Building Society raised concerns that the reforms could cause good landlords to exit the market, leaving only exploitative landlords who hike rents. Jonathan Sinton, head of mortgage relations, emphasized the need for changes to work for landlords as well as tenants.
The government asserts that the act will offer better protections for 11 million private tenants. Steve Reed, secretary of state for housing, called the act a historic leap forward in renters' rights, ending the injustice that left millions living in fear of losing their homes.
