Renters' Reform Bill delay - what does it mean for the lettings market?

Housing Minister Christopher Pincher announced that the introduction of the Renters' Reform Bill will be delayed for an indefinite period due to the impact of the COVID-19 pandemic.

Pincher told MPs in the House of Commons that the government will wait until 'there is a sensible and stable economic and social terrain' before progressing the Bill, which was originally launched as part of the Queen's Speech last December.

When finally introduced, the Renters' Reform Bill will enact significant changes to the lettings process – among others removing Section 21 from the Housing Act 1988 and replacing individual security deposits with a lifetime deposit that follows the tenant from property to property.

The Bill also proposes to make the government's database of rogue landlords and property agents accessible to tenants, agents, landlords, employers and professional bodies.

It was expected that the Renters' Reform Bill would make speedy progress through Parliament this year, with the government stating that it was keen to reform the Section 21 eviction process as quickly as possible.

However, the pandemic has stopped the proposed legislation in its tracks. What impact could this delay have on letting agencies and the rental market over the coming months?

Agents already dealing with new eviction rules

The proposed scrapping of the Section 21 evictions process would cause significant upheaval for property professionals, but the industry has already been required to manage a raft of changes to the evictions system this year.

Between March and September, evictions were banned and this year's annual Christmas freeze on bailiff enforcement of possession orders has been extended, running from December 11 to January 11 2021.

Although evictions can now proceed through the courts again, bailiffs have also been asked not to enforce court orders in areas under Tier 2 and Tier 3 local lockdowns.

Meanwhile, new rules implemented when the ban on evictions was lifted in September require landlords to provide six months' notice when seeking repossession, except in the most serious cases – and to demonstrate how tenants’ finances have been affected by COVID-19.

The combination of these measures - implemented to provide renters with greater stability and to reduce the spread of the virus - means that for large parts of 2020, landlords and agents have been unable to regain possession of properties with a Section 21 notice.

While the government is yet to provide many details on how it intends to change eviction rules after the pandemic, this year’s fast-changing evictions process is likely to have helped landlords and agents prepare for further eviction difficulties after Section 21 is removed by forcing more rigorous eviction and arrears recovery procedures now (see further down).

Legislation delay gives agents a breather

The news of the Renters’ Reform Bill delay has taken considerable pressure off the industry.

So far in 2020, agencies have already been required to adapt to new eviction rules and comply with extensions to key pieces of legislation such as the Tenant Fees Act and the Homes (Fitness for Human Habitation) Act.

In addition, the Electrical Safety Standards in the Private Rented Sector regulations were introduced in July, while agents will be preparing for the prospect of further energy efficiency rules and a requirement for full disclosure of referral fees in the future.

However, it's important for agents to remember that the Renters’ Reform Bill is unlikely to go away – and that the new eviction and arrears recovery strategies they have learned during the pandemic will continue to be useful once Section 21 is scrapped.

By keeping thorough records of all full and partial payments made by tenants, letting agents operating under the temporary changes to eviction rules can clearly demonstrate when rent arrears predate the COVID-19 pandemic. This information will also be essential when pursuing a Section 8 eviction for persistent delays in payment.

If the evictions process becomes more drawn-out after the Renters’ Reform Bill passes, arrears management procedures will become even more crucial. While arrears have spiked compared to pre-pandemic levels, agents have done a great job of keeping the rent flowing during COVID-19 by using SMS or e-mail payment reminders – and by agreeing and recording repayment plans with tenants where appropriate.

COVID-19 and the associated restrictions on eviction have stress-tested agencies’ arrears strategies as evicting rent-defaulting tenants has become more difficult, and at times impossible. By adopting best practices now, agents can adapt to future legislation more easily.

*Neil Cobbold is Chief Sales Officer at PayProp