Note: Articles on the Renters’ Rights Bill will be continuously updated as details emerge
Last updated 11 October 2024
Following the second reading of the Renters’ Rights Bill on 9 October, Labour has made it clear that it does not intend to introduce rent controls.
In response to the cost-of-living crisis, Scotland tried out a rent rise cap of three per cent, which ended on 31 March 2024. A new rent increase procedure now applies in Scotland for rent increase notices issued from 1 April 2024 onwards. The landlord can propose an increase of any amount and if the tenant wishes to challenge the increase, they can refer it to the rent officer, who must apply a tapering formula to the increase. Any rent increase notices issued on or before 31 March 2024 are still capped at three per cent.
However, this kind of rent control has never been suggested in England or Wales. In their ‘A fairer private rented sector’ white paper, the last Government stated:
“We do not support the introduction of rent controls to set the level of rent at the outset of a tenancy. Historical evidence suggests that this would discourage investment in the sector and would lead to declining property standards as a result, which would not help landlords or tenants.”
What the Renters’ Rights Bill will do is introduce certain measures that are intended to help prevent excessive rent rises, and tenants will be able to challenge them without fear of the proposed amount being increased by the First-Tier Property Tribunal.
When a property is in demand, tenants – sometimes encouraged by agents and landlords – will often start outbidding each other to secure the tenancy. As well as pushing up rents, this means those who simply can’t afford to pay more than the advertised price may keep missing out on properties, even though they might make an excellent long-term tenant.
The Bill aims to protect tenants and place some level of control on rents by outlawing these bidding wars. Landlords and letting agents will be legally required to publish an asking rent for their property and banned from asking for, encouraging, or accepting any bids above this price.
This is very similar to the law that came into force in New Zealand in 2021, which states:
“Landlords cannot invite or encourage prospective tenants to pay more rent for a property than is stated in the advertisement or offer. This means they cannot organise an auction over a rental property or offer to give the rental to a tenant if they agree to pay more for it.”
However, it goes on to say:
“Prospective tenants or any other person can still voluntarily offer to pay more than the stated amount of rent and a landlord may accept this offer.”
While the new Bill does explicitly state that higher bids are not to be accepted, this could be very hard to enforce in practice, and the unintended consequence of Labour’s proposal could be that properties will simply be advertised at an inflated price.
David Smith, Head of Litigation at JMW, has covered this is more detail in his blog, where he concludes:
“I can well understand a desire to reduce or eliminate pressure from landlords or agents which encourages tenants to bid against one another. However, my experience is that tenants need little encouragement to do this when they are under pressure to secure a property or where a property is desirable. Therefore, I do not see that this sort of legislative change is likely to have much useful effect.”
- David Smith, Head of Litigation, JMW
Currently, landlords can write ‘rolling’ rent increases into the tenancy agreement, or raise them at any point if the tenant agrees. If they don’t have the tenant’s approval, landlords can issue a Section 13 notice not more than once every 12 months, informing the tenant of an increase, which must be “fair and realistic”.
While all that may sound reasonable, it leaves tenants vulnerable to unscrupulous landlords coercing them into accepting excessive rent rises for fear of being evicted if they don’t agree. Another underhand tactic sometimes used to get a tenant to leave without having to evict them, is hiking the rent to a level the landlord knows is unaffordable, effectively ‘forcing them out by the back door’.
The Bill proposes that increases can no longer be written into contracts and landlords will only be able to legally increase rents once a year, using a Section 13 notice that gives the tenant two months’ notice of the increase taking effect. The new rent must align with current market rates.
If a tenant feels that a rent rise is excessive, they already have the right to take the matter to the First-Tier Tribunal. However, the risk is that the Tribunal could decide that a ‘fair market rate’ is actually higher than the amount the landlord was proposing.
In addition, once a ruling has been made, the rent increase can be backdated to the Section 13 expiry date, so tenants could end up owing money they can’t afford. It is therefore no surprise that very few tenants bother to use the Tribunal.
The Renters’ Rights Bill proposes three key changes to protect tenants and make sure they are able to challenge rent increases without the risk of ending up in a worse financial position:
However, while this is certainly good for tenants, landlords are concerned that it will incentivise tenants to refer rent increases to the Tribunal even if they are fair, as it will defer the time when the rent increase will take effect.
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