Student Landlords and the Renters’ Rights Bill – Part 2

Summary: This article examines the impact of the Renters’ Rights Bill on student landlords, particularly those managing smaller shared houses. Key changes include restrictions on rent setting, the prohibition of rent in advance before tenancy commencement, and new rules on guarantees, all of which require landlords to adjust their practices accordingly.

Introduction

This is the second part of a series analysing how the Renters’ Rights Bill will affect landlords of student properties, focusing on smaller shared houses rather than university or purpose-built student accommodation. The first part addressed the abolition of fixed-term tenancies, a significant change for the sector. Here, we explore the bill’s provisions relating to rent payments and the implications for student landlords.

Key Rent-Related Changes in the Bill

The bill introduces several important changes affecting rent:

• Landlords must specify a ‘proposed rent’ in adverts, which they cannot exceed, aiming to prevent bidding wars.
• The prohibition of rent in advance before the tenancy begins.
• Rent increases will be limited to the section 13 statutory notice procedure.
• Modifications to the mandatory eviction ground, ground 8.

Given that most students rent for only one year, the new rules on rent increases and eviction procedures may be less immediately relevant. However, the restrictions on rent setting and rent in advance are likely to have a significant impact.

The ‘Proposed Rent’ and Its Implications

The bill requires landlords to state a ‘proposed rent’ in adverts, which cannot be exceeded. This measure is intended to curb bidding wars, although it is unclear how common such practices are in the student rental market.

Landlords might be tempted to set a high proposed rent to maximise income. However, tenants will have the right to refer the initial rent to the First Tier Tribunal (FTT) for review within the first six months of the tenancy. This right, previously limited to assured shorthold tenants, will extend to assured tenants under the new legislation.

Importantly, the FTT will only be able to reduce rent, not increase it. This means tenants could challenge a high rent and secure a reduction after signing the tenancy agreement. Landlords should therefore ensure that the proposed rent reflects a justifiable market rate to withstand potential challenges.

Restrictions on Rent in Advance

The bill places strict limits on taking rent in advance, which could pose challenges for student landlords:

• Before the tenancy is entered into: No rent in advance may be taken. Any advance rent paid must be returned. Requesting rent in advance at this stage risks civil penalties under the Tenant Fees Act.
• Between the tenancy being entered into and the tenancy start date: Only one month’s rent can be taken in advance.
• During the tenancy: Landlords cannot require rent to be paid before the period it covers but may require payment at the start of the period. Tenants may voluntarily pay rent in advance once the tenancy has started.

Many student landlords currently take a full term’s rent in advance before the tenancy begins, often funded by student loans or grants. Under the new rules, this practice could lead to penalties unless the rent is returned.

This change may increase the risk of non-payment if students receive funds but are not required to pay rent upfront. While sensible tenants may pay voluntarily, others might be tempted to use the money elsewhere. This may prompt changes in how student grants and bursaries are managed, but landlords should prepare for increased risk.

Guarantees and Their New Limitations

Guarantees will become increasingly important under the new legislation. A notable change is the addition of section 16N to the Housing Act 1988, which provides that if a tenant dies, a guarantor who is a family member will no longer be liable for rent.

This change responds to tragic cases where family guarantors were held responsible for rent after a tenant’s death, including suicides. However, the protection is limited:

• It applies only in the event of the tenant’s death, not other defaults or abandonment.
• It covers only family member guarantors, excluding professional guarantee companies.
• It appears to apply solely to rent liability, so damages or other costs may still be recoverable from the guarantor if covered by the guarantee.

Defining When a Tenancy Is ‘Entered Into’

The phrase ‘entered into’ is frequently used in the bill but lacks a clear statutory definition. Generally, it is understood to mean the point at which both landlord and tenant have signed the tenancy agreement, creating a binding contract.

Additional indicators include:

• A specified tenancy start date.
• Exchange of signed copies between landlord and tenant.

Landlords should consider the tenancy as ‘entered into’ once both parties have signed and exchanged the agreement, as this affects when rent in advance restrictions apply.

Conclusion and Next Steps for Landlords

The rent-related provisions of the Renters’ Rights Bill will require student landlords to review and adapt their rent collection and tenancy procedures. Ensuring compliance with the new rules on proposed rent, rent in advance, and guarantees is essential to avoid penalties and disputes.

Future articles in this series will explore eviction rules and other aspects of the bill affecting student landlords.

For further guidance, landlords can refer to the Landlord Law FAQ on the Renters’ Rights Act.