Student Landlords and the Renters’ Rights Bill – Part 1

Summary: The upcoming Renters’ Rights Bill will abolish fixed-term tenancies, significantly impacting landlords of student shared houses in the private rented sector. This change means tenants can end their tenancy with two months’ notice at any time, creating new challenges for landlords managing joint tenancies.

Introduction to the Renters’ Rights Bill and Student Lets

The Renters’ Rights Bill is nearing the final stages of parliamentary approval and is expected to receive Royal Assent shortly. Landlords across the UK must prepare for the changes it will bring, but student landlords, particularly those renting out smaller shared houses rather than purpose-built student accommodation, will face unique challenges.

Purpose-built student accommodation and university-managed housing will experience fewer disruptions. However, landlords of smaller private sector student lets need to understand how the abolition of fixed-term tenancies will affect their management and income security.

The Abolition of Fixed-Term Tenancies

A key provision of the Renters’ Rights Bill is the removal of fixed-term tenancy agreements. Minister Matthew Pennycook has emphasised that fixed terms will no longer be part of the new tenancy framework. This change aims to protect tenants from being locked into problematic tenancies, such as those involving unresolved repairs or poor property conditions.

Currently, tenants who sign a fixed-term tenancy are legally bound to pay rent for the entire term, even if issues arise. Under the new law, tenants will be able to end their tenancy by giving a two-month Notice to Quit (NTQ) at any point, including on the first day of their tenancy. The notice period must end on the final day of a rental period, meaning the actual notice length will range between two and three months depending on when it is served.

Impact on Student Lets

At present, groups of students typically enter into a fixed-term tenancy for a shared house lasting one academic year. If a tenant leaves early, the landlord remains protected because all tenants are jointly liable for the rent for the full fixed term.

With fixed terms abolished, any individual tenant in a joint tenancy can serve a NTQ at any time, effectively ending the tenancy. While the tenant can withdraw the notice if all parties agree, landlords may face situations where this does not happen, leading to complications.

When a Joint Tenant Serves a Notice to Quit

In a joint tenancy, all tenants sign the same agreement and share liability. If one tenant serves a NTQ, the tenancy ends for all tenants, leaving the landlord with remaining tenants but no active tenancy agreement. Landlords then have two main options:

• Require all tenants to vacate the property.
• Agree to let the remaining tenants stay, ideally with a replacement tenant to share the rent.

Option 1: Requiring Tenants to Leave

If landlords want the tenants to leave but they refuse, eviction requires a court order for possession. This legal process can take six months to a year, making it an impractical short-term solution. Meanwhile, landlords will want to receive rent payments. However, accepting rent without clear terms risks creating a new tenancy agreement, complicating the situation further.

Option 2: Allowing Tenants to Stay

If landlords accept rent from remaining tenants, a new tenancy is automatically created under section 54(2) of the Law of Property Act 1925. This new tenancy can last up to three years without a formal deed. The Renters’ Rights Bill will require landlords to provide a written tenancy agreement or face fines up to £7,000.

Landlords should aim to formalise new tenancy agreements with remaining and incoming tenants at the end of the NTQ notice period. This process involves:

• Obtaining new guarantor signatures, as original guarantees linked to the previous tenancy will no longer be valid.
• Managing deposit arrangements appropriately.
• Updating or redoing the inventory if the incoming tenant does not accept the existing one.

When a Sole Tenant Serves a Notice to Quit

Renting rooms individually rather than on a joint tenancy basis may simplify matters. If a single tenant serving a NTQ ends their tenancy, only their occupancy ends without affecting others. The landlord will need to find a replacement tenant for the vacated room.

While remaining tenants might be concerned about sharing with a new occupant they did not choose, many may appreciate the landlord’s efforts to maintain accommodation availability, especially as some landlords may exit the student lettings market.

Consulting existing tenants about potential new occupants and involving them in the search can help maintain harmony within the property.

Joint Tenancies Versus Renting Rooms Individually

Currently, most student landlords use joint tenancies, which provide the advantage of collective rent liability for the fixed term. With the abolition of fixed terms, this protection will disappear.

To avoid the administrative and legal complexities arising from joint tenants serving NTQs, landlords might consider renting rooms individually. This approach reduces the risk of entire tenancies ending due to one tenant’s notice. For further guidance, Landlord Association members can access a detailed FAQ on this topic.

Part 2 of this series will explore how the new rent regulations under the Renters’ Rights Bill will affect student landlords.