Renters’ Rights Bill: critical updates for landlords & tenants
Renters’ Rights Bill Update
You wait for progress with the Renters’ Rights Bill and, just like buses, two milestones come along at the same time. The House of Commons gathered on 14th January 2025 for the reporting stage of the Bill and the third reading – two stages that happened in succession. Here’s the topline: the Bill was passed with a majority of 329 votes (440 in favour, 111 against).
Now for the finer details. The discussion points and outcomes of the most recent stages are of critical importance to the entire lettings industry. Here are three points you need to know about the latest amendment to the Renters’ Rights Bill:
- Large, upfront rental payments banned
The headline amendment will mean landlords will be banned from accepting substantial amounts of rent upfront. Letting agents and landlords who continue requesting upfront rent before a tenancy starts will be fined up to £5,000.
Landlords will be able to accept a holding deposit of up to one week, a tenancy deposit of 5 or 6 weeks, and up to one month’s rent in advance before a tenancy has begun. Interestingly, tenants will retain the right to pay rent in advance once a tenancy begins but not before.
The ban of large, upfront rental payments is designed to level the renting playing field, ensuring that tenants who can’t find an upfront sum of money are not at a disadvantage. It should also discourage landlords from pitting renters against each other, with the one willing to pay the highest amount of upfront rent the chosen party.
Industry experts were, however, quick to comment on how this amendment to the Bill may actually push some tenants out of the market. At present, tenants who have no/poor credit history, a fluctuating or unproven income, those moving from overseas, including students, and renters unable to provide a guarantor are able to offer 6 or 12 months’ rent to a landlord as a guarantee. Usually this is enough to put them on an equal footing with other tenants.
Prohibiting this style of upfront payment will leave landlords with little alternative than to only accept tenants with proven income, guarantors and/or an unblemished credit history. This will leave some of the most vulnerable tenants with fewer private rental options.
- Rental guarantors will play a bigger part
The ban on large, upfront rental payments means it’s more likely that first-time tenants, renters who don’t have great credit histories, international movers and people with inconsistent earnings or non-standard employment will be asked to supply a rental guarantor.
A rental guarantor is someone who is legally obliged to step in and pay the rent when the tenant can’t. A guarantor is usually a family member or close friend but it’s worth noting that guarantors will themselves have to pass a referencing process. As such, those who have poor/no credit history and no steady income or savings will be rejected as a guarantor. This narrows down the likelihood that every tenant who needs a guarantor will be able to supply one.
- Rent guarantee services may fill the gap
Although already in existence, rent guarantee services are not widely used in the private rental sector. That may change if the Bill’s amendment to upfront rental payments passes into law. Private companies can act as a guarantor for renters, which is useful if the tenant can’t provide a suitable friend or family member.
So, what’s the catch? Rent guarantee services come at a cost. Prospective tenants required to provide a guarantor – including people on zero-hours contracts, self-employed, retired, those in receipt of benefits, UK and overseas students and renters with poor/no credit history – can pay for a private company to become their rental guarantor. Payment can be in full or made in instalments, subject to eligibility. Providers currently include Housing Hand, RentGuarantor and Homeppl, although the number is set to explode once the Renters’ Rights Bill becomes law.
Rent caps look to be off the cards
While much of the heat was on the ban of upfront rental payments, the Housing Minister did address the matter of rent caps. Labour’s past rhetoric has suggested it is not against the idea of limiting how much landlords can charge in rent but, for now, this looks to be off the table. Mr Pennycook confirmed that rent caps were not in the Bill, saying there was evidence to suggest they could harm, rather than help, tenants. He also commented that rent caps could result in reduced rental supply and discourage investment in the private buy-to-let sector.
What next for the Bill?
The Bill had its first reading in the House of Lords within 48 hours of its third reading in the House of Commons. With the second reading imminent, the progress is rapid. Indeed, suggestions that the Bill will gain Royal Assent and elements become law as early as April may prove accurate. We await any amendments from the House of Lords as they too must complete the committee stage and reporting stage, as well as have a third reading.
If you are involved in the lettings sector – in a private or social housing capacity – feel free to contact Viewber for help, we are ready to help landlords, agents and property managers with the practical consequences of the Renters’ Rights Bill as soon as it becomes law.
