The Conservative and Labour Manifestos and Renters Reform: Focus on Build to Rent and Student Accommodation

Following the announcement that a General Election would be held on 4 July 2024, the Renters (Reform) Bill was dropped from Parliament. At that point in time, it had concluded its passage in the House of Commons and was awaiting second reading in the House of Lords.

The Conservative Party’s manifesto doesn’t specifically refer to Build to Rent or student accommodation but it is clear that the Conservatives intend to reintroduce the Renters (Reform) Bill (“the Bill”) and pass it through Parliament, if they win the General Election. The Bill will have a significant impact on Build to Rent and Purpose-Built Student Accommodation providers (see below). The Conservatives’ intention to revive the Bill is subject to their intention to “deliver the Court reforms necessary to fully abolish Section 21”. There is no doubt that the Courts are struggling to deal with the amount of possession claims which they are currently seeing. The latest landlord possession timelines for the private rented sector published by the Government on 16 May 2024 indicate that the average time for a claim from issue to obtaining possession has increased to 24.1 weeks. What is unclear is the steps that the Conservatives intend to take to reform the Court system. This is likely to require a considerable increase in funding to the County Courts and Court reform is unlikely to be quick and easy to achieve.

Specific mention of Build to Rent or student accommodation are also notably absent from the Labour Party’s manifesto. However, Labour intends to “overhaul regulation of the private rented sector”, abolish Section 21 “no fault” evictions, empower renters to challenge unreasonable rent increases and to extend “Awaab’s Law” to remove damp and mould from properties to the private rented sector. 

Potential impact if the Bill were revived by the next Government

Abolishing fixed term tenancies and no fault evictions

It is worth noting that whichever party forms the next Government, the Bill is likely to be amended before it is presented to Parliament. However, taking the version of the Bill at the date it was dropped, the Bill will abolish fixed term Assured Shorthold Tenancies and also the ability of a landlord to serve a Section 21 Notice giving at least two months’ notice for a tenant to vacate. Instead, tenants occupy under a periodic tenancy from month to month and can remain in occupation for as long as they want unless they breach the terms of their tenancy. In order to vacate, the Bill requires tenants to serve two months’ notice before leaving the property. A landlord, on the other hand, needs to serve notice relying on a statutory ground of possession. 

Taking back possession

If the tenant fails to vacate, the landlord must bring possession proceedings and establish their ground(s) for possession. The Bill also removes the ability to issue accelerated possession proceedings which enables claims to proceed more quickly, without a hearing, because these can only be issued where a Section 21 Notice has been served. Under the Bill, it is likely that possession claims will take much longer to reach a conclusion as each claim requires a Court hearing and for the landlord to prove their ground for possession. This, in turn, dramatically increases the number of possession claims requiring Court intervention and may exacerbate Court backlogs with possession claims. This is an issue for many private sector landlords but is particularly acute in the Build to Rent model as void periods are commercially unattractive and rely on a landlord quickly being able to re-let the property to another tenant.

Statutory rent increase notices

Another significant issue for Build to Rent providers is the removal of fixed term ASTs in terms of the procedure for increasing the rent under the tenancy. Currently, any rent increases are negotiated between the end of the last tenancy and the beginning of the next fixed term tenancy. However, under the Bill tenants simply remain in occupation for an unspecified period of time until they decide to serve a notice to quit. This means that landlords of Build to Rent and student accommodation need to serve statutory notices of increase of rent to initiate the procedure for a rent increase. The statutory procedure allows tenants to challenge increases of rent at the First-Tier Tribunal (Property Chamber) meaning providers may incur additional costs and experience unexpected delays in receiving an increased rent.

The right to keep pets

Tenants will be given the right to keep a pet and landlords cannot unreasonably refuse this request. Balancing an individual tenant’s request to keep a pet against the management of multi-family properties is likely to be a challenge which will require careful consideration. It is also important to note that there are limits on deposits landlords can require from tenants to cover any damage to the property caused by pets although it has been proposed that tenants should be required to maintain insurance to cover potential pet damage or to compensate the landlord for the reasonable costs of obtaining such insurance. 

Special issues for PBSA

As far as student accommodation is concerned, the explanatory notes to the Bill suggested that Purpose-Built Student Accommodation (“PBSA”) was exempt from the new rules if the provider was registered for a Government-approved code but, those provisions never made their way into the Bill. A new ground for possession was added to allow a landlord to recover possession of a property let to full-time students at the end of the academic year so that it could be relet to students for the next academic year. This ground, however, didn’t apply to Purpose-Built Student Accommodation. With the removal of fixed term ASTs, a student tenant is technically able to serve two months’ notice to vacate at any point during the academic year. This is a considerable potential problem due to the cyclical nature of the academic year and providers may be unable to find new students to occupy the property until the beginning of the next academic year resulting in further void periods. 

The market suggests that investment in Build to Rent and PBSA properties is soaring. Investors and stakeholders in this sector will be keeping a keen eye on which party wins the next General Election and their legislative priorities once in Government. It seems clear that whether the Conservatives or Labour win the next General Election, they intend to bring forward a version of the Bill to its conclusion. However, there could be significant changes made before the Bill reaches the statute books.