The Renters’ Rights Act and its impact on estates

The Renters’ Rights Act (the Act), which received Royal Ascent on October 27, is a significant overhaul of the private rented sector. The key reforms are outlined below and look to reshape the relationship between landlords and tenants. While the Act aims to provide greater security for tenants, it introduces profound changes for those involved in estate / trust administration and/or disputes arising from the same. The changes introduced could lead to unforeseen delays in the eviction of tenants which in turn will slow the realisation of estates and trusts and additional expense. This article considers the implications of the same.

Key reforms

It is suspected (but not certain) that the reforms will likely come into effect in early to mid- 2026, albeit some elements of the Act may well commence later than others. It should be noted that aside from the additional rights provided to tenants the Act looks to ensure that landlords can still recover their property for legitimate reasons. 

Abolition of Section 21

“No-fault” evictions under Section 21 of the Housing Act 1988 (the “Housing Act”) are to be brought to an end, and landlords must provide a concrete reason from specified grounds to repossess a property. 

Periodic Tenancies

All Assured Shorthold Tenancies will be converted to rolling periodic assured tenancies, removing fixed terms. 

New Grounds for Possession

The Section 8 process (under the Housing Act) provides the legal framework for landlords to evict tenants. Unlike the “no-fault” evictions under Section 21, Section 8 requires landlords to provide valid reasons for seeking possession, i.e., "grounds for possession". Under the Act these grounds are to be expanded, with new and updated mandatory and discretionary grounds for landlords to sell, move in, or deal with tenant default.

Private Rented Sector Ombudsman

A new and mandatory Ombudsman is to be created with the aim of providing a quicker and cheaper alternative to the Courts for resolving a wide range of disputes. 

Decent Homes Standard & Awaab’s Law

There is a new minimum quality standard to be applied to private tenanted properties, with the imposition of strict timelines for repairing serious hazards like mould and damp. 

Rent Increase Reform

Rent increase clauses in tenancy agreements will no longer be enforceable. 

Rent can only be increased once a year via a Section 13 notice (under the Housing Act) the notice period for which has been increased from 1 month to 2 months. Importantly, the new rate of rent will take effect either on expiry of the notice (if the tenant does not challenge); or on the date the tribunal determines the new rent (if the tenant chooses to challenge).

In essence, the tenant is incentivised to challenge as this delays the commencement date of the new rate of rent irrespective of the outcome of the review (which may be months later). Furthermore, the tribunal (when it makes its decision) will not be able to increase the rent beyond the landlord’s initial proposal. For example, a landlord who proposes an increase in January (to align rent with the latest market price), but receives tribunal approval in August (due to a tenant challenge) may find that the rate proposed in January is below market rate in August. Additionally, the previous lower rate would have been in force between January and August. 

Impact on estate administration and contested estates

For executors, trustees, administrators, property managers and other professionals handling rental assets in an estate / trust administration (or dispute) context, the Act introduces new procedural requirements and timelines which are of particular relevance. 

For clarity, “landlord” (as defined under the Housing Act) includes “any person from time to time deriving title under the original landlord and also includes, in relation to a dwelling-house, any person other than a tenant who is, or but for the existence of an assured tenancy would be, entitled to possession of the dwelling-house”. As such this does include those appointed as executor (who derive their title from the Will) from the death of the previous landlord, and those appointed administrator (who derive their title from the issue of the grant of representation).

Managing Inherited Rental Properties

Since, those administering an estate with tenanted properties will no longer be able to rely on a Section 21 notice to gain possession of an estate or trust property, the first recourse may be to Section 8 which requires specific evidence and adherence to notice periods. 

If possession is required to sell a tenanted property, then a new mandatory ground (i.e., the court must grant possession if the landlord can prove this applies) is provided for that purpose (but will require documented evidence of the intention to sell). However, this ground is unavailable within the first 12 months of a tenancy, and there is a requirement to provide a longer 4-month notice period (compared with Section 21). It should be noted that there may also be recourse to anti-social behaviour and nuisance grounds for repossession. Particularly in a contentious scenario it is essential that there is good record-keeping to support a Section 8 application.   

It will also take longer to take action in cases of rent arrears (due to a longer notice period in the Act), which means that an estate may be without both the cashflow from a tenanted property and/or the property asset itself for longer periods. Trustees will need to consider their investment duties in light of the changes to the rent setting process emanating from the Act, as the same impacts on the foreseeable returns arising from continuing to hold the property.

Evidently, for estates which need to liquidate assets quickly, these delays will need to be accounted for in any financial and matter planning. This is especially since funds may be required to discharge tax liabilities with respect to the administration, the late delivery of which may accrue interest and penalties. For example, inheritance tax (IHT) timeframes are strictly enforced, and unless tenanted property issues are anticipated there could be significant delays in meeting IHT liabilities. 

Nonetheless, it is worth noting that (prior to the Act) executors/administrators in particular often found themselves without a right to possession other than that provided by Section 21. This had the potential to be problematic as the executors/administrators often did not possess the full details as to the tenancy, which made it difficult to serve a valid Section 21 notice. The new ground for landlords wishing to obtain possession in order to sell may in fact be better suited to executors/administrators, as they may find it easier to show an intention to sell as opposed to serving a section 21 notice.

Compliance

The new Private Rented Sector Database and Ombudsman scheme may not be implemented for some time. Nonetheless, once implemented, on the commencement of management of a tenanted property it must be ensured that the property is registered on the new Private Rented Sector Database and that the landlord is a member of the Ombudsman scheme. The ability of a landlord to use certain possession grounds hinges on compliance with these requirements. Of course, this may build in additional delay for an estate seeking to repossess a property.

It must also be ensured that there is ongoing compliance with the Act itself, such that new civil penalties are not incurred for actions such as: failing to provide required tenancy information or attempting to rely on possession grounds which are not applicable. The civil penalties issued may be significant at up to £7,000 per breach, and with repeat or serious offenders facing the possibility of criminal prosecution or fines up to £40,000. This would not only reduce the size of the estate but potentially expose executors and trustees to claims from disgruntled beneficiaries.

Once the decent homes standard / Awaab’s law element of the Act comes into force, the level of urgency required will be even greater. This will introduce specified timeframes for investigating hazards which may be as little as 24 hours. Again, failure to comply may lead to significant enforcement action. This is a considerable risk element for trusts and estates, whereby there may be an initial lack of knowledge about the relevant properties for the executors and/or trustees tasked with managing the same. 

Best practice

It is recommended that during an estate administration an audit is conducted of all tenancy agreements at the earliest opportunity. There may be a need to adjust the tenancy agreement(s) to bring the same in line with the Act and/or to canvass tenant intentions around vacating the property. Albeit, any canvassing of tenants should be done with great care and with legal advice to avoid inadvertently falling foul of the Act. 

A key element is to ensure that any registrations or engagement with the ombudsman (once this scheme is implemented) is dealt with as a priority to prevent administrative roadblocks.

It is clear that any requirement to liquidate tenanted assets will need to build in longer timeframes to account for the 12-month protected period and the 4-month notice period. Indeed, allowance should also be made for the possibility that the Court process itself may take longer in future due to the increase in claims, and the complexity of all claims, as a result of the Act.

In view of the potential compliance issues, trustees and executors should give thought to taking legal advice at the outset and engaging reputable management companies to oversee the quality standards of any tenanted properties. 

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