Important Update For HMO Investors About The Renters Reform Bill

In this episode, I’m diving into the hot topic of the renter's reform bill and bringing you the latest updates on its progress. We’ll break down the proposed amendments and explore what they mean for landlords, especially those of us who own HMO properties.

Some of the headline changes include scrapping Section 21 (no-fault evictions), getting rid of fixed-term tenancies, and introducing new rights for tenants to request pets. Plus, I’ll cover the revamped Section 8, detailing the grounds for possession that student landlords need to know about.

Staying ahead of these changes is crucial for landlords. So, tune in to stay informed and be ready for what’s coming with the renter's reform bill. 

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Transcript

Andy Graham (00:02.67)

Hey, I'm Andy and you're listening to the HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short -term investment plan soon became a long -term commitment to change the way young people live together. I've now built several successful businesses. I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks and hacks, the ups and the downs, the best practice and everything else you need to know to start, scale and systemise your very own HMO portfolio now.

Andy Graham (00:40.622)

In today's episode, I am going to do my very best to put you to sleep because I need to give you an important update about the renter's reform bill. Now, if you don't know what the renter's reform bill is, then I am genuinely quite envious because this is quite a dull, quite boring and quite a frustrating topic. But the reality is it is going to affect you as an investor, as a landlord. And if you're a HMO investor, then it is definitely going to have some implications on how you're able to operate your business moving forwards.

Now, this isn't the law yet, but it is now in the House of Lords. It had its first reading in the House of Commons back in May 2023. There have been a variety of amendments. I'm going to bring you up to speed on what those are today. And now it's with the House of Lords. In fact, the first reading in the House of Lords was on the 1st of May. The second reading was actually on the 15th of May. The committee stage is likely to be scheduled for early in June. Once the Commons and Lords have both agreed on the final version in the process,

that is commonly known as ping pong, the renter's reform bill can ultimately receive its royal assent, which is essentially when it becomes law and it will change from the renter's reform bill to the renter's reform act. Today, I'm also going to give you a bit of a steer as to when all of this is likely to happen. Fingers crossed it actually happens sooner rather than later. Today, I'm going to explain why. So without further ado, please sit back, relax and enjoy today's thriller of an episode of the HMO Podcast.

Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO roadmap really is your one -stop shop. Inside the roadmap, you'll find a full 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants for the future. 

Andy Graham (02:43.28)

We've also got guest workshops added every single month, we've got new videos added every single week about all sorts of topics, we've got downloadable resources, cheat sheets and swipe files to help you, we've got case studies from guests and community members who are doing incredible projects that you can learn from, and we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side and track the key metrics that are most important to you. To find out more, head to thehmoroadmap.co.uk now. Come and join our incredible community of HMO property investors.

Andy Graham (03:23.47)

Okay, welcome back. So today we are going to talk about the renter's reform bill. I'm going to give you a bit of an update as to what the bill currently looks like. It has been amended and I'm going to give you as much of a steer as I possibly can as to when it's all likely to come into law, when it's actually going to be enforceable, when we're actually going to have to start doing things differently. Now, before we dive into today's episode, stick with me because whilst I know that this is a bit of a boring one, quite a frustrating one for most of us, it is important. 

It is absolutely without any shadow of a doubt happening, we cannot escape it. So you may as well just hang around and find out what it's likely to look like and when it's all likely to come to fruition. But how about we first of all remind ourselves what the renters reform bill is? Why is there a renters reform bill? And I'm going to caveat this because I'm not a huge fan of it. I'm not a conservative MP either. So I'm just going to give you my very honest and fairly candid opinion of the bill.

But fundamentally, the objective of this, as far as the conservatives have led us to believe, is to make a fairer private rental sector. They want to make it fairer for all, not just for tenants, for everybody. Now I've said quite publicly on the podcast and across a number of my channels that I don't think that it is fair in many ways whatsoever for landlords. And I know I am not alone in that. Now there have been some amendments, fortunately, some very important amendments since the

bill was originally proposed. We're going to talk about those today. But I actually think that this is just one of the conservatives' fairly left ideas to get more votes. It's another anti -landlord policy, a real easy vote spinner. I think that that is fundamentally all it is. I don't actually think that this bill is going to do the job of making the private rental sector any fairer at all. And I think it's actually...

going to continue to encourage landlords to leave the sector. I think it's going to put more pressure on tenants as rents will ultimately and inevitably go up. It really boggles my mind that the government cannot see this. Maybe they can see it, but they are just so blinkered by just getting it through and trying to hold on to their MC in government that they just don't care. So look.

Andy Graham (05:46.318)

I'm not a huge fan of it and I don't think it's going to do its job, but at the end of the day, like I said, it's happening. It's coming through. It's going to be passed into law at some point in the near future. And I said in the intro, hopefully soon. And let me explain why. At the moment, this is a conservative party piece. And as it's currently proposed,

It is likely to go through, then there may be a few very small minor tweaks and changes to it, but it is more or less likely to go through as it is now currently being proposed. There is a real worry that if this doesn't go through before a general election, before what looks likely to be a Labour government, this could change again. And we all know that Labour's opinion of landlords and of the private rental sector is...

quite different even to what has ultimately been a fairly anti -landlord conservative government. It could be much, much worse in my opinion, in fact, and in the opinion of many other people who are far better equipped and skilled and experienced to actually talk about this. It would be far better if this went through under the conservatives than it would be if the Labour government got their hands on it and made their own changes to it before it went and was passed into law. So.

That is why I think it is important actually that the amendments that have been proposed at the minute just go through and we just get it done and we just accept it. If it's delayed any longer, there is a real risk that the Labour government or a Labour government could get their hands on it and it could be a whole lot worse. So be careful what you wish for guys. Right, that aside, now I've made my feelings very clear about this. I felt like that was a bit of a purge, needed to get that out of my system. What does it all look like? Well, I think...

To give you a bit of context, I think we just need to remind ourselves, recap on the process that it's been through. So the first reading of the bill, the Rent Reform Bill, was back in May, 2023. It had a second reading debate around October time. I think it was at committee stage around November, 2023, reporting stage, and the third reading in April this year. And then in May this year, after a variety of amendments through that process,

Andy Graham (08:04.718)

It arrived in the House of Lords. It's had its first reading and actually it's just had its second reading on the 5th of May in the House of Lords. And we're not too far away from it really all being sort of decided upon. Hopefully that happens between summer and autumn this year. If it was all decided, if everyone agreed, it would get its royal assent. It would ultimately be passed into law. Then in reality, there would be a commencement date attached to it, which would probably be at least six months.

after it came into law, that is likely to be after any general election. So the hope is that the bill is passed and comes into law before a general election, but in reality, the commencement date, when we actually have to do anything different, that's not going to happen until after a general election. So that is, I think, the rough timeline that we can expect. There could be extensions to it. I mean, things could change. So...

We don't know and it is very, very tight at the minute guys. I think that is one of the big concerns about this at the moment. It really is touch and go as to whether this is going to happen before any general election. Anyway, let's move on and talk about some of the amendments that have been approved to the bill since it was originally proposed back in May, 2023. And also just kind of bottom out some of the things that we now know are definitely going to happen. First of all, the abolition of section 21. Section 21 is of course,

the no fault eviction, the one that most of us are familiar with. This is basically the ability for us as a landlord to remove a tenant from our property for any reason we like. I think that that was fine. I think that that was fair. We owned the property. Is it not reasonable that we could ask somebody to leave for any reason? Now, according to the government, it was being abused by landlords who wanted to put rents up and they were kind of holding tenants to ransom and saying, well, if you don't agree to this, we are just going to remove you from the property. I can see that.

that would be a problem in some circumstances, a very small number of circumstances. But unfortunately, we have all been tied with the same brush and section 21, no fault evictions are gonna be no more. So let's just accept that and move on. The next biggie is the removal of fixed term tenancies. Let's just remind ourselves what the original proposal to the bill looked like. The idea behind this was originally to allow tenants to move in and...

Andy Graham (10:28.782)

at any point after two months give notice to quit and leave the property. The idea being that that would stop landlords giving fixed term tenancies and forcing tenants to stay in a property if it wasn't up to scratch, if it wasn't a good enough condition or if they got a different job and needed to leave. I'm not sure how that in any way could be considered fair. It wasn't fair. Fortunately, it has been amended. Now,

The proposal is that tenants will be able to give two months notice, but only at month four, because it can only come into effect at month six. So in effect, while we can't grant a fixed term tenancy, there is a minimum of six months. This I think is positive. I think that that is plenty of time for tenants to figure out whether they want to live in a property, for landlords to figure out whether it's working. But also I think most importantly,

doesn't leave it open to abuse. Tenants moving into a property, using it almost as short -term accommodation, and then just moving on, all at a landlord's expense. It's very expensive to turn rooms over, to turn properties over, to do inspections and inventories and viewings and advertise things. So I think it is a good one. I think that this is a win. When the original bill was proposed, however, there was an uproar because fixed term tenancies and being able to grant fixed term tenancies is a key part of the student model.

And a lot of big organizations got together and they lobbied the government very heavily on this point because it really did have the risk of being incredibly detrimental to the way that the student market operates and to how student HMO landlords can operate. And interestingly, and if you did listen to the original episode I did about the bill, which may have been sort of nine to 12 months ago, the original proposal made

PBSA purpose -built student accommodation exempt from this. So the idea was that purpose -built student accommodations, the big blocks and things like that, that house students, they would be allowed to grant fixed term tenancies. I said very honestly and very openly that that is a clear intention to get students out of housing and into purpose -built student accommodation. It was leveraging this tool in the bill to do exactly that. There was no other explanation for it.

Andy Graham (12:47.374)

Student HMOs in the private housing sector operate no differently whatsoever to PBSA accommodation. However, despite all of that lobbying, and there was a lot of noise made about this, the removal of fixed term tenancies will include student lets. Student lets, student HMOs are not going to be exempt from this either. So what that means is for us as landlords, including student landlords, we cannot grant a fixed term tenancy.

Tenants will be able to give two months notice at month four, meaning they can move out at month six, where in effect there is a minimum six months. But if you're a student landlord, you will know that typically you want to rent your property out for 12 months at a time. Don't worry because there is something else elsewhere in the bill that I'm going to come onto that gives some protection against this point. So just bear with me, we will get to that one. So that is the removal of fixed term tenancies. I think the...

best way to interpret this is really, there's going to be a minimum six month tenancy. That's kind of how it is really. And I don't think that's too bad. I'm sure that you would agree. I think that that's reasonable. Okay. The next biggie is conversion of assured short hold tenancies into assured tenancies. I'm not going to go into all the detail in this. I'm not quite sure how it's actually going to come into practice once the bill is approved and gets passed into law. There's going to be a transitionary period, but anyway,

There's just going to be detail, but it fundamentally isn't going to affect too much that you and I really, really bothered about. And the next one, new rights for tenants to request consent for a pet. This was proposed very early on. I think that they have softened their position a little bit on this. I think the way it's currently looking is that landlords won't be able to unreasonably refuse, but I think the grounds to reasonably refuse will be pretty black and white. And I think as HMO investors with the HMO podcast,

That's what we're more concerned with. I think there are going to be things, provisions in here that mean we don't just have to concede to every request for a pet. I mean, I have a lot. I had one recently for a dog in a student house. I said, no, interestingly, I let one of my tenants have a dog in her student house for a couple of nights. Her dad was unwell and that dog chewed the sofa. Really unfortunate and the tenant told me straight away, but I just don't think that certain pets in HMOs are a good idea.

Andy Graham (15:11.886)

I've got, went, did an inspection recently and there was a ferret in there. You might've heard that episode and the house absolutely stunk, just not appropriate. And the other tenants in there, even though they're on a joint AST, they weren't happy about it either as well. So I don't think this is one that works for HMOs at all. I don't think it's fair to force landlords of HMOs to have pets in those sorts of houses. Who wants to move into a room that someone's had a cat in? They might be allergic, might be okay for some people, but some people might be allergic. So anyway.

Let's wait and see what the detail on that point looks like, but they are definitely going to push something through on this. There is going to be a new private rented sector ombudsman that was proposed very early on. Do we really need another ombudsman? Is another ombudsman really going to maintain the standards in the private rental sector? I don't think so. I think the landlords who are already not upholding the standards that are pretty black and white, and there are a lot of standards and regulations to uphold.

I think they're gonna continue doing what they do. This for me is one of the big things. It kind of just misses the point of the bill. How is this helping anyone? How is this helping tenants? How is this helping landlords like you and I who are actually doing great stuff? I don't think it is. There will also be a new private rented sector database, AKA a rented property portal. Not quite sure what the point of this or the purpose is. Really just to keep a track and a tab on things.

Will it work? Will it actually help? I don't know. Let's see. How do you validate if people are allowed to sort of share opinions and thoughts or references? How are we meant to validate if a tenant is allowed to leave some sort of an experience about living in one of our properties if they are disgruntled and we actually don't agree or we don't think it's fair? I'm not sure whether this will be on that sort of a portal. There are suggestions that it will. Maybe it won't be. But again, do we really need another portal to manage our businesses? Another hoop to jump through.

I don't think we do, but it is likely to happen. There will be another decent home standard for the PRS. So this is basically more standards to uphold as HMO investors. Most of us have got licenses. Most of us are adhering already to very high standards. This is kind of like getting non -HMO, non -licensed properties to a kind of a higher standard. There will be some similarities in kind of what's required for HMO licensing. How that'll actually be enforced and managed, I don't really know.

Andy Graham (17:33.838)

I don't think it's anything that you or I are not already doing. So I'm not worried about this at all. But again, I'm not sure whether this is really going to make any sort of an impact. I think the key thing here on a number of these is how are the bad landlords, the landlords who've always ignored the legislation and the advice and the guides, how are they actually going to be enforced? There's no proposals in here whatsoever or elsewhere in the manifesto to support local councils to enforce the rogue landlords. So.

Not sure it's doing its job. Anyway, the final one I want to mention is discriminatory practices. They will outlaw the ability to ban either benefit claimants and children. This could be an issue. I'm not quite sure how this is going to be managed in HMOs, but I know that there are some examples where tenants in HMOs have either had a baby or have a child that is maybe with mom or dad for part of the week and they want to have the child at their house in their HMO for part of the week. 

It's a difficult one. I get that this is a bit of a dilemma, but at the same time, I'm not sure that bringing a child into a HMO is appropriate without then screening all of the other tenants to make sure that they're safe to be around. I mean, you would assume they are, but we can't make assumptions with children, can we? So will there be CRB checks that have to be done on other tenants? Will this be allowed in HMOs? I'm not sure. I don't think it's a good idea. And I think actually,

that there's alternative accommodation solutions that would be better for people who do have children. Some people won't agree with that. I think it's the same for benefit claimants as well. And I don't think it's the point that they're on benefits. I think the key thing is as a landlord, we design a particular type of product. I think whether our product is something that better serves benefit claimants, social housing, or something that's incredibly high spec, super luxurious, they're gonna command people who...

earn very different amounts. And I think creating an environment and a product that serves those individuals is something we should be doing. We can serve them better. We can actually invest better. We can get better results. I think if we try and do both, we're going to, or we're forced to do both, we're going to find it very, very difficult. So like, I think we'll all find our own ways of managing this point, won't we? At the end of the day, but.

Andy Graham (19:55.918)

This is one of the proposals in this bill at the minute. It looks like it's likely to get passed. And I think again, it is pretty deft. So those are the kind of the key changes that have been made to the bill and how the bill is currently looking. Let me just talk to you a little bit about the new section eight. This is a really key piece. So with the abolition of section 21, the removal of no fault evictions, this is probably, I think the most contentious piece in here. I don't think it's fair that landlords aren't allowed to ask a tenant to leave if they want to.

I think we own the house. I think we should be able to. I know some people will disagree with that, but I don't know about you. I've worked very, very hard, saved up an awful lot of money to acquire that asset. I wouldn't let someone just drive around in my car and do what they want. And I think it's the same with a property. But anyway, it is going to happen. And there are some alternative measures that are being proposed and are likely to get passed into law as the Section 21 no fault eviction.

piece is removed and it is a new section eight. Now section eight is split into two things or two kind of key areas. There's mandatory grounds and this is basically the court has to agree to it. And there's kind of discretionary grounds, which is when the court has scope to use their own opinion as to whether or not it's enforceable or not. Some of the key changes to this are basically if you want to remove a tenant from a property, once section 21,

is removed or abolished, there are a few ways that you will still be able to do it. The first one that they're proposing is that if you intend to sell up, there'll be a mandatory sort of two months notice. You can give your tenant a mandatory two months notice that would be enforceable by the courts. There'd be no problem with you doing that. I think you're probably going to have to be able to demonstrate that you intend to sell up. Not quite sure how that will look at the minute. Your tenant would ultimately have to leave. The second one is if a landlord or a family member intends to move into the prep,

into the property that was proposed early on, it's remained. Not sure how many family members are moving into our buy -to -lets. Again, bit nonsensical this one to me, but it is mandatory you'll be able to give a tenant two months notice. Redevelopment by a landlord. This will be mandatory. You'll be able to give two months notice if you plan to do some redevelopment works. But there has been a bit of detail and I think this is important to share with you. A landlord must show that they intend to demolish or...

Andy Graham (22:21.806)

reconstruct the whole or a substantial part of the property in order to carry out the works. And it really has to be considerable. You'd have to be able to demonstrate that somebody couldn't reasonably live there while that work was being done. But let me give you an example. I think if you were going to go back to brick on a property, do a refurbishment to improve the EPC to let's say a C or a B or an A is going to require a lot of work. You'd be able to give, hand your tenants two months notice under the new section A to do that.

Another one is a sort of proposal to the new Section 8, enforcement action against a landlord. So this is a really interesting one. And as soon as I read it, well, I'm going to start with you and see how you think. If enforcement action has to be taken against the landlord. So let's say for example, you don't renew your HMO license for whatever reason. Maybe you didn't do something or maybe you've just decided that you just don't want to do something and therefore you can't get your license.

If there's going to be an enforceable action, if the council could then take enforcement action against you, or it would be threatened, you could provide two months notice. And that would be mandatory. The courts would have to support that. You could remove tenants. My immediate thought to that was, well, this is ludicrous because inevitably anyone could just take advantage of that and they could let something lapse and then use it as an excuse to let, I'll be able to hand a notice in.

And I've read about this since, and actually that has been one of the key things that has been said about this. So again, I don't think it makes too much sense. I know we're talking about unusual circumstances, but if people want to remove tenants, it is these unusual circumstances that are ultimately going to take advantage of. And I think that that one's just wide open. So another unusual one, but that's in there. And then the kind of the biggie, the big mandatory one that I hinted at earlier was grounds for possession for students.

So obviously fixed term tenancies have been removed. Tenants could give notice at month four, meaning they could move out at month six. That would be a huge problem for student landlords if tenants did do that. But equally, if we can't remove students, how can we let for the next academic year? If we've got a group of students that are meant to leave on the last day of August this year, and then we've got a group of students lined up to move in on the first of September, what happens if that group of students that are in now,

Andy Graham (24:45.934)

decide not to leave. Well, as it currently stands, we can't give them a fixed term tenancy, so they're allowed to just continue living there. We needed something in here as student landlords to ensure that we could still pre -let that house for the following academic year and to be able to give those tenants notice to get them out of the house in time for the new tenants coming in. Unfortunately, the government have conceded on this in the bill. There is a new grounds for possession for student HMOs, for student accommodation.

and you'll be able to give two months notice on this. Now there is some key detail. I think the notice has to be served so that the tenants would end up leaving the property between July and September or June and September, something like that. Basically, it ensures that you can hand the notice under the new section eight to existing tenants in time so that they...

had to leave before the new tenants came in. Now obviously you will align that up perfectly to match the dates that you actually want them to move out of the house by and then your new tenants can move in. This is a really key piece. Let's hope that this does remain. I'm pretty sure it will. The student market would be a bit of a mess if this one wasn't kept in. So that is the key proposal in the new section eight for students. And I think that's a big win for us. That was one that was lobbied very heavily. Now there is quite a lot more under the new

Proposed section eight, couple of bits and pieces. If tenants are behind with rents, there will be grounds to repossess. I'm not too sure whether that's going to be mandatory or discretionary. I think it might be discretionary. I think that might be down to the courts. Antisocial behavior. I think that actually there will be more sort of and clearer conditions placed on this. Before it was a little bit wishy -washy. I think it's going to be pretty clear what will be considered antisocial behavior. And I think that that actually will give us.

a lot more scope to sort of repossess the property from a tenant on anti -social behavior grounds. And I think that that's a good thing and a positive thing as well. And apparently any breach of a tenancy agreement. Now I can think of a lot of breaches of tenancy agreements, you know, we're quite lenient with our tenants. Often we have to remind them and keep them in line and things like that. But yeah, there'll be discretionary grounds for that. You will be able to serve two month notice. The court will be able to have their opinion. Look.

Andy Graham (27:05.838)

There's more to this. There's more to all of this, but I think I can hear you begging me to stop. And I think to be honest, I've covered the key things, the really important things for us as HMO property investors. And hopefully what I've done is made it pretty clear that this is now happening and giving you a bit of a guide as to when to expect all of this to happen. Look, let's watch and wait. Let's wait and see, but hopefully it does go through before a general election. And I'm not sure we're going to get anything better out of this guys. Unfortunately, I think that that is as good as

it's going to get for us. Look, I know that this is a really dull topic. I know it's really frustrating, but we've just got to accept it is what it is. However, I am interested to hear your thoughts on this. Do you think it's fair? Do you think that this amended version is better? Let me know what you think. If you haven't already joined, come and find us in the HMO community. It's our free group on Facebook, a great place to come and talk about this sort of thing. Start looking and discussing and planning about how we...

might need to make changes. If you're a student landlord, there are some really key things, despite these proposals, that I would recommend you do, including perhaps changing the date that you actually start and finishing your tenancies. I could do a whole episode on that, but coming over to the HMO community, let's have these conversations. Find me on Instagram, let me know what you think, drop me a DM, and tell me, if you've listened to today's episode, tell me what you think about these proposed amendments to the renter's reform bill.

That's about it for today's episode guys. Thank you for tuning in. If you have stuck with me all of the way through to today's episode, thank you so much. I appreciate every last second of your time, but more than anything today, I appreciate the moral support that you've given me whilst I discussed this incredibly dull and frustrating topic. Don't forget, if you want to level things up, if you actually want to find out how to increase the profits, how to scale up your property business, how to provide a better service, how to be a better landlord, and invest how to actually improve the private rental sector, head on over to thehmoroadmap.co.uk. Go and grab yourself either a starter or a premium subscription. The premium version will get you access to everything and it includes my most valuable resources, loan templates, contracts for rent to rent, notice board document, tenant welcome packs, and a whole lot more. That's it guys. Thank you so much for tuning in again. And don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO Podcast.