The impact of the Renters' Rights Bill on starter tenancies

In this article, we consider the implications of the Bill for starter tenancies.

The current position

At present, starter tenancies are commonly used by landlords who are registered providers of social housing (RPs) to allow new tenants to have a "starter" period, which is usually 12 months, before agreeing to a longer-term tenancy. The starter period allows both the landlord and tenant to see whether the tenant can manage the tenancy, including the rights and obligations under it.

This is achieved by RPs granting an initial 12-month assured shorthold tenancy (AST) for the starter period. Provided there are no issues during the starter period, the tenancy will either automatically convert from an AST to a rolling weekly or monthly periodic fully assured non-shorthold tenancy, or there will be a mechanism to ensure conversion. The landlord also has the ability to extend the starter period for a further six months prior to the expiry of the initial 12-month term, if appropriate.

What's changing and what does it mean for starter tenancies?

The Renters' Rights Bill proposes to abolish ASTs entirely, without exception, as well as the ability to rely on section 21 of the Housing Act 1988 in order to terminate those tenancies simply by serving at least two months' notice in the required form, which must expire on or after the end of the initial fixed term.

The result of this will be that RP landlords will no longer be able to grant any form of AST, including for a 12-month starter period, or any period at all. All existing starter tenancies will convert to periodic assured tenancies once the Bill becomes law.

This will remove the ability of RP landlords to use any form of starter tenancy, as all tenancies granted going forward once the Bill is law will be assured tenancies, with a rental period of no longer than one month.

When will this happen?

While the Renters' Rights Bill is expected to be made law this year, it is not yet known when the provisions will come into force.

Section 144 of the Bill (as currently drafted) details how the Bill will be implemented, and sets out that the Act will come into force on a day appointed by the Secretary of State. In particular, section 144(8) provides as follows in relation to Chapter 1 of Part 1, which is the Part of the Bill governing, amongst other things, the abolition of ASTs:

"Different days may be appointed for different purposes in relation to Chapter 1 of Part 1 only so that—

(a) one day is appointed for the purposes of assured tenancies that are not social housing assured tenancies, and

(b) one or more different days are appointed for the purposes of social housing assured tenancies"

The effect of this section is that the implementation of the ban on ASTs may come into force on a different day for social housing and non-social housing tenancies.

"Social housing" is defined by reference to the Housing and Regeneration Act 2008, which defines social housing as "low cost rental accommodation" or "low cost home ownership accommodation" which are then further defined by the legislation but in summary include below market-rent tenancies provided to people whose needs are not adequately served by the commercial housing market, and shared ownership or equity percentage arrangements. This would therefore cover a significant proportion of RPs' property, excluding their market rent or long lease arrangements.

It is therefore possible that the ban on ASTs, and subsequent effect on starter tenancies, could be delayed for RPs. While there are no clear dates yet, it is possible that the implementation date for Chapter 1 of Part 1 of the Bill for social housing could be after the implementation date for the rest of the rented sector. This is to allow time, in particular, for the Government to update its Direction to the Regulator of Social Housing so that they can update their Tenancy Standard, which requires a statutory consultation process.

What landlords should be thinking about now

Until the Bill is finalised and made law, landlords can continue to use starter tenancies.

However, landlords should consider their position now ahead of the implementation of the Bill to ensure that they can assess alternative forms of tenure to ensure they are suitably prepared in advance of the ban on ASTs. While it is possible that the implementation could be delayed for RPs, no timescales are currently known, including whether there will be any transitional period or other provision for RPs.

In the meantime, if a valid Section 21 notice has been served and possession proceedings have been issued when the Bill becomes law, then the Section 21 notice remains valid until the possession proceedings have been concluded. The amendments under Chapter 1 of Part 1 will not apply in those circumstances and the tenancy will remain an AST until the conclusion of the proceedings. In circumstances where a valid Section 21 notice has been served before the commencement date of the legislation, but possession proceedings have not been issued, the landlord will have 6 months from the date the notice was given, or 3 months from the commencement date, if that 3-month period ends before the 6-month period. This means that landlords will have a maximum of 3 months from the date that this part of the Bill becomes law to issue proceedings relying on valid Section 21 notice served before commencement of the legislation.