The Renters' Rights Bill is just one step away from receiving Royal Assent and becoming the Renters’ Rights Act. The new legislation will introduce sweeping reforms to the private rented sector which we have considered at length in our previous insights.
The minister, Baroness Taylor, said it wouldn’t be either right or fair for students to have less flexibility than other tenants just because of their educational status. This article examines what the new legislation means for the student housing sector.
Purpose built student accommodation (PBSA) registered with a specified government approved national code of practice, currently ANUK/Unipol and Universities UK/GuildHE, falls outside of the assured tenancy system. All PBSA tenancies are common law tenancies and therefore the provisions of the Renters’ Rights Act will not apply.
Student properties known in the industry as 'off-street' properties fall within the scope of the new legislation and it's this type of housing which is the focus of this article.
Under the new law, any existing assured shorthold tenancies will automatically convert to periodic assured tenancies and 'relevant persons', i.e. landlords and agents, will no longer be able to grant fixed-terms, removing the financial security associated with 12 month fixed-term tenancies. You can read about the implications of this change in more detail here.
Tenants will be able to give two months’ notice at any time to bring their tenancies to an end; this will likely result in many tenants serving notices to quit at the end of the examination season – i.e. May or possibly earlier. Many undergraduate degree lectures and other contact hours stop at the Easter break and, with the majority of exams being on-line, this means that students could head home leaving landlords with empty properties and protracted void periods between academic years.
With the abolition of section 21, landlords will only be able to obtain possession of their properties via one of the expanded statutory grounds for possession. A student housing landlord will be able to rely on one of the new statutory grounds, ground 4A, subject to satisfying the following conditions:
Under the new regime, students must give two months’ notice to their landlords if they wish to move on. By contrast, many of the statutory grounds of possession require landlords to give more than two months’ notice with the new section 4A ground requiring four months. Therefore, if landlords intend to recover possession at the end of the academic year, they might consider serving pre-emptive notices on one of the statutory grounds at least four months prior, even if they anticipate being served with tenant notices to quit.
In a recent article we highlighted that rent periods under the new tenancy regime cannot be longer than one calendar month.
Currently many student letting agreements provide for termly or quarterly rent periods. Termly periods align with student finance payments so students will need to budget carefully to ensure that they can meet their monthly payments.
The Tenant Fees Act 2019 will be updated to include a new 'prohibited pre-tenancy payment of rent’. A pre-tenancy payment of rent is prohibited if paid before the tenancy is entered into. Advance payments are routinely requested from students where landlords are unable to guarantee payment of rent. Going forward, landlords will need to rely on professional guarantors to minimise the risk of students falling into arrears.
Student landlords are looking at strategies to significantly mitigate the impacts of this new regime.
The PBSA exemption will almost certainly encourage student landlords to look at their portfolios to see whether there is any scope to amalgamate their student properties, to create a larger student development qualifying for registration under one of the codes and exemption from the assured tenancy regime.
We may see student landlords offering licences to occupy as opposed to tenancies; this is considered at length in an earlier article. Other landlords may simply decide to get out of the student housing market altogether.
Suffice to say that the Renters’ Rights Act will be a game changer for all landlords, not just those in the student housing sector and we can expect it to be subjected to some serious judicial stress testing following implementation.
For more information about when the Renters’ Rights Act will become law, please read our progress update here. For further information, please contact our property litigation team.
