The Renters’ Rights Bill imposes a raft of significant reforms to the private rented sector in England.
The reforms aim to provide greater security to those occupying rented premises and provide clarity to both landlords and tenants in a sector that is currently deemed complex and overregulated. Whilst most of the new provisions will apply only to England, some will also extend to Scotland and Wales.
One of the key proposed reforms relates to the tenant’s notice to quit. A notice to quit is the mechanism for terminating a periodic assured shorthold tenancy. The Renters’ Rights Bill aims to streamline the process, making it easier for tenants to end their tenancies. In this article we detail the current regime, highlight the proposed changes and explore how the proposed amendments will affect tenants and landlords.
Under the current regime, an assured shorthold tenancy agreement typically commences as a tenancy which runs for a specific period of time, usually six or 12 months, with clearly identifiable start and end dates. This is called a fixed-term agreement.
A tenant occupying under a fixed-term agreement has no right to end their tenancy prior to the end of the fixed-term, unless there is a break clause in the agreement or the landlord provides their consent. As such, fixed-term tenants cannot use a notice to quit to end their tenancy.
At the end of a fixed-term tenancy, the tenant can do one of three things:
If the original tenancy agreement contains a clause specifying how the tenancy will continue after the expiry of the fixed-term, then the periodic tenancy that arises is known as a contractual periodic tenancy. However, it's more common for the original agreement to be silent as to how the tenancy will continue and therefore any periodic tenancy that follows on is known as a statutory periodic tenancy.
A periodic tenancy is one which continues from period to period, for example weekly, monthly or annually, depending on the last rent paid i.e. if the tenant paid rent monthly during the fixed-term then the periodic tenancy will run from month to month.
Unlike with fixed-term tenancies, a tenant can serve a notice terminating their periodic tenancy agreement at any time. The length of the notice needs to be a minimum of four weeks and must end on the first or last day of a period of a tenancy. For example, to terminate a monthly tenancy commencing on the first of the month, the tenant must serve a notice which expires on the last day of any given month or the first. This means that monthly, quarterly or annual tenancies require a longer period.
Under the current regime, a landlord can also require the tenant to provide a longer period of notice, provided this is reflected in the tenancy agreement.
In addition to giving the requisite amount of notice, the tenant must also comply with the requirements for service as contained in the tenancy agreement or implied by statute. If just one of these requirements is not met, the notice to quit may be invalid.
The current regime limits a tenant’s ability to end their agreement and where a tenant has the right to do so, their attempts can be hindered by the prescriptive notice requirements, often leading to disputes between landlords and tenants.
Following the implementation of the new legislation, all tenancies will become periodic tenancies, and as such, tenants could theoretically serve a notice to quit from the first day of the tenancy. The default notice period will also be amended to two months for all types of tenancy, regardless of the frequency that rent is paid, although the notice period must still end on the last day of the rental period.
Furthermore, any attempt to lengthen the notice period in a tenancy agreement will automatically be invalid, although the parties will be able to agree to a shorter notice period by consent.
The draft legislation also proposes to abolish the need for the notice to quit to comply with the form and service requirements, meaning that a tenant will be able to provide their two months' notice in any form and it will be deemed to be valid. Once served, a notice to quit cannot be withdrawn without consent so tenants should carefully consider whether to terminate their tenancy before taking any decisive action.
The proposed amendments to the notice to quit requirements will be welcome news for tenants. With increased freedom and scope to end their tenancies, tenants will be able to serve notice to leave a property with relative ease.
For landlords, the future is much less certain, as without a fixed-term tenancy there will be no guaranteed rent. Landlords will therefore need to navigate the rental market in the knowledge that their tenant could leave the property at any time and for any reason, leaving them with the costs of re-letting and longer periods of vacant properties.
There is also concern amongst landlords that some tenants will exploit the new procedure, using properties as a cheaper form of short-term letting in tourist areas.
Whilst the proposals remain in draft form, it's likely that the proposed legislation will be enacted this spring, with phased implementation thereafter so we recommend that both landlords and tenants seek specialist advice if they intend to serve or expect to receive a notice to quit in the near future.
If you need assistance in this respect, please contact Lizzie Schulz and Aimee Fishleigh.
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