Renters’ Rights – taking the long view

The year ahead will bring the Government’s Renters’ Rights Bill into force. The initial reaction from landlords to this radical change in the private rented sector has been predictably negative (with good reason), but rural estates must soon face up to a “new normal” of rent control and enhanced security of tenure for tenants. In taking stock of the situation, it is perhaps possible for rural estates to find reasons, if not to be cheerful, at least to be sanguine about the forthcoming changes and to seek to approach them positively.

Looking back

The historic context is important. We have been here before: first introduced in 1915, rent control and security of tenure legislation was a feature of the landscape for most of the 20th century, consolidated in the Rent Act of 1977. Before 1989, protected tenancies under the Rent Acts afforded residential tenants strong security of tenure, the fair rent system and generational rights of succession. The unintended consequences of this are well-explored – landlords became reluctant to let and unwilling to invest in the fabric of buildings, leading to constraints in the quantity and quality of supply (a cautionary tale for the present). Deregulation of the private rented sector began with the Housing Act 1988 and the introduction of assured tenancies. This stimulated the expansion of the sector, and the advent of buy-to-let mortgages encouraged investment.

The climate has been benevolent for landlords since 1989. For much of our professional lives section 21 of the Housing Act 1988 (allowing landlords possession “as of right” on two months’ notice) has empowered landlords to remove unwanted tenants and enforce de facto rent reviews. However, this has arguably contributed to other social mischiefs and the pendulum of public policy is now swinging back. Landlords are rightly wary of the changes proposed. The Renters’ Rights Bill will indeed make things more difficult for rural estates – more difficult to remove tenants, to raise rents, to manage properties generally – but not by any means impossible. Indeed, the new regime will not be greatly dissimilar to that which obtained for assured tenancies in the early nineties – and the sector survived.

Changing perspectives

The period since 1989 has coincided with the increasing professionalisation of rural land management, which has in turn encouraged estate dwellings to be considered as investments, judged on their ability to create a return on capital. This has been part of a wider trend where the increase in residential property prices in recent decades has caused the public to view their own homes increasingly as investments, or to invest in buy-to-lets. Within society generally, there has been an increasing (and perhaps narrowing) focus on the exchange value of residential property, rather than its utility value as a home. This has not always been a force for good.

The great increase in the capital value of freehold property over this same period, and its relationship to average earnings, is well known. In 1997 the cost of a home in England was 3.5 times annual earnings; the factor in 2023 was 8.2. The cultural impact of this lack of affordability is huge – boomerang kids unable to get on the housing ladder until their later 30s; generation rent starting families on the shaky foundation of assured shorthold tenancies. The instability and insecurity of living within the private rented sector has been recognised across the political spectrum. As the current Government’s guide to the Bill observes, “Millions of people in England live day in, day out with the knowledge that they and their families could be uprooted from their home with little notice and minimal justification”. Michael Gove in the original White Paper, A Fairer Private Rented Sector, published under the previous government, also aspired to create “a modern tenancy system that gives renters peace of mind so they can confidently settle down and make their house a home ... so that everyone can live somewhere which is decent, safe and secure – a place they’re truly proud to call home.”

Owners of rural estates (both private and institutional) may well find some sympathy with that sentiment. Many will find it chimes with their own sense of being responsible landlords embedded in a locality; their vision of an estate that produces and sustains public goods; their values that emphasise stewardship, not just of the land, but of the wellbeing of individuals within a local community.

Farewell section 21

The ban on “no-fault evictions” is, of course, the headline news, but the power of the section 21 notice can be overstated. Since the Housing Act 2004 the enforceability of section 21 notices has been gradually eroded, as governments increasingly saw it as a lever to pull to advance other policy agendas – be that the provision of EPCs, gas safety certificates or to tackle retaliatory eviction. Anyone involved in contested section 21 notice proceedings in recent years will know that serving an enforceable section 21 is not straightforward – if a previous agent failed to provide the TDS prescribed information, took more than five weeks’ rent as deposit, or committed some other minor misdemeanour, the process can be stymied as a result. Even an enforceable notice does not mean a tenant will simply up sticks and leave (indeed, some local authorities advise tenants to ignore them and stay put until the court process takes its tediously long course). With that in mind, the need to rely now on a section 8 procedure engaging the new grounds in the Bill may not turn out to be the catastrophic step-change for landlords we are tempted to predict in more gloomy moods. The section 8 grounds have been extended and enhanced and include several which are helpful for rural estates:

• Sale: where the landlord wants to sell the property, they can serve notice on that basis. Tenants will have a protected one-year period at the start of their tenancy when this ground cannot be used, the landlord is likely to need to produce evidence of their intention to sell and cannot then relet within a further one-year period (to prevent abuse of the ground).
• Redevelopment: where the landlord needs possession to demolish or “substantially redevelop” the property, notice can be given, where certain conditions are met.
• Employment: landlords can serve notice to regain possession from tenants who are employees when their employment ends (or the property is needed for another employee). Note, however, that this cannot be used for agricultural workers.
• Agriculture specific: there are grounds permitting notice to be served where the tenancy has been granted by a farm tenant and the superior, agricultural tenancy under which the holding is let to that farm tenant has been terminated; also, where the dwelling is needed to house an agricultural worker.
• Bad tenants: grounds for termination where there has been anti-social behaviour or non-payment of rent.

Even if a tenant is sub-optimal (and the rent equally so), having someone in the cottage paying the Council Tax is often better if the alternative is a long void: empty houses cost money and yield none. Estates also generally do not use section 21 on a whim and, where it is used, there is likely to be a “real” reason. The sense we are getting from a number of our clients is that although they may use section 21 because it is convenient, there is usually a good reason to seek possession – most of which are covered in the new grounds.

Taking stock: estate cottage audit

The cultural and political perspectives on reform in the private rented sector are multi-faceted. But what is certain is that rural estates face a practical need now to pause and take stock of their residential portfolio before the changes take hold. Many estates are doing just such an audit, considering the following among other matters:

1. Purpose: what is the purpose of owning a particular cottage? Often it is revenue – some estates will look at outlying cottages, consider the low yield, the increasing burden of management, and decide that the capital is more fruitfully deployed elsewhere. Others, rather than selling, are experimenting with capital investment to create a higher specification in the hope of an uplift in rent. Others are moving from renting to AirBnB. The equation will depend on the dwelling and can be very different for a core property in the heart of the estate, where there is a sense of dynastic responsibility.
2. Occupant: considering whether a particular tenant is a good long-term fit for a dwelling close to the main house is prompting some estates to take the last opportunity to use section 21 to terminate occupation (or to set the rent). But there are other questions to ask about occupants of cottages close to home. Many such cottages house estate employees on low rents – would these better be moved on to service occupancies? Others accommodate old retainers or their widows on a “promise” dating back decades, often on a soft rent – is now the time to formalise that one way or another (and is the occupant on the right rent)?
3. Condition: now is also an opportunity to consider the fabric of the dwellings. When was the last time this was looked at carefully by your managing agents? The application of Awaab’s law to the private rented sector will mean a much closer focus on issues of damp, mould and fitness for human habitation (not to mention EPCs and MEES). An estate’s concern on these points will largely be motivated by the desire to do the right thing by its tenants, but the potential for negative publicity arising from problems is important to bear in mind.

Starting the new year with such a review can be a positive management step.

Lean in

Perhaps inevitably, measures designed to clamp down on the undesirable elements of a sector will also unduly burden “good” landlords. And there is no doubt the Renters’ Rights Bill will present considerable challenges to rural estates when enacted. But it is a reality that must be faced. Just as with winter weather, there is little point railing against something beyond our control. In a stoic spirit of making the best of things, rural landowners may choose to lean in to what is coming, try and make virtue out of necessity, and wait for the skies to clear.

This article is part of the Rural Estates Newsletter 2025, click here to read.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2025