The government has recently introduced the Renters (Reform) Bill to Parliament, proposing significant changes to the residential rental sector. One of the key proposals is to replace fixed-term tenancies with rolling tenancies, offering more flexibility and certainty to tenants. Additionally, the bill aims to ban Section 21 "no-fault evictions," which allow landlords to end a tenancy without any specific reason once the fixed term is over or during a periodic tenancy.
The bill raises some less well publicised considerations for commercial developers acquiring residential or mixed-use properties for future development with existing tenants in situ. Although the removal of Section 21 evictions is a notable change, the bill seeks to strengthen landlords' eviction powers under Section 8, introducing new possibilities that were previously unavailable.
Under the current legislation, a developer landlord seeking possession of a property for demolition or reconstruction purposes can only serve a Section 8 notice, relying on Ground 6, if they acquired the property before the tenancy was in place, among other conditions. However, the new bill amends Ground 6, allowing a landlord to exercise this right notwithstanding existing occupation rights except where the tenancy began less than six months before the date specified in the Section 8 notice or, if a compulsory purchase order was issued, enabling the landlord seeking possession to purchase the property within one year prior to the specified notice date under Section 8. While the bill is seen as bad news for landlords this is a positive change for them.
Ideally, acquiring a property for redevelopment with vacant possession remains preferable. In this respect the bill also introduces a new Ground 1A, which permits a landlord to terminate a tenancy if they intend to sell the property, provided that the tenancy has been in existence for at least six months as at the expiry date of the notice or if the sale is to a person authorised to purchase the property under a compulsory purchase order. While it remains unclear whether such transfers must be conducted at arm's length and whether group company transfers will be excluded, Ground 1A is also an improvement for landlords. However, where waiting for vacant possession is not an option, it is advisable to carefully consider the available grounds under Section 8 and assess how they may impact the development timetable and plan. It is worth noting that the bill includes financial penalties if a landlord specifies a ground on which they are not entitled to rely, resulting in the tenant surrendering the tenancy without a possession order being issued.
Although the bill is still in its early stages and only had its first reading in the Commons on May 17, it is essential for commercial developers and landlords to keep an eye on its progress, as it could have significant implications for their future projects.