A leading solicitor, David Smith of JMW Solicitors, in a recent LinkedIn article warns of the unintended consequences of amendments to be debated at the third reading of the Renters’ Rights Bill on 14 January 2025.

Smith states the most important set of proposed amendments to the Bill relate to the scrapping of rent in advance payments.

Rent in Advance

Rent in advance is very important for both landlords and tenants in the following scenarios:

• Tenants with weak credit histories.  
• Tenants from overseas (such as overseas students) with no credit history.

Smith states that without the ability to pay rent in advance these tenants are unlikely to be offered tenancies at all or they will be asked to pay for a guarantee insurer product that can meet the legislation’s requirements.

The amendments do not just apply to tenancies, they apply to licences as well. Student landlords have been considering using licences to allow for advance payment to be taken. There are other options but some student landlords may elect to use licences anyway because there will be other benefits such as fixed terms.

Smith adds that the situation is further complicated as the amendments will block the use of some existing guarantee products.

Most serious of all, the amendments prevent taking any rent before the tenancy agreement is signed. This is contrary to one of the most common practices when the tenant pays the rent and deposit and ensure that those cleared funds have arrived before the tenancy agreement is signed. Otherwise, there is a risk that the tenant will sign and the money will not in fact clear and the landlord will have to let them in and immediately start the eviction process.

Smith suggests an alternative whereby the holding deposit is used against the first month’s rent (rather than as a contribution to the security deposit) and the landlord insists on the security deposit being paid in full before signing the agreement. The restriction on advance payments does not apply to the security deposit, only to rent. That will not get all the funds in but should provide enough to give the landlord some reassurance.

Smith conludes “The government has not just gone further than I expected here but it has actually gone further than anyone might have expected and also probably gone further than it really intended to itself.

“The knock-on effect here is likely to be seismic and will be hugely exclusionary for a lot of tenants on lower incomes. The government may say it is trying to protect these tenants but the reality is that private landlords have a choice as to who they rent to and that is not likely to change soon. By removing risk mitigation strategies used to allow letting to specific groups of tenants the government simply makes those groups unlettable in the current market.”

Other Amendments

There is a further proposed amendment which will affect the student sector. This prohibits the new ground 4A for recovery of possession from students being used where those students entered into a tenancy agreement more than six months before they occupied the property.