Part 3
Tenant relations, screening and financial management
3.1
Banning discrimination, covering no DSS, Children and Fair Housing
New housing legislation, such as the Renters' Rights Act in England, introduces explicit prohibitions against discriminatory practices in the private rental sector. These measures are designed to ensure fair access to housing for all prospective tenants, focusing on a tenant's ability to afford the rent rather than their personal circumstances or source of income.
3.1.1
New prohibitions on discrimination
The Act formally bans two key forms of systemic discrimination that have historically limited housing options for vulnerable groups:
3.1.1.1
The ban on 'no DSS' policies
What is banned - It is now explicitly illegal for landlords and letting agents to impose blanket bans on prospective tenants simply because they are in receipt of benefits (such as Universal Credit or Housing Benefit, often referred to as 'DSS').
Addressing systemic bias - This prohibition formalises court rulings that found 'No DSS' policies to be a form of indirect discrimination under the Equality Act 2010, as they disproportionately affect women and disabled people who are more likely to rely on benefits.
Advertising - Language such as "no DSS," "no benefit claimants," or "working professionals only" in advertisements is now unlawful.
3.1.1.2
The ban on discrimination against families
What is banned - Landlords and agents are prohibited from discriminating against prospective tenants based on having children or their family status.
Mortgage/lease clauses - Crucially, any clause in a landlord's mortgage, superior lease, or insurance policy that seeks to prohibit tenancies for people receiving benefits or with children will be ineffective under the new law.
3.1.2
Lawful tenant screening focusing on affordability
While landlords have the right to select the most suitable tenant for their property, that decision must be based on objective criteria related to the tenancy's sustainability, not on discriminatory assumptions about a protected group.
Lawful screening criteria (objective)
Affordability
Assessing whether the tenant's total verifiable income including wages, pensions, and all benefits is sufficient to cover the rent and living costs.
References
Checking genuine references from previous landlords regarding conduct, rent payment history and property maintenance.
Credit history
Conducting credit checks with permission to assess financial history and responsibility must be applied fairly to all applicants.
Right to Rent
Carrying out mandatory 'Right to Rent' checks on all adult occupants.
Unlawful / prohibited discrimination
Source of income
Rejecting a tenant simply because a portion of their income comes from benefits ('No DSS').
Familial status
Rejecting a family solely because they have children, unless the property is legally unsuitable (e.g. overcrowding rules).
Discriminatory language
Using phrases like "Professionals only" or "No children" in adverts.
Assumptions
Assuming a tenant on benefits will be late with rent or cause property damage.
Practical advice for landlords
Assess total income - Treat income from benefits like Housing Benefit or Universal Credit as valid, verifiable income. Your assessment should be based on the total income meeting the rent, not the source.
Focus on credit/arrears - If you have concerns, focus on the applicant's payment history (e.g. previous rent arrears) and credit checks, not their benefits status.
Guarantors - You can request a guarantor for any tenant if their financial situation warrants it, but this should be a measure of last resort, not a blanket requirement for all benefit recipients.
Avoid overcrowding - The only lawful reason to refuse a family with children on grounds related to family size is if the number of occupants would violate statutory overcrowding limits for that specific property.
3.2
Handling rent arrears with new rules and timescales
The Renters' Rights Act introduces significant changes to the process of evicting tenants for rent arrears. The goal is to provide tenants with more time and support to address temporary financial difficulties, while still providing landlords with clear grounds for possession when tenants are in serious, persistent arrears.
3.2.1
Key changes to mandatory rent arrears grounds
The new rules significantly shift the legal timeline for mandatory eviction, which will now rely solely on the revised Section 8 possession grounds (as Section 21 'no-fault' evictions are abolished).
Eviction element
Previous rule (under Section 8, Ground 8)
New rule (under Renters' Rights Act)
Mandatory arrears threshold
Tenant must owe at least 2 months' rent or 8 weeks if paid weekly on the date of notice and on the date of the court hearing.
Tenant must owe at least 3 months' rent or 13 weeks if paid weekly on the date of notice and on the date of the court hearing.
Minimum notice period
2 weeks
4 weeks
Total timeline impact
Landlord could begin court proceedings after approx. 2.5 months of arrears.
Landlord must wait until arrears are 3 months old, plus the 4-week notice period. This means a tenant will accrue at least 4 months of arrears before court proceedings can commence.
This change focuses on Ground 8 (the mandatory ground) and is intended to prevent tenancies from ending due to temporary financial setbacks, ensuring a more stable and secure tenancy.
3.2.2
Proactive arrears management strategy
With the eviction process now taking longer, early intervention and clear communication become critical for landlords to manage their cash flow and resolve issues before they escalate to the new 3 month threshold.
Step 1
Early intervention (Day 1 - 30)
Communicate immediately - Contact the tenant the moment rent is a few days late. Use a calm, professional tone to identify the cause of the late payment.
Goal: Distinguish between forgetfulness and a genuine financial crisis.
Signposting support - If the tenant is experiencing financial hardship, immediately signpost them to available resources, such as:
Local Housing Allowance (LHA) details and Universal Credit claims.
Debt advice services (e.g. Shelter, Citizens Advice).
Document everything - Record all communication (emails, texts, call logs) and any agreed-upon repayment plans.
Step 2
Repayment plan and monitoring (Day 30 - 90)
Implement a repayment plan - Work with the tenant to establish a realistic, written repayment plan to clear the arrears alongside the standard monthly rent. Ensure the tenant is capable of adhering to it.
Use discretionary ground 10 and 11 - Remember that a landlord can still use the discretionary grounds (Ground 10 and Ground 11) for:
Ground 10 - Some rent is currently owed.
Ground 11 - Persistent late payment of rent even if arrears are occasionally reduced below the threshold.
Continuous monitoring - Strictly monitor the repayment plan. If the tenant fails to keep up with the plan, move quickly to the next step.
Step 3
Applying for possession after 3 months of arrears
Once the mandatory threshold of 3 months' rent arrears is met, the formal eviction process begins:
Serve a valid Section 8 notice
Use the official, updated government form.
Clearly specify Ground 8 (mandatory 3 months' arrears), and may also include Ground 10 and Ground 11 to provide multiple routes to possession.
Ensure the notice period is a minimum of 4 weeks.
Wait the notice period - You must wait the full 4 weeks before you can apply to the court for a possession order.
File court claim - If arrears are still at least 3 months on the day the claim is filed, proceed to court. Since the mandatory ground (Ground 8) is met, the court must grant possession, unless there are human rights considerations or a valid defence.
3.2.3
Financial risk mitigation
The extended timeline means landlords are likely to sustain greater rent loss before they can legally regain possession. To mitigate this risk:
Enhanced tenant screening - Conduct extremely robust tenant affordability checks and referencing before the tenancy starts, focusing on a history of consistent payment and affordability, not the source of income.
Guarantors - For tenants whose income is borderline or fluctuating, consider requiring a guarantor with sufficient income, as this offers a strong financial safety net.
Landlord insurance - Review landlord insurance policies to ensure they provide adequate rent guarantee coverage to protect against loss during the longer arrears and eviction process.
3.3
The ban on rental bidding and upfront rent limits
The Renters Rights Act introduces a ban on rental bidding to prevent prospective tenants from being pressured into offering rent above the advertised price, which often inflates market rents.
3.3.1
What is prohibited
No soliciting or accepting higher offers - Landlords and letting agents are strictly prohibited from:
Inviting or encouraging a prospective tenant to offer rent higher than the advertised price.
Accepting an offer of rent that is above the advertised price, even if it is offered unsolicited by the tenant.
Fixed Advertised Rent - Every property must be advertised at a single, fixed rental price.
3.3.2
Marketing dos and don'ts
Do's
Clearly state a fixed, total rent payable for the property.
Ensure consistency across all advertising platforms (e.g. property portals, agent websites).
Document all offers received to demonstrate compliance, even if the advertised price is the only one accepted.
Set the advertised rent based on market value and comparable properties.
Dont's
Advertise the property using ambiguous language such as "offers over" or "rent negotiable."
Solicit or invite higher bids, verbally or in writing, from interested applicants.
Accept any rent offer that is higher than the proposed rent stated in the advertisement.
Change the advertised rent during the marketing process to accept a higher bid already received.
3.3.3
One month maximum limit on upfront rent
The Renters Rights Act limits the amount of rent that can be requested in advance to one month's rent in addition to the tenancy deposit, significantly reducing the high upfront costs for tenants.
3.3.4
Upfront payment cap
Maximum upfront rent - Landlords and agents can only require a maximum of one month's rent in advance for the first rent period.
Permitted payments - This one month's rent is in addition to the permitted tenancy deposit which is capped at five weeks' rent for properties under £50,000 annual rent, or six weeks' rent if £50,000 or more.
Monthly payments - All new assured tenancies must have rent periods of no more than one calendar month, meaning clauses requiring quarterly or six-monthly rent payments will be unenforceable.
3.3.5
Initial payments and timing
Do's
Request the first month's rent after the tenancy agreement has been signed by both parties.
Clearly label all monies received as either rent in advance or tenancy deposit to avoid confusion.
Accept a tenant's voluntary offer to pay more than one month's rent in advance after the tenancy agreement is signed, provided it's clearly allocated to specific future rent periods.
Dont's
Demand or accept any rent payment before the tenancy agreement is fully executed.
Require a lump sum payment of multiple months' rent (e.g. 3, 6, or 12 months) as a condition of the tenancy.
Have an enforceable clause in the agreement that requires the payment of rent for more than one month at a time.
3.4
Strategic considerations for small portfolio landlords
The UK's Renters' Rights Act represents a seismic shift in the private rented sector, requiring landlords to fundamentally re-evaluate their investment strategies. The core strategic impacts revolve around increased operational risk, higher capital expenditure, and a shift toward long-term, high-quality tenure.
3.4.1
Impact of tenancy reforms - Void periods and portfolio risk
The abolition of fixed-term tenancies (such as Assured Shorthold Tenancies) and Section 21 'no-fault' evictions directly impacts income stability and liquidity.
Increased potential for void periods
All tenancies will become periodic (rolling from month-to-month or week-to-week). Tenants can now end a tenancy with just two months' notice at any time.
This removes the guaranteed income stability of a fixed term (e.g. 12 months) and introduces greater volatility to cash flow, making it harder to predict occupancy and increasing the risk of voids.
Landlords who need to regain possession to sell or move in a family member must now provide four months' notice (up from two) and cannot use these grounds within the first 12 months of a new tenancy. This extended notice period and initial protected period create a significant delay, which effectively lengthens potential void periods for landlords looking to exit or occupy a property.
Erosion of portfolio liquidity
The loss of Section 21 means regaining possession requires a legally valid ground (under Section 8) and a court process, which can be lengthy due to court backlogs.
This diminished ability to regain swift possession reduces property liquidity, making a quick sale or refinancing more difficult.
3.4.2
Maintenance and compliance
The extension of the Decent Homes Standard (DHS) and Awaab's Law to the private rented sector will necessitate a significant increase in maintenance and capital expenditure budgets, especially for landlords with older stock.
Higher maintenance budget for Decent Homes Standard:
The DHS requires all rental properties to be free from serious hazards (e.g. damp, mould, excess cold, fall risks), in a reasonable state of repair, and have reasonably modern facilities (e.g. up-to-date kitchens and bathrooms).
The median cost to bring a non-decent private rental home up to standard has been estimated at over £8,000, with many properties requiring far more extensive work on insulation, heating, and structural repair.
Compliance shifts maintenance from reactive to a proactive, preventative model. Landlords must budget for regular, thorough inspections and necessary capital upgrades to avoid costly enforcement action and fines of up to £7,000 for breaches.
Time bound repairs (Awaab's Law):
This requires landlords to address hazards like damp and mould within strict, short legal timeframes, making a high contingency and rapid response capability essential. Failure to act quickly can lead to severe penalties and rent repayment orders.
3.4.3
Strategic exit versus. investment
Faced with increased compliance costs, reduced liquidity, and greater operational risk, landlords must make a critical strategic decision regarding their existing portfolio, whether to sell or invest?
Strategy
Rationale and impact
Who it suits
Sell low-quality and non-compliant properties
Divesting properties that require substantial investment to meet the DHS. This frees up capital and eliminates high-risk assets with thin profit margins.
It avoids high upfront upgrade costs, removes the risk of non-compliance fines, and improves the overall quality profile of a remaining portfolio.
Landlords with older, low value, or low yield properties, limited access to capital for refurbishment, or those seeking a complete exit from the private rented sector in the UK.
Invest in upgrades and modernisation
Committing the necessary capital to meet and exceed the DHS and higher quality homes command a better rental yield, attract and retain higher-quality tenants, minimise voids (secure tenants are less likely to move), and insulate the landlord against new regulation and tenant challenges.
Landlords with well located, higher value properties who view the sector as a long term investment, or those with the capital to implement a strategic, full scale upgrade programme.
The key takeaway is that the new regulatory landscape makes it unviable to operate a buy-to-let business model based on low quality, poorly maintained housing. Future success will rely on properties that are demonstrably safe, well maintained, and modern.
