Big news in Renters' Rights: Manjit Kataora, Foxtons Director - Legal & Compliance, shares what you need to know about the Rent in Advance debate.
By: Manjit Kataora
The amendment to the Renters' Rights Bill that was tabled by the government, which would see landlords unable to receive more than one month’s rent plus the deposit, was debated today in the Commons during the Third Stage reading. This is the last stage of the Commons before the Bill is transferred to the House of Lords.
Why is rent in advance an issue?
The government has expressed concern over the practice of landlords requesting large amounts of rent in advance and the cost pressure this places on tenants. The evidence given in the Commons during Committee Stage was largely anecdotal and, actually, this doesn’t happen as often as people think because landlords look for long term security rather than a ‘quick win’.
The concerns, however, were underpinned by the argument that a ban on bidding wars would not work on its own because landlords would just ask for higher amounts of rent in advance instead (the level of deposit poses no such issues because under the Tenant Fee Act 2019 these are already capped). But the two points are distinct: bidding wars are concerned with the level of rent payable per rental period (and the rent level is something that can be challenged in the FTT, so tenants already have a remedy); advance rent is concerned with the number of rental periods for which an agreed (market) rent is payable by the tenant.
Credit ratings
Rent in advance has long been a mechanism by which those applicants who do not have a sufficient credit footprint that would otherwise allow them to pass referencing requirements can access the PRS.
The obvious example within this class is overseas students looking to settle and study in the UK. Rightly, the Bill contains express provisions preventing landlords and agents from discriminating against tenants with families or who are on benefits but the proposed amendment to cap rent in advance introduces a new risk of discrimination against this class of applicants and, for that matter, anyone else who does not have a suitable credit footprint but who might nevertheless still be able to sustain a tenancy.
A valuable export
Given the proposals, it’s unclear how international students in particular are supposed to access the PRS.
Universities UK, in its submission to the Renters' Rights Bill committee (October 2024), points out that “…the Renters Rights Bill is an education issue, not just a housing issue” and that “the availability of suitable accommodation is a crucial part of a thriving higher education sector”. At the time, these submissions were centred on the issue of HMOs and the lack of fixed terms for students. Those issues are now clearer in the bill but the more recent proposal to limit rent in advance places the impact of the Bill on the university and student sector firmly back on the table.
Referencing standards are not usually set by landlords, agents or tenants. Instead, they are set by actuarials applied by third-party companies based on information supplied by the tenant. Those applicants without an income or credit rating will, absent further assurances, fail referencing and be denied access to the sector.
According to the House of Commons Research Briefing ‘International Students in UK higher education’ (September 2024) the overall value of higher education ‘exports’ (the international student market) increased by 81% between 2010 and 2021to £27.9 billion. In 2022/2023 India and China alone sent a combined 229,375 students to the UK. On any view, overseas students form a significant and valuable part of the UK economy.
Summary
As a class, overseas students are not applicants who cannot sustain a tenancy. But the amendment, if adopted, will relegate them to a class who are prevented from demonstrating they can sustain a tenancy. The same goes for anyone who can demonstrate the means to sustain a tenancy by paying more than one month’s rent.
It’s hard to reconcile the foreseeable effect of these proposals with the overall government narrative that the UK is open for business. Surely it makes no sense to construct barriers to entry for students choosing to study in the UK and other classes by making it more difficult to secure rental accommodation.
Source: Our top lettings and legal experts at Foxtons are monitoring the progress of the Bill to provide you with accurate, reliable information. This piece was authored by Manjit Kataora, our Director of Legal and Compliance, who will continue to analyse developments and track its progress for you.
