The government has laid further amendments to the Renters’ Rights Bill today (8 January 2025). These are to be debated at the third reading of the Bill on 14 January. There are other amendments from other MPs but I do not expect any of these amendments to progress and in most cases they will not even be voted on.

Rent in Advance

The most important set of amendments relate to rent in advance. These were flagged to a large extent as the government had indicated that it would look at the issue of rent in advance and seek to limit substantial demands for rent as it took the view that these limited access to the market for vulnerable tenants. Personally, I had assumed that they would allow some rent in advance and would cap it at three months’ rent or some similar amount. There is in fact an amendment by the Liberal Democrat MP, Gideon Amos, that caps rent in advance at two months’ rent.

Rent in advance is a big deal for parts of the PRS as it enables tenants with weak credit histories to pay an additional sum to allow the overall rent to be reduced so that they can pass referencing and also allows tenants from overseas (such as overseas students) and others with almost no credit history to pay a substantial amount of rent up front. Without these options those tenants are unlikely to be offered tenancies at all or they will be asked to pay for a guarantee insurer product which will cost them money and which is actually lost money as it is then an insurance payment which does not go towards the rent but rather is paid and kept by the provider.

Stopping Rent in Advance

The government has amended the Bill so as to amend the Housing Act 1988. The amendments being made already limited the rental payments to one month or 28 days but it was unclear whether there could be a larger first payment or whether a landlord could ask for several monthly payments up front. In fact the Bill says that clauses seeking rent in advance are of no effect.

But it actually goes a lot further than this.

Wider Effects

The amendments are also being made to the Tenant Fees Act. These further amendments not only make clauses of no effect, they impose a specific provision of any request or taking of any form of rent in advance or any payment of rent before the tenancy agreement is entered into. This is pretty big because it has a much wider effect.

Of course all forms of rent in advance are prohibited which will affect tenants who cannot pass referencing and also affect overseas students but using the TFA makes it a lot wider.

First, the TFA does not just apply to tenancies, it applies to licences as well. Student landlords had been considering using licences to allow for advance payment to be taken. By banning rent in advance in the TFA it will not be possible to bypass this restriction by using licences and something else will need to be used. There are other options and some student landlords may elect to use licences anyway because there will be other benefits (such as fixed terms) but this will undermine that strategy.

Second, this will also block the use of some guarantee products. One of the options being offered now is to ask a tenant to take out an insurance policy (at the tenant’s expense) to provide a rent guarantor. It is prohibited under the TFA to require a tenant to take out an insurance policy or enter into any form of contract with a third-party. But this is allowed where it is as an alternative to something that is permitted by the TFA. So currently the various rental guarantor offerings rely on the tenant being given a choice between a large payment of rent in advance or a third-party guarantee product. Obviously, if the TFA has banned all forms of rent in advance then that is not a valid choice, so it will be really difficult for these third-party products to operate at all.

Conclusion

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.