Luke Weldon has penned the third instalment in our renters reform series.

In my third article on the new Renters Reform Bill, where the government seeks to level the playing field between landlord and tenant, I focus on the issue of rent in residential lettings.

One feature of the Bill is the adjustment to 12 months rather than 6 months as the effective period. For instance, you can evict a tenant if you want to move in yourself, but not in the first 12 months of the tenancy. This is a sensible move. Letting someone live in a place for only a few months allows little more than sofa-surfing. Us humans require more certainty and stability.

In tune with that standard and ethic, the Bill proposes a cap on rent increases to one per year – i.e. not in the first 12 months – and limited to the market rate.

The aim is laudable and, if effective, would prevent landlords from implementing rent hikes mid-term to price tenants out of their homes and replace them with the ready supply of desperate folk better able to bear the increase.

The problem is the setting of market rate. Firstly, as its name implies, the market sets the rate. That “unfair” rent hike, annually set across the sector, will be market rate.

Secondly, I come from the world of commercial rents. They are usually reviewed every 4 years by reference to complex rent review provisions and by way of horse deal between valuation surveyors. That cost is often justified and proportionate given the sums at issue.

What process is the government proposing for residential lettings? It would have to be a severely stripped-down version of the commercial regime given the review is every year and the relatively modest sums at stake. And will the final arbiter of that above-sweet-shop-flat rent be the First-tier Tribunal? If so, is it resourced to cope with the deluge?

Rental bidding wars would also be banned. This is to stop the current, unedifying method by which tenants are forced to compete for properties by offering more money. Of course, that is the free market in operation and is driven by far more demand than supply. It is also no different to how properties are bought and sold. Then again, it drives up market rents, it means that only the wealthiest get a decent home, and it is not very nice when it happens to you. That is, there are enough grumpy folk directly impacted to make it politically expedient.

Thus, landlords and letting agents would be required to list properties with a set asking price. They would ultimately be prohibited from asking for or accepting bids above that price. But, given that set asking price is not prescribed, will that mean that rents will instead be set by Dutch auction? That is, the landlord enters a well above market rent and incrementally lowers it until someone matches the bid? I fail to see how that is any different from what we have or avoids the peril the legislation seeks to stop.

This is an area of law that is becoming increasingly complex with the introduction of new protections for renters, the safest way to navigate these new challenges is with an experienced guide. Luke Weldon is a Partner at Carbon Law Partners specialising in real estate and commercial issues. You can contact him on luke.weldon@carbonlawpartners.com or 07816 755 372.