Renters’ Rights Act sparks cashflow fears among landlords

The Renters’ Rights Act, which takes effect tomorrow, is forcing landlords to reassess the financial resilience of their portfolios, with brokers warning that rent arrears, tribunal delays and refinancing pressures could prompt smaller investors to leave the private rented sector.

The most immediate concern is cashflow. Brokers said some landlords had little capacity to absorb missed rent, higher costs or delays in recovering possession. The end of Section 21 and the move to rolling tenancies are also expected to place more weight on rent guarantee insurance, legal cover and professional advice.

“Landlord clients are concerned about the practicalities around the tenant tribunal system,” said Gerard Boon (pictured top, far left), managing director at Boon Brokers. “We have made our clients aware that if tenants wish to challenge a rent rise, they can do so, and potentially drag landlords through a costly claim.”

According to Boon, landlords were also concerned that rent rises could be delayed while disputes are heard, creating pressure where mortgage and other costs are rising. He said the tribunal system could face significant backlogs.

“One of our partner solicitors expects that tribunal claims may take over a year to conclude, leaving landlords exposed to cost increases that they may be unable to meet due to an inability to immediately increase their tenant's rate,” he added.

Austyn Johnson (pictured top, second from left), founder of Mortgages For Actors, said arrears risk had indeed become a major concern for landlords with limited reserves. “Some have no surplus cash, therefore, if a tenant defaults on the rent, the client could possibly pay for only two to three months before they get into trouble,” he pointed out.

“The other thing is it can potentially take up to 16 months to evict a tenant. That has huge inpllications on their ability to borrow or remortgage.”

Protection and planning move up the agenda

Both Boon and Johnson pointed to a wider shift in the type of support landlords now seek from advisers. While mortgage pricing remains important, the brokers said landlords were increasingly asking about protection against rent loss, legal costs, loan-to-value pressure and portfolio strategy.

“We have actually set up a dedicated company to help with rent guarantee insurance as we were getting asked about this so much,” Johnson said. “I think protecting rent and legal cost of eviction are starting to be at the forefront of their mind.”

Smaller landlords face pressure to sell

Boon noted that many landlord clients were now falling into two groups: smaller private landlords considering a sale, and limited company landlords looking to acquire stock. That divide could accelerate consolidation in the sector. 

“Those who own properties in their personal name are at a significant disadvantage from a tax perspective compared to those who own property via a limited company,” he said. 

“This act adds further frustration to private landlords, who are highly likely to sell to limited companies. I expect 'corporate landlording' to increase significantly over the next few years, at great detriment to tenants, with a general reduction in housing stock available.”

Supply pressures to keep rents rising

The impact on rents remains a central question for brokers and lenders. While the legislation is intended to improve tenant rights, advisers said supply pressures could keep rents rising if landlords sell and fewer homes remain available to rent.

“I have no doubts that rent will increase significantly for tenants over the next year or so,” Boon said. “This is because the supply of rental properties is expected to fall across the country.”

Johnson said landlords were already treating rent increases as part of contingency planning, particularly after the rate shock that followed the 2022 market disruption. “Landlords have to make rental increases as part of their contingency planning,” he said. “We have seen a lot of landlords who were keeping rents at a similar level as the tenants were good payers.”

“However, when there was rate shock in 2022, there were a number of landlords that were unable to move to a new lender as they were not meeting the stress testing. We are also seeing landlords transition into the HMO market due to larger rental returns.”

Brokers’ role shifts towards risk advice

For mortgage brokers, the Renters’ Rights Act may not directly change the advice process on product selection, but it is likely to shape discussions on affordability, risk and exit options. A Mortgage Introducer poll found that more than two-thirds of respondents believe the Act will increase the value of broker advice. 

Boon said broker advice would still matter where regulation affected a client’s ability to service debt, even if solicitors and property managers were better placed to advise on the legal detail. “Brokers can provide value by making clients aware of the Renters Rights Act and how it could impact their ability to repay their mortgage in the future,” he explained.

Buy-to-let remains viable for bigger operators, lenders say

Adrian Moloney (pictured top, second from right), group lending distribution director at buy-to-let specialist Rely, said their own landlord research showed widespread cost increases, but also resilience among landlords. He said some had raised rents, some were absorbing costs, and others were seeking professional advice.

“Our latest Landlord Leaders research underlines just how stretched the sector already is,” Moloney said. “Virtually all landlords (97%) have seen costs rise in the past year, yet a majority (62%) remain optimistic about operating in the sector.”

The operational burden is also becoming more important. “The immediate priority for landlords is execution,” Moloney said. “Ensuring tenancy agreements, processes and property standards are aligned is no longer a future consideration; it is an operational requirement from day one.”

The buy-to-let market remains viable for some investors, but the direction of travel is towards more professional management and stronger capital positions. Ryan Etchells (pictured top, far right), chief commercial officer at Together, said demand for rental housing remained high despite the regulatory shift.

“While the shift to rolling tenancies and the end of Section 21 represents a significant change, the fundamental demand for quality rental housing remains incredibly high,” Etchells pointed out. “These rules are designed to professionalise the sector and weed out ‘bad’ landlords, but for the majority of responsible investors, the long-term capital growth and steady rental yields still make BTL a smart move.”

According to Moloney, the next phase would be shaped by landlords’ ability to adapt quickly. “What we are likely to see in the coming months is a widening gap within the sector,” he said. “Landlords who are well-capitalised, well-advised and already operating at scale will be better positioned to absorb change and continue investing.”

“The private rented sector is becoming more professional, more regulated and more operationally demanding. While that should help raise standards and improve tenant outcomes, it also raises the bar for participation.”

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