Tenants now only pay one month’s rent upfront, not more. The Renters’ Rights Act, which came into force in May, prohibits landlords from requesting more than a single month of rental payment in advance, and that payment can be taken only once the tenancy agreement has been signed. Alongside a deposit, this is now the full extent of what a tenant can be asked to pay before moving in.
New protections for tenants
The Act represents a major overhaul of the private rented sector in England and Wales. It abolishes so-called no-fault evictions under Section 21 of the Housing Act 1988, meaning landlords can no longer evict a tenant without providing a specific statutory reason. Evictions must now proceed through a Section 8 notice, requiring the landlord to prove a ground for possession. The reforms also scrap assured shorthold tenancies in favour of periodic tenancies that continue indefinitely unless validly terminated on specific grounds.
From 1 May 2026, landlords must provide new tenants with written information covering key terms: the names of all tenants, the property address, the rent amount and due date, deposit details, repair responsibilities, and the tenant’s bill obligations. Existing tenants must receive a government-produced Renters’ Rights Act Information Sheet by 31 May 2026. Local authorities have gained enhanced enforcement powers, including civil penalties of up to £7,000 for initial breaches and up to £40,000 for repeated offences. Landlords can also face criminal prosecution.
Landlord concerns over risk
Before these changes, asking for large sums of rent in advance was a common way for landlords to reduce the risk of rent arrears, especially when a tenant did not quite meet standard affordability criteria. That safeguard is now removed. The restriction on upfront rent significantly alters how financial risk is managed in the private rental sector, according to Sam Reynolds, chief executive of property insurance technology firm Zero Deposit. “With restrictions on upfront rent payments and fewer traditional safeguards available, landlords and agents naturally place greater emphasis on affordability checks and income protection when assessing prospective tenants,” he said.
The scale of the challenge is illustrated by affordability data. Zero Deposit’s analysis found that the average renter in England is likely to fall short of the standard affordability requirement of 2.5 times the annual rent. With average rents currently at £1,438 per month – £17,256 a year – tenants would typically need to earn at least £43,140 annually to pass such checks. Yet average earnings across England stand at £41,859, leaving a shortfall of £1,281. Some landlords may even toughen their threshold to three times annual rent, which could mean that nearly half of England’s local authority districts – 47.6 per cent – see average earnings fall below the required level.
Rigorous referencing essential
Landlords now need alternative, evidence-led methods to assess tenant affordability and risk. The cornerstone of this is thorough referencing. According to Nouran Moustafa, practice principal at Roxton Wealth, “Landlords need to stop seeing large upfront rent as the only form of security. It was never a perfect test of affordability anyway. Someone can have cash today and still be financially unstable three months later. The better approach is proper, evidence-led referencing, income checks, employment status, credit history, previous landlord references and whether the rent is genuinely affordable against the tenant’s wider commitments.”
Landlords can conduct many of these checks themselves: credit checks, employer references, affordability assessments, and speaking to a tenant’s previous landlord about rent payment history and property condition. Specialist referencing companies can handle the process professionally. Goodlord, for instance, offers AI-enhanced referencing that includes credit checks, identity verification, sanctions checks, and direct-to-payroll income verification using Open Banking. It aims to finalise around 70 per cent of references within 24 hours. HomeLet, a provider with more than 30 years of experience, offers its VISTA referencing service, which delivers real-time affordability assessments based on credit commitments and essential expenditures, with 70 per cent of applications completed in real time. HomeLet reports receiving more than 200 fraudulent applications per day, underscoring the need for robust verification.
Standard referencing checks should include: identification verification and address history; credit checks that assess credit scores, debts, County Court Judgements, and past payment behaviour; income and affordability verification through Open Banking or payroll methods; residential history; and Right to Rent checks confirming a tenant’s legal right to reside in the UK – updated guidance has increased fines for non-compliance.
Guarantors and insurance fill the gap
Given the affordability gap, analysts predict landlords will become more reliant on rent guarantors – typically a family member who agrees to set aside funds should the tenant fail to pay. Zero Deposit’s Reynolds said, “We expect guarantors to become an increasingly common requirement for renters who fall outside standard affordability criteria, particularly younger tenants, overseas applicants, self-employed workers, and those moving to high-cost rental areas.” The number of areas where a guarantor might be needed could more than double, potentially affecting nearly half of England’s local authority districts. Guarantors themselves should be referenced and their agreement must be legally binding.
Rent guarantee insurance offers another layer of protection. In return for a premium, the policy pays out the monthly rent for a set period if a tenant falls into arrears and may also cover legal fees associated with serving notices and eviction. Michelle Lawson, director of Lawson Financial, said: “Rent guarantee insurance is now a must and is a low cost way of protecting your rental income against most adversities.” An alternative is a zero deposit scheme, where the tenant pays a fee to an insurer who covers the landlord for up to 12 weeks’ rent. The landlord does not hold the money, and the insurer handles claims and bills the tenant. Tenants must still pass referencing, and a guarantor may be required if they fail.
Professional help and compliance
Engaging a good lettings agent can provide access to a pool of tenants who have already been referenced. Agents also help landlords keep up with ever-changing rental rules and regulations. Lawson warned that self-managing landlords are at risk. “A good letting agent will be fully referencing prospective tenants. Self-managing landlords will be the ones potentially sleep-walking into disaster as so many are inexperienced and rely on social media to find tenants and for advice – they need to ensure that they use reputable channels. There are many industry backed resources that they can call upon but a number will still cut corners which, with the Renters Rights Act and subsequent council imposed fines, could prove costly. To avoid doubt, they should now be employing the services of a good letting agents who knows the new legislation as the buck stops with the landlord regardless.”
Beyond the Act itself, landlords and letting agents must also comply with the Digital Markets, Competition and Consumers Act 2024, effective from 6 April 2025, which imposes stricter standards on fee transparency, advertising accuracy, and consumer protection. Penalties for non-compliance can reach £300,000 or 10 per cent of global turnover. Since May 2024, letting agents have also been subject to mandatory reporting obligations under the UK financial sanctions regime, requiring them to report suspected breaches to the Office of Financial Sanctions Implementation. Notably, the government has confirmed that landlords are not legally obliged to provide tenant references.
