Part I                                                                                                        

introduction

Background to the project

                             1.1              The background to this project may be found in comments by Lord Woolf in his report Access to Justice.[1] That report dealt primarily with how the procedures of the civil courts might be improved, with the object of increasing access to justice by reducing the cost and delay of going to court. But Lord Woolf was firmly of the opinion that in the key area of housing – in particular, where there were disputes between landlords and tenants – the law itself was so complex that this too amounted to a considerable barrier to access to justice.

                             1.2              At the same time, there was within the housing industry – particularly amongst local authorities and housing associations, commonly described as the “social rented sector” – a feeling that all kinds of unnecessary complications arose from the fact that the legal regulation of registered social landlords (formerly housing associations) fell within the scope of the Housing Act 1988 (as amended by the Housing Act 1996) – assured tenancies – whereas council housing came under the Housing Act 1985 – secure tenancies. This had led to calls for a “single form of tenure”, at least for the social rented sector.[2]

                             1.3              In addition, the British Property Federation – representing private landlord interests – was working with the Chartered Institute of Housing to develop ideas for new approaches to the regulation of the private rented sector.[3]

                             1.4              The Labour Government had made it clear that it was not seeking fundamentally to alter the regulatory arrangements put in place by the former Conservative Government, following the passing of the Housing Acts 1988 and 1996. In particular assured shorthold tenancies, which as a result of the Housing Act 1996 had become the “default” form for private sector tenancies, were to remain.[4]

                             1.5              With this combination of judicial criticism, industry concern and (party) political consensus, the circumstances were opportune for a law reform project to be undertaken by the Law Commission.

                             1.6              The first step in the process was that the Commission was asked to prepare a scoping paper setting out its views as to how such a project might be taken forward. The request for the scoping paper was made by the Lord Chancellor and the (then) Minister of Housing, Nick Raynsford MP, in the summer of 2000. The scoping paper was published in March 2001.[5] This set out, in outline, suggestions for a programme of work relating to the reform of housing law.

                             1.7              The proposals in the scoping paper were immediately approved by Ministers in March 2001 and a formal reference of the project was made to the Commission.

                             1.8              Our overall terms of reference for the law reform work arising out of the scoping paper are:

                                                                   (4)          such other aspects of Housing Law as may be agreed between the Law Commission, the Department of the Environment, Transport and the Regions[6] and the Lord Chancellor’s Department.”

Timetable for the project: a phased approach

                             1.9              It was decided at the outset that the terms of reference – which were very broad – should be implemented in two phases. Phase I, which was referred to the Commission in March 2001, would consist of a single project with two “branches”, undertaken simultaneously. The first would aim to develop the concept of a newtype I agreement, with substantial statutory security of tenure, primarily but not exclusively for use in the social housing sector. The second would aim to develop the concept of a type II agreement, broadly based on the existing assured shorthold tenancy, primarily but not exclusively for use in the private sector. In the event work on these two branches has been fully integrated into this consultation paper.

                          1.10              Phase II would consist of two further projects covered by paragraphs 2 and 3 of the terms of reference, one on harassment and unlawful eviction, the other on the rights of succession to agreements.

                          1.11              On reflection, we considered, and the Government agreed, that the work on rights to succession was so closely linked to the issues of housing tenure that it should be brought forward. Succession was accordingly incorporated into the current reference.[7] We will be issuing a further consultation paper on this topic later in 2002. In that second paper we shall also be consulting on a number of other matters relating to the transmission of agreements, in particular assignment and sub-letting, which have been omitted from this paper. We hope to publish this second paper in the summer of 2002.

Outcomes

                          1.12              The principal outcome of this project will be a final report, to be published in the summer of 2003. This will set out our recommendations which will reflect the responses to the consultation. A draft bill will be attached to the report, which – if enacted – would give effect to the recommendations.

                          1.13              In the longer term, it is the hope of the Commission that this might be the first stage in the creation of a complete housing code.

                          1.14              Although the Law Commission has often engaged in programmes of law reform that have a very high social policy content – our work on family law may be particularly noted – we think this is the first time that we have entered an area which hitherto has been so dominated by party political debate. We are conscious that, as law reformers, our function is to analyse the existing state of the law and to make proposals for its modernization. Thus, for example, those who might wish to argue that we should include within our proposals a “right to housing”, based, perhaps, on ideas to be found in the Universal Declaration of Human Rights, 1948,[8] or the International Covenant on Economic, Social and Cultural Rights, 1966,[9] will be disappointed. Such ideas would involve the consideration of policy issues that go far beyond the scope of a law reform project that the Law Commission may sensibly carry out.

                          1.15              Nevertheless this project is not a simple exercise in the consolidation of the existing law. Accepting that the balance of interests between landlords and tenants should remain broadly as it now is, we are making proposals to change the details of the law in order to achieve our primary objectives of increased simplicity, flexibility and transparency. In making these proposals we have had to make choices about options for change. To that extent our proposals reflect matters of housing policy. It is on these that we shall be consulting.

                          1.16              In addition, we think that a law reform exercise cannot be undertaken without bearing wider social policy issues in mind. Housing policy and the law that seeks to implement it naturally relates to other areas of social policy, such as employment policy or family policy.[10] Housing may also relate to other policy issues, such as environmental policy.[11] It is not our task to make proposals relating to employment, family or environmental policy; but we need to try to ensure that the framework of housing law that we propose has the robustness and flexibility to ensure that policy objectives in these other areas can be achieved. Nonetheless identifying the precise boundary where law reform ends and the development of social policy begins is not always an easy or obvious task.

Defining housing law: the search for principle

                          1.17              It could be argued that a law reform project on “housing law” should extend to all that body of law which regulates the whole functioning of the housing market,[12] including owner-occupied housing. While a law reform project leading to a complete codification of housing law might ultimately be drawn as widely as this, here we are limited by our terms of reference.

                          1.18              Our work focuses on the law which should regulate the provision of residential lettings by local authorities, by housing associations and other social landlords, and by private landlords. Even this focus requires us to consider a wide range of matters, as the following pages make clear.

                          1.19              In carrying out our review of the current state of housing law, we have thought it appropriate to state and where necessary to reconsider some of the basic principles on which housing law should be based.  We have identified four such principles:

                          1.20              The principle that the State should guarantee tenants’ security of tenure, irrespective of the terms of the contract, has become a central principle of housing law. These guarantees are not absolute and never have been. They operate more fully in some contexts than in others. The present legislative position[13] has been reached more through a series of political responses to particular social pressures than the acceptance of any statement of principle. This does not mean, however, that the present position cannot be justified in principle.

                          1.21              Social housing is designed to provide long-term housing for tenants who, for a variety of social and economic reasons, are particularly vulnerable within the housing market. The creation of sustainable communities relies on confidence by tenants that, if they keep to their terms of their agreement, they will keep their long term family homes. The secure tenancy regime, with a high degree of security, provides tenants with confidence in the near-permanence of their housing.

                          1.22              The lack of security of tenure for tenants with introductory tenancies[14] is consistent with the over-arching purpose of social housing providing sustainable communities. These tenancies provide an opportunity to identify those whose behaviour may prove to be problematic, so that any housing, and the terms on which it is provided, are appropriate to them. As the consultation paper on what became introductory tenancies published by the Department of Environment in 1995 states:

Anti social behaviour by a small minority of tenants and others is a growing problem on council estates … the misery caused to tenants when the enjoyment of their home is spoilt by the activities of their neighbours or others can destroy their whole quality of life. Whole estates can be stigmatised by the anti-social behaviour of a few.[15]

                          1.23              In the private rented sector, where the provision of rented accommodation under the Housing Act 1988 is on a different basis, the long-term social dimension is now less in evidence. Landlords are, in the main, providing accommodation to niche sectors of the market who in general fall outside the scope of social housing and many of whose tenants are not seeking to be housed on a long-term basis. The private sector now exists within a market framework. Although the potential for exploitation of tenants by landlords remains, changes in the housing market mean that, these days, there is less need for the State to guarantee long-term security of tenure. Rather the relationship between the landlord and the occupier can be mediated by the terms of the contract, a contract which under ordinary principles of consumer  law must be fair, and in relation to which breaches may be remedied in the same way as other breaches of consumer contracts. Nothing in this paper will prevent private landlords from enhancing their contracts with occupiers by including a greater degree of contractual security of tenure than the minimum required by the legal framework we propose.

                          1.24              We are clear that housing law must retain the basic principle that there should be circumstances where the state should ensure a high degree of security of tenure, and others where it need not.

                          1.25              It is also widely accepted that, where a tenant refuses voluntarily to leave accommodation at the end of an agreement, a landlord should normally be required to go through “due process” – issuing a notice of intention to take proceedings, and establishing a ground for possession in proceedings before a court – before obtaining a court order for possession.

                          1.26              Such processes conform with the requirements of Article 6(1) of the European Convention on Human Rights. The system also ensures that the relevant substantive rights within the European Convention are met. In particular the measures provide protection for Article 8 rights, the right to respect for a home, and Article 1 of the first protocol, the general principle of peaceful enjoyment of property.[16]

                          1.27              Court scrutiny of eviction decisions within social housing serves to prevent arbitrary action against the individual. There is a particular need for scrutiny of decisions to evict taken by state authorities because of the inequality of the relationship between the individual and the state exacerbated by the social purpose of the housing and the vulnerability of tenants.[17] Originally local democratic accountability was believed to provide the necessary legitimacy.[18] However that has become increasingly unrealistic in practice. Examples of the consequences of a lack of statutory security, at a time when local authority tenants had no security of tenure and limited recourse to judicial review, can be found in the National Consumer Council discussion paper “Tenancy Agreements between Councils and their Tenants”.[19]

                          1.28              The need for judicial oversight of the introductory tenancy regime was recognised in McLellan v Bracknell Forest[20] where the existence of the internal review procedure, governed by a rigorous regulatory framework and supervised by both the county court and judicial review were necessary to the regime being compliant with the European Convention.

                          1.29              The fact that a landlord has to explain the reasonableness of its decision to evict in an impartial and public forum promotes the formation of policy to minimise evictions and provides both public and tenant accountability for actions which might otherwise appear contrary to the purposes of social housing.

                          1.30              In the private sector the lessons of history are that without due process, landlords will be tempted to take the law into their own hands. What is needed are efficient procedures to ensure that a landlord who claims possession is entitled to do so; and that if he or she is, possession should be ordered quickly.

                          1.31              Acceptance of these principles does not mean that all the details of the current law should be retained. We consider in Part XIIhow processes, which we think still conform to these principles, might nevertheless be amended to ensure greater efficiency.

                          1.32              By contrast with these well-established principles, we think it is now appropriate for housing law to adopt a more consumer perspective. This is crucial, given our desire to see the contract as the key to the landlord-occupier relationship.

                          1.33              Hitherto, the legislative strategy has been for landlords and tenants to enter into (contractual) agreements, which are then to a substantial degree ignored, as details in the agreement are over-ridden by statute. This approach ignores the fact that over the last 30 years or so there have been increasing legislative steps taken to ensure that the terms on which consumers contract are fair. There can now be a much clearer focus on ensuring that the terms on which homes are rented are fair, from the outset, rather than suspecting that they may be unfair and creating statutory provisions to enable them to be ignored.

                          1.34              The latter approach has two disadvantages, in that

                          1.35              We think is appropriate that our review of the law on housing tenure should reflect this consumer perspective, which puts the emphasis on making the terms of the contract fair from the outset. If accepted, we think this will lead to new ways of thinking about housing law, in particular the importance of the contractual relationship between the landlord and the tenant, and the balance of rights and obligations between both sides of the agreement.

                          1.36              In addition, although the United Kingdom has long subscribed to the principles of the European Convention adopted by the Council of Europe after the Second World War, the enactment of the Human Rights Act 1998 has drawn attention to the fact that all new proposals for legislation must comply with the principles set out in the Convention. This is of considerable importance in the context of housing law.[21]

Outline of the scheme

                          1.37              It may help the reader to have an early indication of the outline of our proposals. All the consultation questions they imply are raised in Parts VI – XIV. The key features of our proposals are

                          1.38              We envisage that our scheme should, in principle, apply to any contract which confers a right to occupy premises as a home. We discuss in Part IX what the scope of the proposed scheme should be. Among issues considered there is a provisional proposal to move away from using the distinction between a tenancy and a licence as a factor determining the boundary of our scheme for regulating housing agreements. 

                          1.39              We envisage that an agreement to rent a home should be in three parts.[22]

                                                        (1)      Part A will set out the core terms describing the subject matter and the parties (that is, the property, the landlord, the occupier, the term of the agreement and the rent).

                                                        (2)      Part B will set out compulsory terms, which will be required to be in the agreement as a matter of law. These will fall into two sections. Section 1 will deal with security of tenure and state the circumstances in which the landlord will be entitled to seek an order of possession from the courts. Section 2 will contain the obligations currently implied by law, adapted to take account of the fact that under our proposed scheme they will apply to all residential occupiers, not only tenants.

                                                        (3)      Part C will set out the other terms of the agreement. Part C will contain a list of matters in relation to which default terms will be drafted. It will be open to landlords and occupiers to negotiate their own equivalents of these provisions. In addition, Part C may contain additional terms agreed by the parties. Any negotiated terms must be fair under the Unfair Terms in Consumer Contracts Regulations 1999.[23]

                          1.40              We think that the agreement must be in writing. The landlord will be required to provide a copy for the occupier. Given the importance of the written agreement, we also think there should be sanctions imposed where the landlord fails to provide the required copy.

                          1.41              Regulations should also set out, in a Schedule, a number of model agreements which the parties will be able to use. Our assumption is that there would need to be at least three – one for type I agreements (for which we would want to encourage use of periodic terms rather than fixed terms), one for periodic type II agreements and one for fixed term type II agreements. Following consultation, the Secretary of State may determine that there should be a greater number.

                          1.42              We want agreements incorporating the required terms to be made widely available, for example, in newsagents, libraries and Citizens Advice Bureaux; they should also be able to be downloaded electronically.

                          1.43              A cornerstone of our provisionally proposed approach, therefore, is that the written agreement should be the place where the rights and obligations of landlords and occupiers are set out.

                          1.44              One point is worth stressing. The focus of this consultation paper is primarily on questions of status and security. The written agreement will go much wider than that, to cover the full range of rights and duties on both landlords and occupiers. In this Paper, we are not setting out a full discussion of the substantive contents of the agreement. In particular, there may be further law reform work to be undertaken in relation to what are now the terms implied by law, which in our new scheme would appear as express terms in the second section of Part B of the agreement. But we are putting in place an essential building block which would enable the wider objective of a complete codification of housing law to be achieved. This is not to say, however, that this present scheme could not be legislated as it is presented in this Paper, just that future law reform work may focus on reforming the contents of the agreement, rather than re-writing statutory or common law obligations.

                          1.45              We are not proposing that agreements should be left entirely to market forces. Consumer law exists to curtail abuses of freedom of contract. But, by adopting the consumer approach, the fairness of the contract can be emphasised. We think this approach should also encourage good housing management practice.

                          1.46              The major limitation on the contractual approach in respect of security is that we have accepted that it is right to continue to require the landlord to obtain a court order prior to eviction. The parties cannot contract out of this protection. Indeed, in the case of local authorities and possibly other social landlords, to propose otherwise would conflict with obligations under the Human Rights Act 1998.

                          1.47              The contract may provide that the landlord can only evict by taking court proceedings. However, the contract cannot itself impose a requirement on the court to hear such proceedings or to make such orders. The court’s jurisdiction must be confirmed by statute.

                          1.48              In order to make it clear that the focus of our proposals is on the contractual relationship, we have decided to use terminology that is less linked with existing notions of landlord and tenant law. In this paper, therefore when we are discussing our proposals, we have sought to adopt the following terminology.

                          1.49              Perhaps slightly inconsistently we continue to refer to “landlord” and “rent” as we think these are terms which are generally understood by the public. We make it clear that these terms embrace, respectively, “licensors” as well as landlords in the technical legal sense; and any payment for the right to occupy the home, whether or not under a tenancy or a licence.

                          1.50              Housing law is impossible to understand without understanding its historical growth under the impact of social and political pressures. In Part II: The evolution of housing law, we give a broad over-view of how the law has come to be as it is and draw what we think are the main lessons to be learned from this history.

                          1.51              We do not, and could not, give a detailed account of housing law as a whole. Nonetheless, we have thought it right to provide a brief summary of the current state of the law setting out in particular the various statuses known to the law and the grounds for possession. This is the precursor to offering a short over-view of the goals of the project and indicating some of the transitional problems that will need addressing. This is found in Part III: Housing status and security of tenure: promoting simplification.

                          1.52              It so happens that recently a number of other comparable jurisdictions have taken steps towards reforming parts of housing law. Of particular importance is the recent legislation in Scotland, and the experience in a number of Australian jurisdictions. We give an overview of these developments in Part IV: The approach in other jurisdictions.

                          1.53              In housing law as elsewhere, the enactment of the Human Rights Act 1998 has had a significant effect. In a series of very recent cases, the courts have developed principles of far-reaching (and perhaps insufficiently appreciated) importance, particularly in relation to the interplay between substantive human rights and the public law duties on landlords. We consider this in Part V: The impact of human rights law.

                          1.54              As is evident from paragraphs 1.32 to 1.35 above, bringing a consumer approach to bear on housing law is fundamental to our approach. In Part VI: The consumer approach: focusing on the agreement, we set out what this means in practice. It is here that we set out the central position of the agreement in our scheme of regulation, incorporating the security regimes for the type I and type II agreements in the tripartite form of agreement outlined in paragraph 1.39 above. In these proposals, we draw attention to the importance of, and apply, the unfair contract terms approach to the terms of the agreement.

                          1.55              We set out our proposals for the high security type I agreement in Part VII: The type I agreement: the security regime. The substantive security rights would be modelled on the secure tenancy, in that eviction would be at the discretion of the court. This would, however, be accomplished through the medium of the terms of the agreement. The agreement would provide that eviction would result from a breach of a term of the agreement, or from the occurrence of other specified circumstances, but only if the court considered it reasonable.

                          1.56              The low security type II agreement, which would replace the existing assured shorthold, is set out in Part VIII: The type II agreement: the security regime. We consider a possible significant departure from the assured shorthold model, asking for views as to whether or not the six months’ moratorium on the issue of a possession order, which is currently a feature of assured shorthold tenancies, should also apply to the type II agreement. We also consider whether the notice period for the notice-only ground for possession of a periodic type II agreement should be three months, instead of the two months under the current assured shorthold tenancy. We propose the equivalent of a mandatory ground for non-payment of rent, and a regime similar to the circumstances in which possession may be granted on a discretionary basis to that obtaining for type I agreements, both of which would be needed for longer fixed-term type II agreements.

                          1.57              In Part IX: The scope of the scheme, we propose that the distinction between a lease and a licence should no longer be a key factor in determining which agreements come within the scheme. We also discuss the classes of agreements to which our system would apply, and those which would be excluded. The exceptions provisionally proposed include re-drawn versions of the resident landlord and hostels exclusions, holiday lets and accommodation in hospitals, nursing homes, and prisons. We also propose excluding agreements where the agreement comes under some alternative regulatory structure, such as that relating to agricultural holdings. Other residential agreements currently excluded from statutory protection would either continue to be excluded, or become type II agreements, depending on whether or not there is to be a six months’ moratorium on granting possession orders.

                          1.58              In Part X: Terminating agreements, we discuss how procedures for terminating agreements might be simplified and improved. In particular, we are provisionally proposing that there should be a principle of “use it or lose it”, to encourage landlords only to issue notices of intention to seek possession when they really intend to seek possession. We ask whether the rules relating to notices should be amended so that, instead of the present situation where they normally refer to the earliest date on which possession proceedings may be brought, they would refer to the earliest date on which a possession order could be given.[24] We think that this, together with other proposals to improve the transparency of notices, will make the position of tenants facing eviction clearer. We also propose the creation of a new procedure to assist landlords where a home has been abandoned.

                          1.59              In Part XI: Using the new agreements, we turn to the relationship between the agreement types and the identity of the landlord. The principal question is what restrictions should there be on the freedom of choice of agreement granted by social landlords (local authorities, housing associations and others who provide housing on a non-commercial basis). We identify two principal options – that all social landlords should have a free choice between type I and type II agreements; or that all local authorities and registered social landlords[25] should be obliged to use type I agreements, except in specified circumstances. We invite views. If the second option is adopted, we consider the exceptional circumstances in which these landlords would be allowed use of type II agreements. We also discuss the need for a general probationary agreement for social landlords.  On the private sector side, we provisionally propose that the type II agreement should be the default for the sector. We emphasise that the features of the type II agreement provide a floor of rights that can be contractually enhanced, including by entering into longer fixed term agreements, if market conditions so require.

                          1.60              There is a widespread perception that judicial decision making on discretionary grounds is less predictable than it should be. In Part XII: Powers of the court, we provisionally propose that the discretion to be exercised by the court be statutorily structured, to enhance consistency of judgments. We also consider the use of suspended possession orders, and provisionally propose an alternative system designed to align better the use of court time with the real needs of fair adjudication.

                          1.61              Anti-social behaviour by tenants is a particular concern to all of those involved in housing and community regeneration. We consider how to address it in Part XIII: Anti social behaviour. We provisionally propose a new procedure for the summary eviction of anti social tenants. For type I occupiers, we provisionally propose a new procedure allowing a county court which found a breach of a relevant injunction or an anti-social behaviour order[26] to order the demotion of occupiers to type II agreements (to which the summary eviction procedure could apply), or their relocation, or their eviction.

                          1.62              Part XIV: Mapping existing agreements onto the new scheme considers the issues involved in bringing existing tenancies into the new scheme.

                          1.63              In Part XV: Summary of provisional proposals and consultation questions we bring together the questions we hope consultees will answer. We should stress that, as with all exercises of this kind, we do not expect all consultees to answer all the questions; what will assist us most is informed opinion on the issues that concern respondents.

                          1.64              Despite all the attention that is given in discussion about housing to the question of owner-occupation, it is still the case that nearly a third of the population live in rented accommodation. Of 19.8 million properties in England, 5.7 million are rented.[27] Of a total of 20.6 million households in England in 1999/2000, 6.4 million were in rented accommodation.[28] Of those renting, something over two-thirds (4.3 million) rent either from local housing authorities or registered social landlords (the social rented sector), and just under one third (2.1 million) from private landlords (the private rented sector).

                          1.65              In the social rented sector, the largest group are homes rented by single females (1.0 million), followed by broadly similar numbers of couples with no dependent children (821,000), single males (744,000), couples with dependent children (712,000) and lone parents with dependent children (690,000).

                          1.66              In the private rented sector, the largest groups are couples with no dependent children (510,000) and single males (482,000). These are followed by “other multi-person households” (333,000), single females (316,000) and couples with dependent children (274,000).

                          1.67              The only group where the number in rented accommodation exceeds the number in owner-occupied accommodation is lone parents with dependent children (875,000 as against 407,000). Of those in this group who rent, the vast majority rent from the social rented sector. Approximately a quarter of all social rented households are one person households (1.7 million out of a total of 4.3 million); over a third of private rented sector households are one person households (800,000 of a total of 2.1 million).

                          1.68              Over 40% of privately rented units (754,000 out of 1.8 million) are in properties built before 1919 – a much higher percentage than for the social rented sector (6.5%). By contrast, 63% of rented properties in the social rented sector had been built between 1945 and 1984.

                          1.69              Further, in the private rented sector nearly 20% (444,000 tenancies) are described as “not accessible to the public”. This is a significant group comprising mostly lettings by employers to their employees and rent-free lettings to friends or relatives of the landlord in private houses or flats.[29]

                          1.70              It is harder to get information about specific groups of households and their tenure patterns. However data are available on households with dependent children.[30] These show that lone parents who have not previously been married are overwhelmingly accommodated in the social rented sector (360,000 in 1999/2000 – 70% of the total). A further 331,000 (43%) of lone parents who had been previously married are also accommodated in the social rented sector.

                          1.71              Given the assumption that the social rented sector is principally responsible for accommodating those with children, it is perhaps surprising that 96,000 lone parents – never previously married – (19% of the total in this category) are accommodated in the private rented sector. Of lone parents who had been previously married, another 88,000 are accommodated in the private rented sector (11% of the total in this category). In total 184,000 single parent households with dependent children are in the private sector. The majority of these will be resident on short-term assured shorthold tenancies, awaiting long-term housing in the social rented sector.

                          1.72              Despite frequent comment about the decline of the private rented sector, figures show that, in fact, the size of the sector has held remarkably steady over the last 20 years, and indeed has in recent years begun to grow. In 1981 there were 1.9 million households (11% of all households) privately renting; in 1999/2000 this total had risen to 2.1 million (though expressed as a percentage of all households, this had gone down to 10.2% of the total).[31] The vast majority of private lettings are assured tenancies (65%), the overwhelming majority assured shortholds.

                          1.73              There are still 154,000 protected tenancies under the Rent Acts; these numbers however are reducing by around 30,000 a year.[32] It is however doubted whether this trend will be followed through in a strictly linear way.

Wales[33]

                          1.74              The housing position in Wales differs in some important respects from that in England. Most obviously the total housing stock (1.27 million) is much smaller. And within that total, a higher percentage – 72% – is owner-occupied. Nevertheless, either from choice or necessity, over a quarter of the population of Wales continues to rent their dwellings. The rented sector remains a significant part of the Welsh housing market.

                          1.75              Unlike the situation in England, where social housing is moving to a balance between local authorities and housing associations, social renting is still dominated by local authority provision. 188,000 dwellings were rented from local authorities in April 2001, as compared with 55,000 from registered social landlords.

                          1.76              However, as in England, these bald figures mask other significant changes. For example, as a result of the right to buy legislation, the total number of local authority dwellings has declined sharply over the last 20 years.[34] And the housing association sector has grown, from just 11,000 dwellings in 1981 to 55,000 now. However Welsh housing has yet to experience the massive changes in landlords that the large scale voluntary transfer programme has caused in England. One reason for this may be that, by comparison with England, there are not – outside the major conurbations of Cardiff and Swansea – the huge council estates familiar in English cities. Council estates tend to be much smaller and thus managed more locally.

                          1.77              The private rented sector now accounts for about 9% of dwellings (a total of 111,000 properties). Although the percentage has held steady, the actual number of privately rented properties has – as in England – been rising slowly, from 97,000 dwellings in 1991, to 111,000 in 2001. As in England it seems that the bulk of the growth has been for special niche markets, such as students, and others seeking temporary accommodation, who are not generally seen as a high priority for social housing.

                          1.78              The present Government sees a continuing need for an active rented sector. The central argument of the recent Housing White Paper[35] was that there should be better quality in housing provision and more choice for the occupier. Specifically, the Government pointed to the need to promote a healthy private rented sector as well as promoting choice in social housing.

                          1.79              These tenure groupings have not always been thus; there has been dramatic change over the last 100 years. At the beginning of the 20th century, the predominant form of rented housing provision – indeed the predominant form of housing provision – was from the private sector. This was supplemented with a modest contribution from housing charities, the forerunner of the social rented sector.

                          1.80              Even today the balance between these groups is still shifting. For example, the role of local authorities in providing accommodation directly has been reducing. Greater reliance is being placed on other social housing landlords and private landlords to meet the needs of this sector of the housing market.

                          1.81              Other changes to the rented sector may also be anticipated. Whereas in some parts of the country there is very high demand for housing and thus a buoyant market for accommodation of all kinds, in other parts of the country demand is low. In these areas there may be substantial estates of residential accommodation but with low demand from potential tenants. In such areas, serious environmental problems may arise if these estates start to decay.

                          1.82              Any regulatory framework should take account of these pressures to ensure that local authorities and other landlords have the ability to manage their estates efficiently. In some cases this may result in proposals for the demolition of dwellings. This may be preferable to the physical decline of under-populated areas. Indeed such action may be an important key to area regeneration. The regulation of the landlord-tenant relationship must not be so inflexible that strategic plans for the benefit of an area taken as a whole cannot be implemented.

                          1.83              A number of important issues relating to the regulation of the landlord-occupier relationship are not considered in this paper.

                          1.84              The law relating to disrepair, on which the Law Commission published a report in 1996,[36] is now being taken forward within the Department for Transport, Local Government and the Regions in conjunction with new proposals for the enforcement of housing standards.[37]

Tenancy deposits

                          1.85              Similarly, the question of whether or not tenancy deposits should be regulated, and if so how – an issue covered in the legislation of many Commonwealth jurisdictions[38] – is not considered here. It is currently the subject of pilot projects being run by the Department for Transport, Local Government and the Regions.

Specialist courts

                          1.86              A third issue outside the scope of this Paper, despite the fact that it has been considered in most other Commonwealth jurisdictions, is whether or not there need to be special courts or tribunals for the resolution of housing disputes. Evidence from those jurisdictions suggests that these can be a very cost-effective way of resolving residential landlord-tenant disputes. The idea of creating a specialist housing court or tribunal is also one that has been raised from time to time in this country.[39]

                          1.87              An alternative idea that has been advanced is that decisions on housing disputes should be adjudicated by a specialist cadre of “ticketed” housing judges, who have been given training in housing law. We anticipate that this is an issue which will need further consideration should this paper form the first stage in the codification of housing law.

                          1.88              Controls on rent levels is another topic we are not considering in any detailed way. Policy on rent regulation is essentially an issue of socio-economic policy. We have therefore assumed that the present situation – where social housing is subsidised through a variety of housing finance measures (and registered social landlords operate on a not-for-profit basis) and where private sector rents are, in effect, market rents – will continue.

                          1.89              Housing benefit is similarly excluded from our consideration, save insofar as aspects of the present administration of the housing benefit scheme impact on particular aspects of the law that clearly fall within the scope of our terms of reference.

                          1.90              We have also not addressed sectors of the housing market subject to their own regulatory codes. These include properties leased on the basis of long-term leaseholds, which are subject to their own regulatory regime[40] and are seen in practice as quite distinct from the residential lettings/tenancies which are the primary focus of this project. We have not considered the position of people who live in mobile homes,[41] nor those who live in houseboats. Agricultural dwellings/tenancies are also outside the scope of this Paper.[42]

Right to buy

                          1.91              One issue which has caused us considerable difficulty is the interface of the proposals in this paper with the “right to buy”. At present the right to buy is (broadly) a direct consequence of being a secure tenant, and only local authorities can grant secure tenancies. Housing association tenants (except those who have a preserved right to buy, because they were once council tenants and meet certain conditions) do not have the right to buy. If we establish a new form of housing agreement for tenants of social landlords, both local authorities and housing associations (our type I agreement), the right to buy will have to be separate from the type of agreement itself. The legal definition of those who have the right to buy will have to be distinct from the type of agreement. We have formed the view that the right to buy is not, of itself, an aspect of tenant status, which is the central focus of our work.

                          1.92              We acknowledge that, if our proposals are adopted, then any legislation will need to redefine the basis on which the right to buy may be exercised. For present purposes, we assume that those currently entitled to the right to buy will retain that right, and those who do not currently have that right will not acquire it. The new statutory framework will need to contain provisions to deal with this. Nothing in this Paper should be taken to imply that there will be any change to the current position in relation to the right to buy.

                          1.93              The same is true of the right to acquire and the right to manage. In all of these cases, we consider that the distribution of these rights is not a matter for law reform. The content of the policy must be decided by Government. The policies will then become free-standing legal structures, separate from those relating to the housing agreements we propose in this Consultation Paper. Some may see the disentangling of, particularly, the right to manage from the agreement itself as representing the loss of a more communitarian approach to tenancies. That, it appears to us, is a debate on which we must remain neutral, but from our, law reform perspective, it is important that the strict legal structures should not determine the content of these broader policies. Nothing that we propose should be seen as impacting either positively or negatively on such policy approaches.

                          1.94              We have not been asked to consider the law on homelessness as part of our work. However certain matters relating to the allocation of residential accommodation do have relevance to our project and we consider these in context below. [43]

Regulatory impact

                          1.95              Any change of the scale contemplated in this paper will inevitably bring both benefits and costs to businesses, other organisations and individuals. The current practice in Government is to consider the impact of changes to regulatory structures on businesses, particularly small businesses, charities and other voluntary organisations in the context of regulatory impact assessments, a policy process Government Departments are required to use in relation to proposals for reform. Although the Law Commission does not provide its own regulatory impact assessments, if the Department accepts our proposals, it will be necessary to go through the process at that point. Respondents can be of the greatest assistance by providing us with their judgment as to the benefits and costs of introducing our scheme. It provides respondents with the opportunity to influence the process.

                          1.96              As far as the formal regulatory impact assessment process is concerned, it would be particularly valuable to hear from the small businesses involved in housing, such as small landlords and letting agencies; and from the charities and voluntary organisations involved economically in the sector, such as housing associations, housing co-operatives, and those providing hostels and other housing for vulnerable people. It would, however, also assist our consideration of the scheme proposed in this paper more generally if respondents in other categories would also indicate their view of the benefits and costs to them.

                          1.97              Particular areas that small business, charitable and voluntary sector respondents might like to consider include the benefits of simplification of the law in reducing litigation costs and associated management costs, savings in legal advisory costs attributable to more easily understood law and the ready availability of housing agreements, and the benefits of greater legal certainty in reducing the amount of time a property may be empty or unproductive. Costs might include the cost of producing written agreements if none are currently used (an indication of the extent to which landlords rely on oral-only agreements now would be helpful), the costs of the requirements in relation of notification of variation, any additional costs consequent on changes to the notice period required for the termination of type II agreements, and of the “use it or lose” approach to the issue of notices. We anticipate that there will be particular costs associated with the transition to the new scheme – the views of respondents would be helpful on this, too.

                          1.98              We ask for information about the regulatory impact of our provisional proposals in this paper.

                          1.99              We have been greatly assisted in our work by input from a specially constituted Advisory Group, representing a wide range of interests in the housing field.[44] Naturally none of them is responsible for the contents of this report.