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You are here: BAILII >> Databases >> The Law Commission >> RENTING HOMES 1: STATUS AND SECURITY (A Consultation Paper) [2002] EWLC 162(8) (28 March 2002)
URL: http://www.bailii.org/ew/other/EWLC/2002/162(8).html
Cite as: [2002] EWLC 162(8)
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Part VIII
the Type II agreement: The security regime
Introduction
8.1 Our proposals for the type I agreement are considered in Part VII. Here we discuss
(1) the proposed type II agreement;
(2) the court’s powers in relation to them, raising the question of whether the six months’ moratorium on the making of an order for possession should be retained;
(3) the circumstances in which landlords should be able to seek an order for possession of a type II agreement;
(4) the use of break clauses; and
(5) what should happen on the expiry of a fixed term agreement.
The type II agreement
8.2 To complement the type I agreement, which has a high level of statutorily guaranteed security of tenure, we think there should also be a type II agreement with only very limited statutory security. It is modelled on the assured shorthold tenancy.[1]
(1) It will be defined using the same landlord-neutral approach adopted for the type I agreement;
(2) All the requirements for a written agreement considered in Part VI will apply;
(3) The circumstances in which the landlord can seek possession will be set out in the terms of the agreement.
(4) All the circumstances in which a landlord may seek possession in relation to a type I agreement, discussed in Part VII, will be available to the landlord in relation to the type II agreement.
(1) where the landlord has served a notice stating that he or she requires possession – which we refer to as the “notice-only basis”; and
(2) where there are serious arrears of rent.
8.5 Where the landlord is seeking possession on the notice-only basis, we envisage that he or she will be able to use an accelerated procedure that does not involve a court hearing. [2]
Periodic and fixed term agreements
8.6 In relation to the type I agreement we asked whether they should be created only as periodic agreements, given that they attracted a high degree of statutory security of tenure.[3] By contrast, the fact that the type II agreement will have only very limited statutory security of tenure makes it imperative, in our view, that the type II agreement should be able to be created on both a periodic and fixed term basis. This will enable landlords who wish to let on a more long-term basis, but outside the scope of the type I agreement, to do so.
8.7 The essential difference between the two types of agreement is that where a fixed term agreement is used, the landlord would not be able to seek an order for possession from the court on the notice-only basis until the period of the agreement had come to an end.[4]
Use of the type II agreement.
The court’s powers to order possession
Accelerated possession proceedings
8.13 The existence of mandatory grounds for possession, where the court must make an order if the circumstances justifying the order are proved, has resulted in the procedural innovation of the accelerated possession procedure. Where a landlord seeks possession on the notice-only basis, possession may be ordered after a judge has read the papers, without the need for a hearing.[5] This procedure is a key feature of the current assured shorthold tenancy.
The six months’ moratorium
Background
8.17 Analysis of the history of housing law suggests that there has long been a tendency for short-term or relatively informal arrangements to be excluded from the schemes of protection. Thus lettings of furnished accommodation were originally wholly outside the scope of the early Rent Acts, and attracted only limited protection in the Furnished Houses (Rent Control) Act 1946.[6]
8.22 The requirement for an initial fixed term of six months was however replaced by a provision providing that a court could not order possession to take effect in the first six months of the tenancy.[7] This is the six months’ moratorium to which we have referred above.
he or she would not be able to obtain an order for possession on the notice-only basis until the contractual period of the tenancy had come to an end.[8] He or she would, however, be able to seek possession on a number of the other grounds available to landlords under the assured tenancy scheme.
The arguments in favour of the moratorium
8.24 A number of arguments can be made in favour a six months’ moratorium.
(1) The six months’ moratorium is not actually very long; it does provide a minimum guaranteed period of occupation during which occupiers can assert their rights against their landlord without fear of eviction. Removal of the moratorium might encourage landlords to issue notices that they required possession almost as soon as the occupier moved in.
(2) The single largest category of applications for assistance under the homeless persons provisions of the Housing Act 1996 is those leaving shorthold tenancies, having been given notice or having been served with a court order. Removing the six months’ moratorium may introduce greater volatility into the private rented sector and thus place even greater pressure on local authorities.
(3) Some local authorities now use the private sector to house homeless families. It has been put to us that such families should be allowed an initial period of security (perhaps even extended to one year) in which to settle into their new accommodation and to bring some stability to their lives.
(4) In some areas, the administration of housing benefit applications takes such a long time that guaranteeing occupation for at least six months gives the authority a chance to get the application processed before the claimant has to move on.
The arguments against a moratorium
8.25 Against these points it may be suggested:
(1) The six months’ moratorium, though not long, introduces an unnecessary inflexibility into the housing market. Accommodation that could be let for a shorter period is not brought to market. Further, while tenants should be able to enforce their rights under the agreement – including their rights to repair – we wonder whether the six months’ moratorium in practice encourages many occupiers, who find problems at this early stage, to take action against their landlords.[9]
(2) In relation to the second point above, we are not convinced that removal of the six months’ moratorium would make a significant difference. In any event, if the period of notice for the notice-only basis for possession were to be increased to three months, as we suggest below,[10] any additional pressures could thereby be mitigated.
(3) Where local authorities use private landlords to accommodate homeless families, there is nothing to prevent the local authority contractually agreeing with the landlord that any letting to a homeless family will be for a minimum period, which might be six months but could be longer.
(4) Questions of housing status should not be determined by problems with the administration of housing benefit, however intractable.
8.26 There are the following additional arguments.
(1) When private landlords were the sole providers of rental housing it might have been essential to ensure that at least part of that market was subject to statutory security of tenure. As noted above, these days long-term housing is available principally through the social rented sector. Many of those occupying privately rented accommodation require it for short periods. The six months’ moratorium does not offer any significant measure of protection and thus could be abolished.
(2) Despite the point made in the preceding paragraph, type II agreements will not necessarily be short-term; instead they may be subject to less statutory security than type I agreements. There is nothing to stop a type II agreement running on for many years if both parties so wish. This can be achieved contractually either by the granting of a fixed term, or by allowing a periodic agreement to roll on.
(3) Landlords have argued against the six months’ moratorium on the basis that they need the notice-only basis for possession to be available as soon as possible to deal with anti social behaviour. We make detailed suggestions about anti social behaviour in Part XIII. Here we note that we do not consider the notice-only basis to be primarily a tool for combating anti social behaviour.
Conclusion
8.29 In providing answers to these issues, consultees are also invited to consider the suggestion for increasing the period of notice that the landlord intends to seek possession on the notice-only basis[11]. We also ask consultees to bear in mind the arguments for reducing the number of exclusions from the type II agreement (below Part IX).
Security of tenure: the terms in the agreement
Circumstances justifying a mandatory possession order
The notice-only basis for seeking possession
8.35 The fact that the type II agreement would allow possession to be ordered on the notice-only basis means that it is important that the law relating to the notice is clear. We make a number of suggestions about notices generally, which will apply equally to these.[12] These include that notices should be straightforward and clear and they should give notice of the date on which proceedings will be started. They should become ineffective if not used within an appropriate time.
The period of the notice
Serious rent arrears
Other circumstances justifying a mandatory order?
8.42 We do not think there are any other circumstances – currently found in the assured tenancy regime – which should be included in the type II agreement which should entitle the landlord to a mandatory order for possession.[13]
8.43 Owner-occupiers who might have used ground 1 when the Housing Act 1988 was passed now let on the assured shorthold tenancy basis. The owner will therefore have the notice-only ground for possession available, which we have discussed above. Ground 1 is effectively redundant. We have discussed the mortgagor default ground – Ground 2 – in Part VII.[14] Again, so long as a fixed term has not been agreed, landlords should be able to rely on the notice-only procedure. The mortgagee should be able to use their existing rights as mortgagees to ensure that they can get access to the property which has provided the security for the loan they have made.
8.44 In relation to the other mandatory grounds for possession which currently attach to assured tenancies, we argued in Part VII above,[15] that they were no longer required in the case of type I agreements. Equally, given our proposals relating to the notice-only and serious rent arrears being mandatory grounds for possession in relation to type II agreements, we see no reason for including the remaining mandatory grounds – which were created before the assured shorthold tenancy concept was created – in the type II agreement scheme. The landlord can achieve the same result more quickly by use of the notice-only basis for seeking possession.
8.45 We leave to one side the question of ground 7,[16] but will return to that in the next consultation paper on succession and transmission of agreements.
Circumstances justifying a possession order on a discretionary basis
Periodic agreements
Fixed term agreements
8.52 Although the current law on the termination of fixed term assured tenancies is complex, the underlying principle is clear. During the period of the fixed term, only the grounds for possession we have classified as “occupier default” and “social policy”[17] can be used.[18] In other words the contractual term must be allowed to run its course, unless the tenant has behaved in such a way as to justify premature termination of the agreement.
8.57 In relation to tied accommodation, a periodic type II agreement would normally offer landlords appropriate protection. If a landlord needed to offer fixed term accommodation to attract applicants to a fixed term employment contract, then the agreement could classify misconduct at work as a breach of the agreement given the tied nature of the accommodation.[19] Breach of the agreement would then be the circumstance in which the landlord could seek possession, even though the fixed term had not expired.
8.58 In relation to circumstances we have classified as estate management,[20] it could be argued that these should not entitle the landlord to seek an order for possession during a fixed term type II agreement. The parties should be regarded as having committed themselves to an agreement for a fixed term so long as there are no breaches of the agreement by the occupier. On the other hand, it can be argued that not all the circumstances relating to estate management issues can be anticipated in advance. This might lead to the conclusion that the fixed term type II agreement should contain a provision which entitled the landlord to seek a discretionary order for possession from the court, notwithstanding the fact that the fixed term had not run its course.
Break clauses
8.64 Although in relation to periodic agreements we shall be proposing that where the occupier wishes to terminate the agreement he or she should be able to do so simply by issuing a notice to quit the agreement, without the necessity of going to court,[21] it could be argued that where an occupier seeks to take advantage of a break clause, he or she should be required to get court approval in the same way that the landlord is required to do. We think this would be too onerous a burden to place on the occupier.
Expiry of fixed term tenancies
8.69 It has long been the law that, where a contractual fixed term tenancy expires, it is replaced by a periodic tenancy unless there is a further grant of another fixed term period.[22] We think this well-established principle should be retained in relation to the fixed term agreements covered by our scheme. It avoids problems of uncertainty where a tenant holds over after the end of a fixed term and offers clarity as to the status of the occupier and the ways in which the tenancy may be brought to an end.
8.72 Although the initial creation of the periodic tenancy is the result of the operation of a statutory rule, we are anxious that the new agreement should be put into writing in the same way that periodic agreements created directly by the parties are to be put into writing.[23] There seems to be no good reason why the parties to an agreement that has been created by the operation of statute should not have a full statement of their current contractual rights and obligations. The landlord should be under an obligation to supply a revised contract to the occupier.
Summary
8.80 It will be able to be created on both a periodic and fixed term basis.
8.81 The landlord will be entitled to get a mandatory order of possession from the court
(a) where the landlord has given the occupier two/three months’ notice of his intention to seek a possession order. In these cases the accelerated possession procedure is available; and
(b) where the occupier is in two months’ rent arrears when the landlord issues a notice of intention to take proceedings and at the date of the hearing.
8.82 The landlord will be entitled to seek a discretionary order of possession
(a) where the occupier has breached the agreement;
(b) where the occupier has driven their spouse or partner from the home by domestic violence; and
(c) where the agreement has been obtained on the basis of false information.
[2]CPR Pt 55 II.
[3]See para 7.16 above.
[4]See para 8.34 below.
[5]It should not be thought that the county court merely rubber-stamps cases put before it. The Judicial Statistics 2000 show that orders were made without a hearing in only 55% of the cases started. 22% were referred to a full hearing in court.
[6]See paras 2.15 and 2.16 above.
[7]Housing Act 1988, s 21(5), as inserted by the Housing Act 1996, s 99.
[8]Housing Act 1988, s 5(2) provides that on the ending of a fixed term tenancy, unless the landlord grants a replacement fixed term tenancy, the tenancy becomes a statutory periodic tenancy. Where the initial tenancy is longer than six months, the statute does not deal expressly with whether the landlord can serve notice under a contractual break clause after the first six months but before the end of the fixed term, or use forfeiture to end the fixed term early, so as to convert the tenancy into a periodic tenancy and then be able to serve two months’ notice to use the notice-only repossession procedure. For our proposals on this see para 8.71 below.
[9]See the discussion in paras 6.159 to 6.175 above.
[10]See paras 8.37 and 8.38 below.
[11]See paras 8.37 and 8.38 below.
[12]See paras 10.3 to 10.48 below.
[13]For the current grounds in tabular form, see para 3.43.
[14]See paras 7.45 to 7.50 above.
[15]See paras 7.18 to 7.57 above.
[16]See paras 3.42 and 3.43 (table 4).
[17]See paras 7.60 to 7.76 above.
[18]This is the effect of Housing Act 1988, s 7(6). There is no equivalent in the Housing Act 1985, which only allows use of grounds 2, 8 and 10 to15 during an assured fixed term. Ground 2 is not a tenant default ground, but we believe it should be replaced by lenders requiring landlords to grant agreements in which the notice-only basis will be available.
[19]This term would be subject to the fairness test in the Regulations and the court’s discretion on repossession. If the employer is concerned to be able to end the fixed term employment contract early for reasons other than misconduct, and wants also to be able to repossess the housing at the same time, then a fixed term is probably not appropriate for the housing contract.
[20]See paras 7.77 to 7.83 above.
[21]See paras 10.49 to 10.51.
[22]Currently Rent Act 1977, s 2(1)(a); Housing Act 1985, s 86 and Housing Act 1988, s 5(2).
[23]See para 6.74 above.
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