Part I
Introduction
Introduction
1.1
In the first
consultation paper arising out of our current project – Renting Homes 1:
Status and Security, Consultation Paper 162 (henceforth “CP 162”) – we set
out our provisional proposals for the simplification of the law relating to the
status and security of tenure of those with the right to occupy premises as a
home, other than as freeholders or long leaseholders. At the heart of those
proposals was the proposition that the granting of rights to occupy premises as
a home should be seen primarily as a matter of contract between the parties.
The terms of the contract would be shaped by principles of consumer law which
would outlaw terms that were unfair.
1.2
We argued that this consumer approach would have two principal
advantages:
(1)
The contract would contain a
full statement of the legal rights and obligations of both landlords and
occupiers under the occupation agreement. Particularly, if expressed in Plain
English, we argued that this should assist both sides to the contract to understand
their legal position more readily than they can at present.
(2)
This approach would be
generally more suitable for this sector of the housing market. It would replace
the complex and frequently incomprehensible combination of contract law,
landlord and tenant (real property) law and statute law which had characterised
the legal regulation of the rented sector of the housing market in the past.
Scope of our
proposals
1.3
The scope of our proposals was deliberately set wide. We argued that
it should cover the vast majority of arrangements whereby the right to occupy a
home has been granted by a landlord to an occupier. In particular, it would
cover arrangements which, under the present law, would be classified as
licences as well as tenancies.
Exclusions
1.4
We acknowledged that there would have to be exclusions from
the proposed scheme. The letting of holiday homes or the grant of rights to
occupy by a resident landlord were two such examples. Also excluded from our
proposals were arrangements that did not relate to the renting of homes and
which were, in any event, subject to other regulatory regimes. We did not,
therefore, consider business tenancies, licensed premises and agricultural
tenancies where alternative statutory schemes exist. It also excluded long
leases (where we adopted, as a cut off point, leases in excess of 21 years)
which amount, in economic and social terms, to a form of owner occupation
rather than a way of renting a home. Otherwise, we argued that there should be
as few exceptions as possible.
1.5
Our final recommendations on the scope of the scheme we
propose will, of course, have to await our analysis of the responses to CP 162
and consideration thereof.
The
subordinate nature of this consultation paper
1.6
Despite its length, CP 162 was based on the straightforward
assumption that there would be a single landlord and a single occupier. It
sought to set out proposals to regulate the relationship between the landlord
and occupier.
1.7
In reality, people do not structure their lives in this simple
and straightforward way. The situations in which occupation agreements are made
will be much more varied and complex than this. A variety of examples can be
envisaged:
(1)
the landlord may wish to
contract with a married or unmarried couple who wish to cohabit. They may be of
different sexes or the same sex;
(2)
the landlord may wish to
contract with a group of friends, for example, a student letting;
(3)
the landlord may wish to
contract with a group who have come together for the sole purpose of sharing a
flat or house;
(4)
the landlord may wish to
contract on a basis that combines one or more of the above, for example, a
couple seeking to share with one or more friends;
(5)
once a person has been
granted a right to occupy, they may wish to bring in another as a lodger;
(6)
a person with a right to
occupy may wish to permit another/others to share or live in the premises on a
non-contractual basis.
1.8
After the agreement has been made the occupier may want new
people to be able to live at the property. This could be achieved by bringing
them into the agreement as occupiers having a direct contractual relationship
with the landlord, whether as a joint occupier with the original occupier or as
a replacement for the original occupier (who may have died or moved).
Alternatively, it may involve the new occupier having no direct legal
relationship with the landlord. This may happen, for example, where the
occupier allows other people to live in the premises on a non-contractual basis
or grants a sub-occupation agreement. To reflect this variety of situations,
our scheme needs detailed rules which determine how each of these transactions
should be carried out, and what the position will be if it is not done
correctly.
1.9
In legal terms, under our new scheme, persons who share
accommodation may be classified as: co-occupiers (either contractual joint
occupiers or non-contractual occupiers), lodgers or sub-occupiers. We deal with
each of these categories, respectively, in Parts III, IV and V.
1.10
In addition, occupiers may want to transfer their rights of
occupation to others. The circumstances in which this might be possible are
considered in Part VI. Problems can also arise when an occupier dies: do others
have the right to succeed to his or her occupation rights? These are considered
in Part VII.
1.11
All these situations raise potentially tricky legal questions.
Who is bound by the occupation agreement at any given time? What is the extent
of the occupiers’ liability under the contract? What rights of control does
and should the landlord have over the identity of those who occupy
the premises? What happens on the death of an occupier; can rights of
occupation be passed on by will?
1.12
In the past, housing statutes have sought to deal with
questions relating to succession, assignment and sub-letting but have given
less detailed attention to joint tenancies and the rights of other members of
an occupier’s household. They have also made little express reference to the
legal effects of dealings with the landlord’s interest.
1.13
Our scheme must endeavour to accommodate the range of
situations that arise in practice. It must be flexible enough to take account
of the varieties of ways in which people live and straightforward enough to
enable people to know where they stand if things go wrong.
1.14
In thinking about each of these categories, we must consider
the relationship between the original occupier and joint occupiers,
non-contractual occupiers, lodgers, sub-occupiers, transferees and successors.
We must also consider the extent to which the landlord is bound by arrangements
made with these people, who were not parties to the original agreement.
1.15
One aspect of this paper, to which we think attention should
be drawn here, is that we have sought to consider the effect of the creation of
occupation agreements on parties other than parties to the agreement. The
question we have asked is: what should the basis be for deciding what rights
occupiers under agreements covered by our new scheme have “against the world”?
On what basis should the law decide whether the landlord’s successor in title
is bound by the agreements of their predecessor? This involves the
consideration of the interaction of our proposed scheme with established
principles of land law, particularly the law of landlord and tenant. These
issues are considered in Part VIII.
1.16
We should make clear at this point that we are not suggesting
that our new scheme should be expanded to interfere with the principles of land
law over these decisionsissues. In
practice, this will mean retaining a role for the lease-licence distinction.
This approach is consistent with the suggestion made in CP 162 that that
distinction should not have a role as between the immediate landlord and
occupier, but that the distinction would remain of importance in determining
the scope of third party rights and obligations. Our general approach is to
propose that occupiers under agreements which count as leases will have rights
both against the new landlord and against the world, whereas those under
licences will not. However, we suggest that the consequences of a new landlord
being bound should be determined by rules contained in our new scheme, rather
than under the Landlord and Tenant (Covenants) Act 1995.
1.17
In order to avoid wholesale repetition of the argument in CP
162, we have in general taken the contents of that paper as read. Where
necessary, we summarise the principal features of the arguments made there; and
we frequently cross-refer to CP 162 for discussion of matters dealt with only
briefly here. In this sense, this paper must be seen as subordinate to CP 162.
1.18
Nevertheless, it is essential that this paper both identifies
the issues that need to be addressed to make our proposed scheme work, and
offers clear and comprehensible solutions to the problems that arise in
peoples’ day to day lives. Notwithstanding the varieties of ways in which
people may want to occupy their homes, our objective is to create a legal
framework that is sufficiently clear to enable any occupier to know what
his or her legal rights and obligations are, and also to allow the landlord to
know what his or her rights and obligations are.
1.19
We will be looking for assistance from consultees for
confirmation that we have achieved these objectives, and for information and
suggestions relating to situations we have not contemplated.
Issues
addressed in this paper
1.20
Bearing these preliminary observations in mind, we summarise
the principal issues addressed in this paper in a little more detail here:
(1)
Joint occupiers and non-contracting occupiers. As indicated above (para 1.7), many people will want to
occupy premises on a shared basis, as partners, friends or in other groups.Part III considers what
should be the basic legal position where the landlord grants the right to
occupy to more than one person. It also asks whether there should be
circumstances in which existing occupiers should have a right to bring a new
occupier into the agreement. It examines the extent of the rights and
liabilities of the new occupier, both as against the other occupiers and as
against the landlord. It then turns to consider the position of others in the
occupier’s household who do not have a contractual relationship with either the
occupier or the landlord.
(2)
Lodgers. In many
situations, an occupier may want to take another person in to live in his or
her home as a lodger.In Part IV we examine the extent to which occupiers should
have the right to take in a lodger. It We looks
at the position of the lodger as against the occupier and also as against the
landlord.
(3)
Sub-occupiers. Where an occupier does not
wish to live in his home, or only wishes to live in part of it, he or she may
want to “sub-contract” their rights of occupation to another. Part V deals with
the question of the extent to which an occupier may sub-contract his or her
rights of occupation – either to part only of the premises or extending to
the whole of the premises – to others. We consider the extent to which
landlords should be able to control this process. We ask what rights, if any,
sub-occupiers would have against the landlord, if requirements relating to the
obtaining of consent have not been complied with.
(4)
Transfer. In Part VI
we consider whether occupiers should be able to transfer (assign) their rights
of occupation to another and, if they can, what is the nature of the
relationship between the new occupier and the landlord. We also consider the
particular matter of the extent to which occupiers may enter arrangements to
exchange their rights of occupation with another. Consideration is also given
to the situation where a court orders an adjustment of occupation rights.
(5)
Succession. Part VII
considers the effect of the death of an occupier on the occupation agreement
and the extent to which occupiers should have the right be free to pass
the rights under their occupation agreement to others.
(6)
Landlords’ successors in title. As mentioned above, Part VIII asks on what basis the law
should decide what rights the occupier has against other classes of people. In
particular, it considers what happens to the relationship between the landlord
and the occupier when the landlord transfers their interest in the property to
another.
1.21
One of the issues that recurs throughout this paper is the
extent to which a landlord should be able to control any transactions which an
occupier may wish to enter into in relation to his or
her rights of occupation. Thus, as a preliminary matter, in Part II of
this paper, we discuss the different rules relating to the current requirements
for obtaining the consent of the landlord before the occupier takes a step,
such as sub-letting or assigning the agreement. We propose a simpler set of
rules and a new terminology.
1.22
In each case we consider whether occupiers should have the
right to insist on changes to the agreement or the occupation of the property.
We consider how such changes should be made. Where the parties to the agreement
change, we discuss what requirements should be placed on the landlord to amend
the written agreement. We also consider the effect there should be on the
contractual liabilities, past and future, of the landlord, the occupier and any
new occupier, if such a change is successfully carried out.
1.23
Some of the changes require the landlord’s consent and will
not be effective without it.
In Part II we consider the effects of purported but unlawful exercises of the
rights to transfer and make sub-agreements. In Part III we consider the effects
where the consent required to bring in a new joint occupier is refused.
The
nature of the occupation agreement
1.24
In CP 162, we placed considerable emphasis on the occupation
agreement as the source of rights and obligationsas between landlords and occupiers. It was made clear
in the discussion in CP 162 that the nature of this agreement would not be
determined solely by contractual negotiations between the landlord and the occupier.
Statute will determine:
(1)
the structure of the contract;
(2)
the persons to whom the
contract will apply; and
(3)
the period of time over which
the contract will last.
The structure of the contract
1.25
We suggested
that the contract would contain three different types of term:
(1)
Core terms;
(2)
Compulsory terms;
(3)
Default terms.
1.26
Core terms: These
terms would relate to the core elements of the agreement and would include:
the names of the parties,; the
identity of the premises and the rent payable. These They are terms
which would have to be agreed between the landlord and tenant and properly
recorded in the written agreement.
1.27
Compulsory terms: We
identified two types of compulsory terms. Firstly, there were those that
related to the circumstances in which a landlord could take proceedings for
possession; secondly, there were terms – currently implied by
statute – which would be set out expressly in the agreement. For example,
we anticipated that section 11 of the Landlord and Tenant Act 1985, which
currently implies certain repairing obligations on the landlord into tenancy
agreements, would be adapted to become an express compulsory terms of our
proposed occupation agreements. These terms would in effect be imposed and not
be capable of amendment.
1.28
In this paper, where we provisionally propose the introduction
of a compulsory term into the occupation agreement, we shall broadly be
reflecting existing (statutory) tenants’ rights.
1.29
Default terms: Other
terms will be available if the occupation agreement does not otherwise deal
with the issue. We described these as the default terms. It is must
be remembered that default terms may be replaced by
terms that have been negotiated by the parties, subject to the overriding
principle of fairness in the Unfair Terms in Consumer Contracts Regulations
1999.
1.30
In short, while the occupation agreement is a form of
contract, it is one whose shape and content is, to a significant degree,
determined by underlying statutory rules.
The persons to whom the agreement will apply
The persons to whom
the agreement will apply
1.31
As the list of issues to be considered in this Part clearly
reveal, occupation agreements cannot be limited in their effect simply to those
parties to the initial agreement. If this were to be the outcome, the
occupation agreements would not cover the many complex living arrangements that
people enter into. We seek to ensure that our occupation agreements can
accommodate the fact that there may well be changes to the identity of the
occupiers, and indeed landlords, under the agreement. We want to ensure that,
as far as possible, changes made to the agreement do not require the agreement
to be terminated and a new one created. We address these issues in this paper.
The period of time over which the agreement will
last
1.32
By including proposals for provisions relating to when
possession proceedings may be brought and that occupation agreements should not
as a general rule be determined without an order from the court, we have
already signalled that the terms of the contract – as shaped by
statute – will determine the period of time over which occupation
agreements will exist.
1.33
In this paper we examine a
number of other situations in which the time during which the agreement will
persist is considered. For example, we consider what should happen when one of
a number of co-occupiers wishes to quit the premises; we also consider what
should happen to the agreement on the death of an occupier.
1.34
It should be understood, therefore, that the agreements which
we propose comprise a particular sort of statutory contractual arrangement. We
hope that the majority of the matters to be addressed in this paper will be
capable of being determined by the terms of the occupation agreement, as shaped
by the underlying statutory rules. These issues will be discussed, in
context, below.
Regulatory
impact
1.35
We noted, in CP 162 at paragraph 1.95, that Government departments are
all required to undertake a regulatory impact assessment of legislative
proposals. As we explained there, although the Law Commission does not
undertake this exercise, nevertheless we
would find information about the regulatory impact of our proposals extremely
helpful.
