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You are here: BAILII >> Databases >> The Law Commission >> Renting Homes (Report) [2003] EWLC 284(2) (15 November 2003)
URL: http://www.bailii.org/ew/other/EWLC/2003/284(2).html
Cite as: [2003] EWLC 284(2)
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PART II
BACKGROUND TO THE PROJECT
2.1 Rented housing remains a very significant part of the housing market in England and Wales. Almost a third of the population rent their homes. Although this pattern of tenure is very different from the situation 100 years ago, when the vast majority of people lived in rented accommodation, there is no indication that the rental sector will continue to decline. Indeed, there is some evidence that it has started to increase in size. Whether or not this happens, it is essential that there is a comprehensible and practical regulatory framework which both landlords and occupiers of rented housing can use.Introduction
2.2 The need for legislative intervention has arisen from the fact that there is an inherent imbalance in the relative bargaining power of landlords and occupiers. While many landlords provide excellent services to their occupiers, some do not. On key issues, such as ensuring that occupiers get value for money and an appropriate level of security of tenure, history suggests that there is always the possibility of exploitation. Legislation seeks to provide a regulatory framework to minimise such exploitation.
2.3 Historically, the way in which this has been achieved has been through the creation of a large number of statutory provisions that need to be read alongside the tenancy agreements that landlords and tenants may have entered into. This legislative strategy makes for an extremely complex body of law, not readily understood by most of those to whom it should apply, or indeed their advisers (if any).
2.4 There has long been criticism of the complexity of the law regulating the relationship between landlords and the occupiers of residential accommodation.[1] A primary objective of this project has been to devise a scheme for the reform of housing law that would address this fundamental problem.
2.5 Our recommendations for the reform of housing law will, if enacted, represent radical legislative change to the regulation of the rented sector of the housing market. The proposed Bill will not only include detailed changes to the existing rules, but also fundamental change to the legislative approach to the regulation of this sector of the housing market. In particular the historic linkage between principles of property law and housing legislation will, so far as is practicable, be abandoned; instead, a new approach based on contract which incorporates consumer law principles of fairness and transparency is proposed.
2.6 The terms of reference for the project, announced on 26th March 2001, were:Terms of reference
"To consider the law relating to the existing forms of housing tenancies in the rented sector and their creation, terms and termination, with a view to its simplification and reform; and in particular to review the law on
(1) the forms of housing tenancy let by:
(a) local authorities and other social landlords, and
(b) private landlords,
with a view to providing a simple and flexible statutory regime for both the social and the private housing sectors;
(2) the remedies available in respect of harassment and unlawful eviction;
(3) tenants' statutory rights of succession; and
2.7 It was always envisaged that the project would be undertaken in two phases. The original intention was to deal with item (1) in the first phase, and leave items (2) and (3) to the second. Government authority for work on phase 1 was granted at the outset; authority for phase 2 would be determined subsequently.(4) such other aspects of Housing Law as may be agreed between the Law Commission, the Department of the Environment, Transport and the Regions and the Lord Chancellor's Department.[2]"
2.8 As work on the questions of status and security progressed, however, it became increasingly clear that the matter of succession could not be left to a later stage. It also became clear that other issues about the ways in which people live in their homes, including joint occupation, could not be left to the second phase. In the event phase 1 of the project became considerably more substantial than originally planned.[3]
2.9 At the same time, we have come to the view that in phase 2 there is more to be done than simply review the law and practice of unlawful eviction and harassment. At the end of this Part we set out our ideas on further work that we think needs to be done before the final goal the creation of a code of housing law is achieved. These ideas are currently the subject of further discussion with Government. Fortunately, the original terms of reference were drafted with sufficient flexibility to permit these additions to the scope of the project.
Developing our proposals
2.10 In developing our proposals, the Commission has sought to keep a number of fundamental objectives in mind:Objectives
(1) the law should be simpler;
(2) the law should be more comprehensible; and
(3) the law should be more flexible.
2.11 In addition, the project is underpinned by four main principles:[4]Principles
(1) that the regulatory framework must include provisions guaranteeing security of tenure, though not to the same degree for all categories of occupier;
(2) that possession should, in general, not be able to be obtained without the landlord going through due process and establishing a ground for possession before a court;
(3) that a clearer consumer perspective should be brought to housing law, that would emphasise both the rights and the obligations of both landlords and occupiers; and
2.12 While these objectives and principles have been broadly welcomed, some will be difficult to achieve. For example, a body of law that is too simple may not adequately reflect the ways in which people actually live their lives and may thus lead to injustice. Our proposals which emphasise the centrality of the occupation agreement may result in its being longer and thus less readily comprehensible than some might hope. We recognise that these aims and objectives may not be wholly consistent, one with another. Nevertheless, we have found them useful tests against which to judge our recommendations for reform.(4) that there must be compliance with principles of human rights law.
2.13 Realising the importance of proposals that could affect the lives of nearly a third of the population of England and Wales, and also impact on the economic interests of a wide variety of people and bodies who have invested in the provision of rented housing, we determined from the outset that we should consult as widely as possible with those who would have an interest in these matters.Our working methods
2.14 We have been considerably assisted by a broadly based housing advisory group with whom, over the life of the project, we have had a number of meetings. The members of the group are set out at Annex A. The members of the group have not been involved in the drafting of this report, and nothing in it should be taken as representing their views, or the views of the organisations they represent.Housing Advisory Group
2.15 In addition, we have benefited greatly from the assistance of an informal group of supported housing providers, who have explained to us the complexity of the arrangements they enter into in providing accommodation for some of the most vulnerable individuals in our community. Members of that group are set out in Annex B.Supported housing
2.16 A large number of bodies and agencies have offered us platforms to introduce our ideas and to encourage debate and discussion on them. The Team has addressed over 70 events, at venues throughout England and Wales. These have ranged from meetings with landlord groups, tenant groups, and specialist advisers to large public meetings and conferences. For the first time, a Law Commissioner engaged in an on-line web-based discussion. A full list of conferences and other events attended is set out in Annex C.Public meetings, conferences and seminars
2.17 The Law Commission received a substantial written response to both CPs. This was perhaps as the result of the importance of the subject, the stimulus of the public meetings, or a combination of factors. Lists of respondents are set out in Annex D.Responses to the Consultation Papers
2.18 There have been a small number of pieces in the broadsheet newspapers. The specialist press, both housing and legal, has covered the project in some considerable detail and have also taken pieces written by members of the Law Commission team. We are extremely grateful for the coverage we have received.Media
2.19 Nonetheless, at a recent housing conference organised by the Chartered Institute of Housing (June 2003), it was striking that around half of an audience of experienced housing managers, who might be expected to be aware of it, on a show of hands indicated that they had no knowledge of the Law Commission project. This reinforces the need for a very full publicity campaign to explain the new scheme, should the Government decide to implement it.
2.20 Before any Bill is presented to Parliament, it is subjected to a Regulatory Impact Assessment (RIA). The task of carrying these out is primarily one for the relevant sponsoring Department, in this case the ODPM. While the Law Commission does not have the expertise and resources to carry out a full RIA, we have been trying to identify, as part of the consultation process, what some of the costs and benefits of our proposals might be. Our respondents have drawn attention to a number of issues that will need to be addressed in any more sophisticated cost-benefit analysis of our proposals.Regulatory impact
2.21 These included the following points.
(1) Local authorities and housing associations were concerned about the initial costs of preparing the new occupation agreements which our recommendations would require.
(2) Similarly, private landlords' groups thought that the costs of implementation would be considerable.
(3) There were those who accepted that the production of model agreements could contribute to a reduction in costs.
(4) Many respondents pointed to the need for a generous budget for publicity and training, prior to the introduction of any new scheme. The importance of not forgetting private landlords and occupiers was stressed.
2.22 The Commission accepts that there will be a substantial initial cost in moving to the new system. In the longer-term, we think that reductions in costs will be achieved by the following:(5) A number of respondents observed that adequate resources for housing advice and other agencies would be required to enable proper advice to be given, both at the start of the new scheme and on a continuing basis, and both to landlords and occupiers.
(1) the creation of model agreements, which will reduce the need for the individual drafting of agreements;
(2) the standardisation of the law, which should allow advisers to deal with issues more easily;
(3) the added clarity which should allow occupiers and landlords to know their legal position more readily without the necessity to obtain costly advice;
(4) more generally, the commercial opportunities for investment in housing that might follow from the adoption of a more flexible regulatory regime; and
(5) increased used of IT which should enable much of the present cost, for example, of posting documents such as copies of the agreement, to be significantly reduced.
2.23 The focus of the work of the Law Commission is on reform of the law. In this project, we cannot ignore the housing policy context which surrounds our work. In particular, the position of local authorities in the housing market has changed. There is decreased emphasis on the direct provision of housing and an increased strategic role. The flexibility of our proposals should make the interface between local authorities, arms-length management organisations (ALMOs) and other social landlords whether registered or unregistered much more responsive to local housing needs. Housing associations which are increasingly developing mixed portfolios of housing (not only for those in social need, but also other groups such as key workers and those wanting to rent in the market) should also find the flexibility of the proposed scheme helpful. Our scheme should facilitate the development of new partnerships between local authorities and private sector landlords, who should be encouraged to use the new contractual framework to improve standards of housing management. We hope our proposed framework could also encourage a new professionalism amongst private landlords, not only those with large numbers of property for rent, but also for the small "hobby" landlord. And it could be the foundation for new partnerships between tenants and landlords.[5]The relationship of our proposals to the development of housing policy
2.24 The precise extent to which different parts of the rental sector take advantage of these opportunities is not, of course, a matter for the Law Commission. That is the responsibility of Government and other stakeholders in the housing market. But the scheme should provide a much more flexible framework within which these and other policy initiatives can be taken.
2.25 Notwithstanding the scope of the project, there are a number of important matters relating to housing law and policy that we have not directly addressed. These were set out in CP 162.The scope of the project: exclusions
2.26 We noted that we were not going to revisit the law on disrepair, not least because the Law Commission had completed a project on this topic in 1996[6] and in relation to which the Office of the Deputy Prime Minister (ODPM) is doing further work. We did not consult on the issue. In the event, we have recommended that the proposals we made in Law Com 238 should become part of the compulsory-minimum terms we recommend should appear in the occupation agreement.[7]Disrepair
2.27 During the period of our consultation, we were aware that schemes relating to tenancy deposits were being tested and evaluated by ODPM. In 2003, the outcome of this evaluation was produced.[8] It has become clear that policy makers see considerable potential for building contractual obligations relating to the taking and repayment of deposits into the scheme we are proposing, even though we did not consider the issue as part of our project.Tenancy deposits
2.28 A number of consultees criticised the Commission for not revisiting the law relating to rent control and regulation. This was never envisaged as being part of our remit. The present government had, in effect, accepted that the policy of market rents in the private rented sector was one that was not to be disturbed.Rent control and regulation
2.29 However, given that landlords are now able to derive market rents from their lettings, it is reasonable to expect landlords to respect their contractual obligations. We recommend we should do further work on the mechanisms needed to ensure that both landlords and occupiers meet their obligations under the terms of the agreement.
2.30 We made it clear at the outset of the project that we would not be looking at housing benefit, either the rules relating to the scheme or its administration. The policy is currently undergoing major review within the Department of Work and Pensions. A number of our respondents expressed regret about this decision, given the important role it plays in sustaining a large number of landlord-occupier relationships, and that failures in housing benefit administration trigger many possession proceedings.Housing benefit
2.31 We can see ways in which reform of housing benefit could usefully underpin some of the reforms of substantive housing law which we are proposing. For example, if the Department of Work and Pensions required those, renting under type II agreements who were in receipt of housing benefit, to be granted, at least initially, a six month fixed term agreement, rather than a periodic agreement, this would resolve a possible difficulty with our proposal to abolish the existing moratorium on the making of a possession order during the first six months of an assured shorthold.[9]
2.32 At present there are clear links between the status of tenants of local authorities and housing associations and their rights to buy or acquire the properties in which they live. We have not used this project to revisit the scope of the right to buy or acquire. We regard these as matters of policy for government. We accept that those who currently have the right to buy or acquire should have their rights preserved. We also need to ensure that those who enter occupation agreements after our scheme comes into effect will continue to be able to exercise their rights on an equivalent basis.The right to buy and the right to acquire
2.33 The right to manage currently allows local authority tenants, acting collectively, to set up a management organisation to take over the management of their own properties. In CP 162, we included the right to manage in the list of matters which we thought fell outside the proper scope of the project, by analogy with the right to buy. We were persuaded by our consultations that this was too simple a view. Unlike the right to buy, the right to manage is properly an aspect of the landlord-tenant relationship, albeit, on the tenants' side, a collective one.The right to manage
2.34 We have considered whether the existing right to manage should be extended to all type I occupiers, including those of RSLs. We do not think we can recommend this. First, we are not in a position adequately to assess the desirability of such an extension. Secondly, we have been told by all sides that a right to manage scheme for RSLs would require significantly different mechanisms from the current local authority system (indeed, there is some dissatisfaction with the existing system in any event).
2.35 We have concluded that we should aim to preserve the existing right to manage, while making incremental increases to its possible coverage in specific situations and providing the Secretary of State with power to make broader changes if he or she considers it appropriate.
2.36 We therefore recommend:
(1) that the existing right to manage be retained for local authority type I occupiers;
(2) that the Secretary of State have power to bring defined housing stock where the landlord is an RSL within the right to manage, as if the landlord were a local authority;
(3) that RSLs could voluntarily opt-into the right to manage; and
(4) that the Secretary of State be given a broad power to amend the existing right to manage scheme to make provision for a single scheme to apply to both local authorities and RSLs, or for there to be distinct but comparable schemes for the two classes of landlord.
2.37 In the light of responses to the consultation, we have become aware that there are other issues on which further law reform work would be desirable and which follow closely from this initial project.Recommendations for future work
2.38 The initial terms of reference envisaged that, after Phase 1, we should go on to look at the specific rules relating to unlawful eviction and harassment. We are now persuaded that, though valuable, this would be too narrow a project. We recommend that more work be undertaken looking at a range of options for regulating landlord behaviour and ensuring that the contractual principles that lie at the heart of our scheme are delivered in practice. We think there should be a wide-ranging review of the incentives that should be created to encourage responsibility, and the sanctions that might be imposed where landlords fall short.Promoting landlord responsibility
2.39 One of the most controversial aspects of the first stage of our work related to our provisional proposals for dealing with anti social housing behaviour. Our recommendations on this issue which relate largely to occupiers of accommodation provided by social landlords are found in Part XV.Promoting responsible occupier behaviour
2.40 Many consultees complained, rightly, that anti social behaviour was not exclusively an issue for the social rented sector. Private sector tenants, and indeed owner-occupiers, could be just as guilty of anti social behaviour. The strength of feeling on this has led us to recommend that this should be another topic on which we should do further work. We need to explore what the current law is; how it works in practice; whether it could be made to work more effectively; and whether changes to the substantive law are required to address the issue further.
2.41 A third issue on which we did not consult, but on which we invited comments, related to modes of adjudicating housing disputes. In relation to this, we were surprised at both the level of complaint about current procedures and the degree of support for a study of alternatives, including alternative dispute resolution (ADR). We recommend that there should be a further project on the adjudication of housing disputes and how the law and practice in this area might be reformed.Adjudication
Note 1 An early comment on the effects of excessive complexity in housing law is to be found in Parry v Harding [1925] 1 KB 111. Lord Hewart CJ observed (at p 114): It is deplorable that in dealing with such a matter as this, a Court, and still more a private individual, and most of all a private individual who lives in a small tenement, should have to make some sort of path through the labyrinth and jungle of these sections and schedules. One would have thought that this was a matter above all others which the legislature would take pains to make abundantly clear. [Back] Note 2 Now the Office of the Deputy Prime Minister and the Department of Constitutional Affairs, respectively. [Back] Note 3 This can be seen from the two consultation papers that arose from phase 1. [Back] Note 4 These are discussed in more detail in CP 162 paras 1.17 1.36. [Back] Note 5 Adoption of many of the ideas floated in The Joseph Rowntree Foundation Shelter Commission on the Private Rented Sector, Private Renting: A new settlement: A commission on standards and supply (2002) would be greatly facilitated by the introduction of the scheme proposed here. [Back] Note 6 Landlord and Tenant: Responsibility for State and Condition of Property (1996) Law Com No. 238. [Back] Note 7 See paras 8.32 8.52 below. [Back] Note 8 See http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/ odpm_house_601879.hcsp. [Back]