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You are here: BAILII >> Databases >> The Law Commission >> Renting Homes (Report) [2003] EWLC 284(5) (15 November 2003)
URL: http://www.bailii.org/ew/other/EWLC/2003/284(5).html
Cite as: [2003] EWLC 284(5)
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PART V
THE AGREEMENT TYPES: THEIR DEFINITION AND USE
5.1 We recommend that our scheme should apply to all occupation agreements, save those that we recommend should fall outside the scope of the scheme.[1]Introduction
5.2 The definition of the two agreement types we propose will be on a "landlord-neutral" basis. The reason for this is that this is one of the ways in which simplification of housing law can be promoted. Our scheme should be broad and inclusive, embracing the vast majority of occupation agreements. We shall nevertheless recommend that there should be landlord-specific rules relating to how each of the tenancy types may be used. In particular, social landlords will be required to use the type I agreement unless defined conditions are satisfied. The consultation process revealed strong support for this approach.
5.3 We recommend that there should be two basic forms of occupation agreement. For the purpose of this report we refer to them as the type I agreement and the type II agreement.[2]Agreement types
5.4 The type I agreement will provide extensive security of tenure. It is largely modelled on the current secure tenancy regime. Type I agreements can only be created on a periodic basis. Given our proposals on how the type I agreement must be used, around 90% of occupiers will occupy under type I agreements.
5.5 The type II agreement will provide a very limited minimum level of security. It is modelled on the current assured shorthold tenancy. It can be created on both a periodic and a fixed-term basis.
5.6 Key features will be common to both types of agreement: for example, the need for a written agreement with fair terms and the need for due process in proceedings for possession.
5.7 In other respects, the rights and obligations arising under the two types will differ. For this reason we must ensure that the line between the two is clear and does not lead to unnecessary litigation. We wish to avoid the boundary disputes between inclusion and exclusion from protection that have bedevilled housing law in the past.
5.8 We also want to ensure that those landlords who so desire can enhance or "write up" the contractual terms of the type II agreement to the benefit of their occupiers. For example, this could involve agreeing not to use all the available grounds for seeking possession, or granting rights to occupy for a longer fixed period of time.
5.9 In most cases, the agreement type will be clear from the face of the document, certainly if the model agreements are used. But this will not always occur. For example:Default positions
(1) the document may not state what the agreement type is; or
5.10 We have decided to recommend default rules to determine the type of the agreement. Thus:(2) a particular agreement type may have been used which, it is now argued, was not what was intended.
(1) the default for a social landlord is the type I agreement; and
5.11 If a landlord wishes to issue an agreement which is not the default agreement for that description of landlord, the landlord must give express notice to that effect. This will be achieved, either by a preamble to the agreement, or by a separate notice to the occupier. In the absence of such notice, the agreement will be the relevant default agreement.(2) the default for any other landlord is the type II agreement.
5.12 The common features of the two types of agreement will be as follows:Common features
(1) both are contractual agreements for the right to occupy premises as a home;
(2) they will be stated in writing;
(3) they will contain a range of key, compulsory-minimum, special and default terms;
(4) those terms (other than key terms) will either be deemed to be fair (by being contained in a model agreement) or will be subject to regulation as to fairness and transparency;
(5) agreements will not be capable of being lawfully determined by the landlord save by due process in the courts.
Particular features
5.13 Type I agreements will have particular features:Type I agreements
(1) their duration will be indefinite;
(2) they will have only discretionary grounds for possession;
(3) they will contain a broader range of compulsory-minimum terms.
Their underlying feature is security for the occupier.
5.14 Type II agreements provide a more flexible form of rental agreement.Type II agreement
(1) They will be able to be either fixed-term or of indefinite duration.
(2) They will be subject to mandatory grounds for possession, including the notice-only ground, as well as the discretionary grounds.
(3) They will contain a narrower range of compulsory-minimum terms.
(4) The power to the vary terms of the agreement will be less restricted than that available to the landlord of a type I agreement.
Use of the agreement types
5.15 As we set out in CP 162, the basis of our approach to agreement types is landlord neutrality. By this we meant that the definition of a particular agreement type is not to be determined by the identity – private, public or social – of the landlord. However this principle of landlord neutrality is limited to the question of definition; it does not answer questions about the use of the two agreement types.The social rented sector
5.16 Certain classes of landlord either have responsibilities and functions imposed upon them by statute or have particular concerns and constraints deriving from their nature, such as charitable status. Local authorities are public authorities for the purposes of the Human Rights Act 1998. Local authority landlords and registered social landlords receive public subsidies. Local authorities have responsibilities towards housing the homeless, even though these are often delegated to registered social landlords.
5.17 In the consultation, some social landlords argued that they should have complete freedom to choose which type of agreement they used. The overwhelming response, however, was that it was essential to limit the freedom of social landlords to choose which agreement type they might use. We accept these arguments. We recommend that there should be constraints on local authority landlords and registered social landlords regarding their use of type I and type II agreements.
5.18 Nevertheless, our recommendations create the opportunity for bringing much greater coherence into the legal treatment of the occupiers of social housing. This was a matter of significance to the Department for the Environment, Transport and the Regions[3] at the time of the Law Commission reference. Nick Raynsford MP, then Minister for Housing and Planning, stated, "We also intend to look to the review as the sensible vehicle within which to take forward our intention, announced in the Housing Policy Statement ("Quality and choice: a decent home for all – the way forward for housing") to look at a single form of tenure for the social housing sector and other tenure flexibilities."[4]
5.19 Currently, the two major providers of social housing, local authorities and registered social landlords, operate under different legislative structures. This is despite the fact that their client groups are very similar and that as a result of large scale voluntary transfer of social housing, registered social landlords now own former council estates. (Indeed, the powers and responsibilities of local authority landlords and registered social landlords are moving increasingly close. For instance, the Police Reform Act 2002 extended the availability of anti-social behaviour orders to registered social landlords.)
5.20 Our recommendations will not eliminate all differences between the occupiers of local authority landlords and those of registered social landlords. There will still be significant differences in their respective rights to buy.[5] And registered social landlords will not, simply as a result of being registered social landlords, automatically be deemed to be public authorities for the purposes of the Human Rights Act.[6]
5.21 Whilst we recommend restrictions on the use of agreement types, we want to enable social landlords to respond appropriately to housing market and housing management requirements. We think there are two ways to encourage this.
5.22 The first is to allow for enhancement of the terms of agreements. At present the content of the tenancy is prescribed in great detail by the relevant statutes. We seek to provide landlords with flexibility for them to enhance the terms on which they offer accommodation to occupiers, for example where they provide additional services, or where they seek to attract business in areas where there is low demand for housing. We also consider that our recommendations will be able to encourage new forms of partnership agreements, for example between local authorities and private landlords, or where other social landlords want to provide more complex mixes of social and market housing.
5.23 Secondly, we want to provide greater flexibility for social landlords in relation to their use of tenancy types. The need for flexibility was recognised in our terms of reference. Announcing them, Nick Raynsford MP said that the Law Commission's work would "enable social landlords to make better use of their stock" and "facilitate greater choice and diversity in the housing sector".
5.24 Thus we recognise there will be circumstances in which use of the type II agreement by social landlords will be appropriate. A list of these is set out at paragraphs 5.30 to 5.50 below.
5.25 We are also anxious that our scheme for occupation agreements should be able to respond to new social imperatives relating to the provision of rented housing. Our proposals for the use of agreements should not, therefore, be regarded as fixed for all time. Rather they should be seen as providing policy makers with flexible tools to achieve their policy objectives. (For instance, current concern about the housing of key workers in areas of high housing demand may at some time require a policy response which would include allowing social landlords to use type II agreements for schemes for key workers.)
5.26 The achievement of these objectives requires two things:
(1) defining the social rented sector; and
(2) defining the circumstances in which that sector may grant type II agreements.
5.27 We recommend that the definition of social landlords should embrace local authority landlords, and all registered social landlords other than fully mutual housing associations.[7]Defining the social rented sector
5.28 Under the present law, certain categories of housing provision made in particular by local authorities fall outside the scope of statutory protection altogether. These exceptions to the current secure tenancy regime constitute one of the sources of complexity in the current law. The reason why these categories of letting are not secure tenancies is because there are special factors which justify their exclusion. In general terms, they do not represent those classes of tenancy which would justify full secure status.Defining the circumstances in which that sector may grant type II agreements
5.29 In seeking to devise a more coherent legal framework, we are anxious that the number of agreements that fall totally outside our scheme should be limited. At the same time, we accept that it would not be right to require social landlords only to grant type I agreements. The type II agreement provides a means of giving social landlords considerable flexibility in those cases where full security is not justified.
5.30 We recommend that social landlords should be able to grant type II agreements in the following classes of case:
(1) probationary agreements;
(2) demotion;
(3) service occupancies;
(4) students;
(5) homeless persons following a decision that full housing duties are owed to the applicant;
(6) provision of accommodation on a temporary basis;
(7) other cases:
(a) development of co-operative housing;
(b) supported housing;
5.31 There will of course be no compulsion to grant type II agreements in any of these contexts; social landlords will always be able to enter type I agreements. However, in the light of representations made to us during the consultation, we agree that these are the special cases in which social landlords should have the flexibility to grant type II agreements.(c) commercial "market" provision.
5.32 Where the social landlord decides to grant a type II agreement, we recommend that it should be required to notify the holder or potential holder of the occupation agreement that an exception to the normal statutory requirement applies.
5.33 We recommend that social landlords should be able to use the type II agreement during a probationary period. This will be availableProbationary agreements
(1) where the occupier was not immediately prior to the grant of the agreement a type I occupier with any social landlord; or
(2) where the occupier or a member of his or her family has been subject to proceedings for and found to have engaged in anti-social behaviour.
5.34 The probationary period would initially be for a maximum of 12 months, although in line with our objective of greater flexibility, landlords would not be obliged to make them last for the whole of that period. Thereafter, the landlord would have power to extend the probationary period for a further six months, where the behaviour of the occupier warrants such an extension. Prior periods as a type II occupier with another social landlord should count towards the probationary period in certain circumstances.[9]This will replace the current "introductory tenancy".[8] The key distinction between our recommendation and the introductory tenancy is that probationary use of type II agreements will be able to be granted on an individual basis. Landlords will not have to adopt the "all or nothing" approach of the current law.
5.35 At the end of the probationary period the occupation agreement will automatically become a type I agreement. Conceptually, probationary occupiers are type I occupiers on probation. The end of the probation period will signal the end of the availability of the notice-only and the other mandatory grounds for possession and the start of full security of tenure. At this stage the occupier will have the right to request a written statement of the (revised) agreement.
5.36 A second situation in which social landlords will be able to use type II agreements will be when they have asked a court for an order to this effect in proceedings for anti-social behaviour.[10] If the court decides to make such an order, it will provide that an occupier, currently under a type I agreement, should have that agreement demoted to a type II agreement.Demotion
5.37 Social landlords should not be obliged to provide service occupiers (such as school caretakers) with type I agreements (though they will be able to do so if they wish). We recommend that where the occupier is an employee of the social landlord and the contract of employment requires him to occupy the premises for the better performance of his duties, the landlord will be entitled to grant a type II agreement.[11] This exception to the statutory requirement to let on a type I agreement should extend[12] to other categories of public sector employees, for example the police and fire service employees.Service occupiers
5.38 We recommend that where accommodation is provided by a social landlord to an occupier who is a student and the occupation agreement is granted to enable the student to attend a designated course at an educational establishment, the agreement could be a type II agreement.[13]Students
5.39 Most duties to accommodate arising under Part VII of the Housing Act 1996 are temporary and will be wholly excluded from the statutory scheme.[14]Duty to accommodate following a decision under section 193 of the Housing Act 1996
5.40 We think that the duty which arises after a housing authority has decided that it owes an applicant full housing duties should be covered by our scheme. We considered whether, in such cases, social landlords should be under a duty to provide a type I agreement. But we have concluded that, in general, type I agreements should only be granted following an allocation under Part VI of the Housing Act 1996.
5.41 We think it would not be appropriate for social landlords, in fulfilling their housing obligations under the homeless persons legislation, to be obliged to provide accommodation on a type I agreement. In many circumstances this would make their housing management role much more difficult.
5.42 Under the present law, local authorities have a number of ways in which they can provide housing temporarily without granting a full secure tenancy. We recommend that the provision of such temporary accommodation should continue to be an exception to the general requirement to provide accommodation on a type I basis. Such accommodation will, in future, be provided on the basis of a type II agreement.Provision of accommodation on a temporary basis
5.43 There are currently four situations to which these recommendations will apply:Existing temporary housing exceptions
(1) where accommodation is provided temporarily on land acquired for subsequent redevelopment;
(2) where temporary accommodation is provided while works on other premises are being undertaken;
(3) where temporary accommodation is provided for persons moving into an area to take up employment there; and
(4) other short-term arrangements.
These exceptions will in effect reproduce the current law.[15]
5.44 We also wish to extend the temporary housing exception in two particular circumstances.New temporary housing exceptions
5.45 First, in CP168 we discussed what should happen when an occupier makes an arrangement with a person to occupy the premises, contrary to the landlord's veto, or without obtaining the requisite consent from the landlord.[16] We wanted to avoid creating a new form of "tolerated trespasser". To deal with this, we recommend that it should be open to the landlord to enter into a temporary agreement with the new (unauthorised) occupier on the basis of a type II agreement.
5.46 Secondly, we recommend that social landlords should have the ability to enter into a temporary agreement with a person who occupies premises after the occupier has died leaving no one with a statutory entitlement to take over the agreement as successor.
5.47 Finally, there are three special cases where we think that a social landlord should be permitted to let on a type II basis.Other cases
5.48 While fully mutual housing associations or co-operative housing associations are excluded from the definition of social landlords, circumstances can arise in which a registered social landlord which is not fully mutual develops homes for subsequent transfer to a fully mutual housing association. Any occupation agreement made in these circumstances should be an exception to the requirement to provide type I agreements and our Bill should provide for this.Development of co-operative housing
5.49 The application of the scheme to supported housing is a particularly difficult issue. We discuss this separately in paragraphs Part XVI. There will be circumstances in this context in which social landlords must be able to grant type II agreements.Supported housing
5.50 Certain RSLs provide accommodation on a commercial "market" basis. This accommodation has not been funded via public monies and cannot be described as social provision. Where accommodation is being provided on a commercial (non-subsidised) basis, the social landlord should be able to choose whether to let on a type I or a type II basis.Commercial (market) provision
5.51 We recommend that the Secretary of State, and the National Assembly for Wales, should have the power to add to the list of exceptions. The provision of housing, particularly in the social sector, is not static – providers continue to innovate, and in some circumstances, we accept that this will require further exceptions to the general rule that social landlords should use type I agreements. A particular current example is the reaction to the crisis in the affordability of housing in London and other areas of housing pressure. Social landlords have developed, or are considering developing, schemes to let on assured shorthold tenancies to particular groups of workers, in particular nurses, teachers and police officers. We accept that this is a broad power, and will therefore recommend, in respect of an English order, that it be subject to the highest level of scrutiny by Parliament, namely the affirmative resolution procedure.Adding to the list of exceptions
5.52 We recommend that all occupation agreements provided by private landlords should be type II agreements unless the landlord has notified the occupier to the contrary. If the private landlord fails to provide a written agreement or the written agreement provided fails to clarify whether it is a type I or a type II agreement, the agreement shall be deemed to be a type II agreement. The exception, whereby the private landlord notifies the occupier that the agreement will be a type I agreement, is similar to the current legal position, when a private landlord positively grants an assured (rather than assured shorthold) tenancy.Private landlords
5.53 As noted earlier, we are anxious to encourage all landlords, both social and private, to "write up" the terms of their agreements, so that the contract provides more than the statutory minimum requirements. We recommend that the scheme should make it clear that this option is available to all landlords.Facility to "write up" the terms of the agreement
5.54 As noted in Part III, we have concluded that the National Assembly for Wales should have the power to vary the rule that, in general, social landlords should be required to use the type I agreement.The position in Wales
Note 1 The scope of the scheme is discussed in Part VI. [Back] Note 2 See paras 1.10 – 1.11 for an explanation of our approach to nomenclature in this report. [Back] Note 3 Now Office of the Deputy Prime Minister. [Back] Note 4 Hansard (HC) 26 March 2001, vol 365, col 433W. [Back] Note 5 The rights to buy and to acquire are not affected by our scheme. [Back] Note 6 We did raise, as a consultation issue, (see CP 162 paras 5.45 – 5.53) whether we should recommend that all RSLs should be deemed to be public authorities for the purposes of the Human Rights Act 1998. There was a good deal of support for this idea; but there was also very considerable hostility to the suggestion, particularly from registered social landlords and Government respondents. In the light of this, and our conclusion that it was not a necessary step for the purposes of our scheme, we have not pursued the idea. [Back] Note 7 Local authorities, in response to Government policy, are increasingly using Arms Length Management Organisations (ALMOs). ALMOs are companies limited by guarantee and not profit making, which are legally independent from the local authority. They provide housing services to tenants and leaseholders under a management agreement with the local authority. They are not, however, legally the occupier’s landlord, and accordingly we do not think their use would undermine or side-step the obligation of a local authority, as landlord, to use type I agreements. [Back] Note 8 Housing Act 1996, Part V, Ch 1. [Back] Note 9 This will reproduce the effect of Housing Act 1996, s 125 (3). [Back] Note 10 Discussed below, para 15.37. [Back] Note 11 This exception is based upon the current exclusion at Housing Act 1985, Schedule 1, para 2. [Back] Note 12 As does Housing Act 1985, Schedule 1, para 2. [Back] Note 13 Housing Act 1985, Schedule 1, para 10(4) provides that “designated course” means a course of any kind designated by regulations made by the Secretary of State for the purposes of this paragraph and “educational establishment” means a university or establishment of further education. These definitions will be retained. [Back] Note 15 Housing Act 1985, Schedule 1, Paras 3, 5, 6 and 7. [Back]