The Law Commission

PART VI

THE SCOPE OF THE SCHEME

Introduction

6.1     One of the principal complexities of the present law is the wide variety of types of housing status that occupiers of rented housing may have. While we cannot get rid of all of these, our aim is to produce a statutory scheme of protection that reduces the current number and embraces the vast majority of occupation agreements. This aim was widely welcomed by consultees.
6.2     This Part sets out the classes of agreement that will fall within the scheme and those that will remain outside. It considers the extent to which existing statutory tests under present schemes of protection can be eliminated, thus making the basic definition of the scope of our proposed scheme more straightforward. It indicates the extent to which existing schemes will be mapped on to the scheme we proposed. First, though, we discuss one of the most controversial of our recommendations: the abolition of the six-months' moratorium.

Abolition of the six-months' moratorium

6.3     This rule, which currently applies to the assured shorthold tenancies favoured by private landlords, prevents a court from making an order for possession on the notice-only ground for possession within the first six months of the start of a tenancy.^[1] In CP 162, we asked whether this rule should go. The issue sharply divided consultees.
6.4     Many people coming from the tenant's perspective thought that the rule provided some protection for a tenant, albeit limited, against a cavalier landlord. The problem, however, was that when pressed they were not able to provide empirical evidence of the practical value of this limited protective measure. We heard of no cases where, as a result of the existence of the moratorium, a tenant started proceedings against the landlord, for instance to enforce the statutory repairing covenant. Indeed, Shelter was one of a number of tenants' groups which argued that the period should be extended to 12 months.
6.5     Others coming from the landlord's point of view considered the moratorium to be of little significance in practice. Some argued that the rule did have a negative impact on the flexibility of the housing market to provide very short-term lettings.
6.6     From the perspective of the project, we knew that, were the moratorium to be retained, we would have to provide for a much longer list of exceptions to the scheme.^[2] This was because we recognised that there are situations in which it would not be appropriate to expect a landlord to have to wait for the six months' period of delay. At the same time, we did not want our ambition to make recommendations to simplify the law to undermine important tenants' rights. Simplification of the law and individual social justice do not always lead to the same conclusion.
6.7     At present, the moratorium has little direct effect. Private landlords overwhelmingly let on assured shortholds with contractually fixed terms of six months or more.^[3] Thus, notwithstanding the moratorium, the agreement itself prevents the landlord from taking possession using the notice-only procedure until at least six months have elapsed.
6.8     The question really, therefore, is whether the moratorium has an indirect effect by persuading landlords to use six month fixed terms, rather than periodic tenancies. We do not think that it does. First, landlords tell us that they like to use six month fixed terms because of the contractual stability it brings by "locking in" the tenant to a fixed period.^[4] Secondly, if the moratorium was an important factor in landlords' decisions to use fixed term agreements, it is surprising that they continue to use six month (or longer) fixed-term agreements after the initial six month period covered by the moratorium has expired.
6.9     It was put to us that if there were no moratorium, a landlord would then rent on a periodic basis so that if a potential tenant turned up willing to pay a higher rent than that paid by the tenant already in the premises, the landlord could then simply evict the existing (perfectly satisfactory) tenant to put in the one willing to pay the higher rent. But if this consideration really would change landlords' letting behaviour, they would now let on periodic tenancies after the first six months. And they do not.
6.10     There was one argument about the relationship between housing benefit delays and the moratorium that caused us sufficient concern that we commissioned some economic research. The argument was that, should the moratorium be abolished, there may be situations in which it could be in the economic interest of a landlord to seek to obtain possession from an occupier on the notice-only ground during the first six months. This could arise because of the time taken to process a housing benefit application. The research, conducted by Professor Szymanski of Imperial College, London, suggested that this might happen.^[5]
6.11     The argument runs as follows. Once a claim for housing benefit is made, each claim takes time to be decided. Straightforward claims that are decided in favour of the claimant will tend to be determined more speedily than complex claims, many of which will be decided against the claimant. The time taken to determine a claim for housing benefit may therefore be taken as an indicator as to how likely it is that the claim will eventually be decided in favour of the claimant. The more time that has elapsed without the claim being decided, the more likely it is that the claim will not be decided in the claimant's favour and the greater the probability that the landlord will not receive the anticipated rental income. Landlords who believe this to be true may use the fact that a claim has not been settled by a particular date as a trigger for eviction (as a way of minimising losses from unsettled claims).
6.12     Local authorities differ significantly in the efficiency with which they process claims. Where a local authority is known to be very inefficient, then almost all decisions will take a relatively long time to be made. The landlord in such situations will not be so concerned about delay, at least for the first few months, because all claims – whether ultimately in favour of the claimant or not – take a long time to decide. Perversely, where a local authority is relatively efficient and processes claims rapidly on average, then the fact that an individual claim has not yet been decided even within a fairly short period of time may lead the landlord to conclude that the decision is likely to be adverse to the claimant. Under these circumstances the landlord may decide that it is in his economic interest to start proceedings for possession (whether or not the specific claim would eventually have been decided in favour of the claimant). If landlords acted in this way then some evictions will occur in relation to claims for housing benefit which, had the landlord held fire, would have been successful. On this argument, the abolition of the six months' moratorium could lead to some increase in proceedings for possession in cases where the landlord has let to an occupier, knowing that the occupier will apply for housing benefit to cover the rent, and local authorities are relatively efficient at administering the benefit.
6.13     It should be noted that, in any event, a landlord who is really concerned about whether or not the rent will be paid by a tenant who is in arrears can – under the present law – commence proceedings for possession if there are two months' arrears of rent, both at the date of the start of proceedings and at the date of the hearing. The six months' moratorium does not apply to these cases. In such cases, however, the landlord cannot take advantage of the accelerated possession procedure.
6.14     Our conclusions are that:

(1) the six months' moratorium does not apply to assured tenants who are currently in the social rented sector and who will in future become occupiers with type I agreements with full security of tenure;

(2) it does not offer private sector tenants who might wish to assert their rights against their landlord any significant effective statutory protection;^[6]

(3) the majority of private sector tenants get as good, if not better, contractual protection through the terms of their agreements, and we see no reason why this should change;

(4) the rule prevents the private rental sector from being as flexible as it could be; and

(5) were it to be retained, it would add significantly to the complexity of our scheme.

6.15     Therefore we recommend that the moratorium should not be a part of the scheme we propose.
6.16     We remain concerned about the potential problem identified by Professor Szymanski. At root, the problem he identified is one of the administration of housing benefit. We think it should be addressed within the housing benefit scheme, rather than by distorting housing law. Accordingly, if our recommendations generally are accepted by Government, including abolition of the moratorium, we suggest that the Department of Work and Pensions might consider whether a housing benefit application in respect of a new^[7] letting should be required to be on an initial six months' fixed term type II agreement.

Contracts granting the right to occupy as a home

6.17     We recommend that, unless there are compelling social policy grounds for excluding them or they are covered by another statutory code, all contractual agreements granting the right to occupy premises as a home^[8], whenever created and regardless of the identity of the landlord, should be included within our scheme.
6.18     It will govern letting agreements provided by private landlords, local authorities, housing associations and charities, and regardless of whether they are, in land law, leases or licences.

The lease-licence distinction

6.19     One of the complexities of the present law is that the Housing Act 1988 (as did the Rent Act 1977 before it) applies only to arrangements that, in law, are leases (tenancies),^[9] not licences. This is the result of the statutory formulation which only applies where a dwelling has been "let".^[10] (The Housing Act 1985 appeared to extend the scope of that Act to licences, but even this has not been without its complications.^[11]) While the practical importance of the distinction has receded in recent years,^[12] it nonetheless retains its potential for complexity. We think this distinction is out of place in a modern system of housing law. We recommend that our scheme should apply to all contractual occupation agreements, not just those classifiable as tenancies.
6.20     While we seek to render the lease-licence distinction irrelevant so far as the question of which arrangements fall within our proposed scheme are concerned, it will remain of significance in the determination of certain third-party rights, where it will still be important to rely on established principles of property law.

Inclusions within the scheme

6.21     A consequence of the adoption of this broad approach, taken together with our recommendations on the "six months' moratorium" (see above paragraphs 6.3 – 6.16), is that we recommend that a number of arrangements currently excluded from schemes of protection should be brought within the scope of the scheme we propose. This will make a significant contribution to the simplification of the law.
6.22     Most of the classes of letting currently outside statutory protection will be incorporated in our scheme as type II agreements. Where these are currently provided by social landlords, specific statutory provision will ensure that these types of agreement will not be type I agreements, but type II agreements.^[13]
6.23     The types of agreement we recommend should be brought within the scope of our new scheme are:

(1) service occupancies;

(2) crown tenancies;

(3) student accommodation provided by universities and local authorities;

(4) agreements made by fully mutual housing associations (co-operatives);^[14]

(5) temporary housing provided by social landlords;

(6) agricultural occupancies under the Housing Act 1988 (although with important changes to preserve existing substantive rights – see paragraphs 6.55 to 6.60 below); and

(7) tenancies arising under Part 1 of the Landlord and Tenant Act 1954 at the end of long leases.

6.24     Introductory tenancies, created under the Housing Act 1996, should be dealt with by transitional provisions.
6.25     Residents in almshouses are currently excluded from the Housing Act 1985 by special provision to that effect. There is, however, doubt as to whether this exclusion is necessary following the decision in Gray v Taylor.^[15] In that case, the almshouse landlord successfully argued that residents in an almshouse were excluded from statutory protection because the residents were not regarded as tenants, but as beneficiaries under a trust, and the payments they made for this privilege were not rent. On this analysis, residents in almshouse are not in a contractual relationship with the trustees of the almshouse. In view of the requirement that our scheme should apply only to contractual agreements, residents in almshouses will be exempt on that basis.

Exclusions from the scheme

6.26     As noted above, there will be two classes of exclusion from the scheme.

Agreements coming within other schemes

6.27     First, we have concluded that there should be specifically excluded from our proposed scheme those classes of agreement that fall within other statutory regimes.

(1) Long leases. We take the view that leases for substantial periods are more akin to owner-occupation than to rental agreements. Usually they are acquired only by the payment of a substantial premium. Leases for a term certain of 21 years or more are currently excluded from the definition of secure tenancy^[16] and are indirectly placed outside the scope of assured tenancies as the result of the current rules on the exclusion from that scheme of leases at low or no rent.^[17] We recommend that all leases for 21 years or more should fall outside our scheme. The exclusion will also extend to agreements for the sale of residual periods of a long lease, even though they may now have less than 21 years to run. The provisions of Part 1 of the Landlord and Tenant Act 1954, which provide for what happens when a long lease comes to an end, will be adapted to fit our proposed scheme.

(2) Business premises and agricultural holdings/businesses. While we do not consider that our Bill should be limited to agreements relating to premises designed, modified or equipped for residential purposes, it is important that the agreement confers the right to occupy premises as a home. If the premises in question are not premises designed, modified or equipped for residential purposes but rather are business premises, the question of whether our statutory scheme applies will depend upon the contract and not upon the premises. Rental agreements of business premises for the purposes of carrying out a business will continue to be covered by Part II of the Landlord and Tenant Act 1954. The business exclusion will also embrace the exclusion of licensed premises. On a similar basis our scheme will continue to exclude "agricultural holdings" covered by the Agricultural Holdings Act 1986, and "farm business tenancies" covered by the Agricultural Tenancies Act 1995.

(3) Mobile homes. These are protected by their own statutory scheme – the Mobile Homes Act 1983.

(4) Rent Act tenancies. For practical reasons, we have concluded that tenancies still protected by the Rent Act 1977 should remain within the Rent Act scheme and, at least for the present, not be brought into the scheme recommended here.^[18]

(5) Rent (Agriculture) Act tenancies. For similar reasons, we also recommend that tenancies protected by the Rent (Agriculture) Act 1976 should remain within that scheme, rather than being brought into the newly proposed scheme. The current position is of long standing and the numbers of people affected are small, and reducing.

6.28     The consultation revealed broad support for these exclusions.

Other categories of exclusion on social policy grounds

6.29     There is a number of other categories of agreement that we have concluded should also be excluded from our proposed scheme. These may be broadly described as "social policy" exclusions.

(1) Holiday lettings. These have long been excluded from statutory regulatory schemes. We think this exclusion should be continued.

(2) Resident landlords. We think agreements with a resident landlord should continue to be excluded from the scheme. We have however come to the view that the current exclusion of the tenants of resident landlords from the Housing Act 1988 is too broad and should not be replicated in our scheme. We prefer the definition of resident landlord used for the purpose of the exclusion of tenancies and licences from the Protection from Eviction Act 1977. That definition depends upon the landlord actually sharing living accommodation^[19] with the tenant. This exclusion would be lost if the resident landlord did not continue to reside in the premises as his only or principal home (and could not be revived even if the landlord returned to live in the premises). The exclusion would not apply where the occupier resides, not with the landlord, but a member of the landlord's family. In such a case, a type II agreement would be created, unless the member of the family in question became the landlord of the occupier by entering into a direct contractual relationship with the occupier. Then the normal exclusion would apply.

(3) Accommodation provided as a temporary expedient to a trespasser. This is currently excluded from protection and we think it should remain excluded.

(4) Housing for the homeless. At present, all accommodation allocated by a housing authority to an applicant who is owed duties under the provisions of Part VII of the Housing Act 1996 is excluded from statutory protection. We think this position should be retained, except that housing provided under the full housing duty should be included (as a type II agreement).

(5) Other special categories of accommodation. There is a range of types of accommodation which could be argued to be homes but which we think is of a sufficiently distinct character to fall outside the scheme. These include: residential provision registered under the Care Standards Act 2000; hospitals defined by the National Health Service Act 1977; and military barracks. We recommend that the Secretary of State should have an exceptional power to add to this list, by order, to meet particular situations, analogous to those identified above.

(6) Supported housing. In CP 162, we suggested that all supported housing schemes should be excluded from our proposed scheme. We have now modified this position in the light of strong representations from those providing sheltered housing. They stressed that a blanket exclusion would not be appropriate given the enormous variety of schemes in existence. For example, while some schemes offer very short-term emergency accommodation to those coming direct from the street, others are more long-term, often part of a care strategy to assist the person to a position where he or she could take full responsibility for meeting their own housing needs. In the light of these representations, we now recommend that while some supported housing schemes should indeed be excluded from our scheme, others should come within it. We deal with these issues more fully in Part XVI below.

Abolition or amendment of existing statutory tests

6.30     A consequence of this approach is that other tests which, historically, were inserted in legislation in order to define the scope of that legislation will, in the scheme we recommend, no longer be required. These include the following.

Rent

6.31     Our primary requirement is that there should be a contractual agreement. Under normal principles of the law of contract, for there to be a contract, there must be "consideration". Some forms of consideration may not appear to be like "rent" as usually conceived. However, we think that provided that there is consideration in the common law sense, then the agreement should fall within the scheme.

Agreements for high or low rent

6.32     A related feature of earlier schemes was that they should not apply either where no or only a low rent was paid, or where a high rent was paid.
6.33     The primary purpose of the low or no rent exception was to exclude from earlier schemes leasehold agreements where only a small ground rent was paid, in addition to the premium paid to acquire the leasehold interest. We have accepted that leaseholds should continue to fall outside the scope of our scheme, but think that a more sensible way to achieve that exclusion is by placing grants of terms of 21 years or more outside the scheme.
6.34     In relation to the exclusion of high rents, this can be explained historically on the basis that earlier types of regulatory legislation were, at least initially, intended to apply only to those in poorer and cheaper housing. It was assumed that those who could afford to pay higher rents would have greater bargaining power and would therefore be in less need of legislative protection.
6.35     We are not aware of any empirical work that has attempted to assess this assumption. But in any event we have come to the conclusion that to try to distinguish between those who should come within a scheme of regulation and those who should not, simply on the basis of the rent they can pay, is no longer desirable.
6.36     Furthermore, the nature of the protections available under the scheme we propose are very different from those envisaged when the first protective legislation was introduced. To retain a rent-threshold test would be to retain one element of complication and inflexibility, which we are striving to remove. We have therefore come to the conclusion that all occupation agreements should come within the scheme, irrespective of the rent payable.

The identity of the landlord

6.37     Another key feature of the present law is that one scheme applies to lettings by one category of landlords,^[20] another to lettings created by other landlords. We have concluded that, while there may well be a strong case^[21] for requiring defined categories of landlord to use type I rather than type II agreements, we have not been convinced that the identity of the landlord should be a key aspect of the definition of the agreement type.
6.38     We therefore recommend that the identity of the landlord should no longer be a part of the definition of the agreement types that fall within the scope of the new scheme. Removal of this requirement will facilitate greater flexibility in rental housing provision, as the scope of the housing activities of local authorities, other social landlords and private landlords become increasingly complex and inter-dependent.

Occupation as only or principal home

6.39     The current regulatory schemes attach only to a tenant's occupation of premises as his or her "only or principal" home. We accept that social landlords, in particular, will want to ensure that persons in housing need do not have agreements relating to more than one property. This, however, can be controlled by making it a condition in the agreement.^[22] Thus a person occupying more than one home will be in breach of the agreement, and liable to proceedings for possession being taken against them. In addition, we recommend that it should still be possible for the landlord to seek possession against a person who has provided false information when applying for accommodation. There is no reason why an agreement relating to a property that is not a person's only or principal home, but nevertheless is (one of) their homes should fall outside the statutory framework and be regulated only by the common law. In addition, this approach avoids the need for complex case law on what constitutes "occupation" for these purposes. There are cases where the present law makes it extremely difficult for a landlord to know whether or not a tenant is still in occupation of the premises.^[23]
6.40     There may, indeed, be cases where even a social landlord would be willing, exceptionally, to allow an occupier to continue to rent a home which was not their only or principal home. Examples are where the occupier works in one place, but his or her family lives in another, or where the contractual occupier is in long term hospital care, or in prison. If a landlord is willing to allow such an arrangement, it could be accommodated by way of variation of the term which would otherwise require use of the home as the only or principal home of the contractual occupier. It would be impossible to sanction such an arrangement at the moment without the occupier losing the statutory security attaching to his or her tenancy.

Discontinuous occupation

6.41     There are situations where a landlord may want to grant a right to occupy, but also provide that for defined periods the occupier should be required to vacate the premises. Universities wanting to have student residential accommodation available for vacation-time conferences is an obvious example.^[24] We consider that it should be possible to make such arrangements in type II agreements, but not the high security type I agreements. We therefore recommend that there should be a compulsory-minimum term that the right to occupy is continuous from the point at which it first arises until the termination of the agreement, but that in type II agreements, this term would be subject to the proviso that it did not apply if there were clearly defined periods during which the right to occupy would be suspended.

Separateness and sharing

6.42     We recommend that scheme should extend to any premises and any part of any premises. It is our intention that existing complexities about separateness and sharing are avoided. Thus occupation agreements will be included whether or not there is sharing of accommodation or indeed where there is no separate accommodation. The sole test will be whether the agreement confers the right to occupy premises as a home.^[25]
6.43     As already noted above, there will be a specific exception where accommodation is actually shared with the landlord.^[26]

Opting in and agreements with companies as "occupiers"

6.44     Although agreements in the excluded categories outlined above will not be required to be type I or type II agreements, the parties may nonetheless wish them to be so. We think that this should be possible in some cases. Some "exclusions" are so fundamental to the scheme that we do not think it would be appropriate to allow opting in. Thus, an arrangement where no legally binding contract exists should not be able to opt in; nor should a contract to rent a garage (as a garage). Additionally, there would be a danger of our scheme being used to circumvent other regulatory regimes if premises subject to one of the other statutory scheme – for example, business tenancies, or agricultural holdings – could opt in. On the other hand, we think a resident landlord providing accommodation to lodgers, for instance, should be able to opt in, if he or she so chose.
6.45     Our recommendation is therefore that an arrangement which is exempt from the requirement to use a type I or type II agreement can nevertheless be brought within the scope of such an agreement, if the parties agree, and

(1) there is a contract,

(2) for a home,

(3) which is not covered by another statutory scheme.

Agreements where the company is the "occupier"

6.46     Under the current law, agreements where the tenant is a company do not qualify for the statutory regimes because they are not agreements "with an individual". On balance, we think this approach is right, even where there is a contract for a home. However, we think that the parties to a contract for a home with a company as the "occupier" should be able to opt into our scheme. We therefore recommend that an agreement between a landlord and a company to provide a home for a natural person may be brought within the scheme, provided that the agreement is sufficiently compatible with the scheme for occupation agreements.

Contracts with minors

6.47     Both land law principles – which prevent a person under 18 from holding an estate in land, including a tenancy – and contract law put obstacles in the way of landlords renting homes to 16 and 17 year olds. This can present difficulties for social landlords seeking to house, particularly, vulnerable young people.
6.48     We want to make it clear that 16 and 17 year olds are able to enter occupation agreements and that, where necessary, landlords will be able to sue for breach of contractual obligations. We are seeking to remove unnecessary legal barriers to the creation of occupation agreements with 16 and 17 year olds. We recommend that 16 and 17 year olds should be treated as adults for all purposes relating to occupation agreements. (This will also have significance in terms of the availability of injunctions to restrain anti-social behaviour.)^[27] The Bill will make clear that those under 16 years of age cannot hold an occupation agreement.

Application to existing agreements

6.49     Our new scheme will apply to all agreements within its scope entered into after the coming into effect of the new Act. But promoting simplification of the law, which is a key objective of the project, will not be achieved unless as much as possible of existing housing legislation can also be repealed.^[28] This will reverse historic approaches, whereby – in general – new regulatory law was added on to earlier legislative provisions. This accumulation of legislative provision has been in large part responsible for the complexity of the current law. Consultees were in broad agreement with this approach.
6.50     We shall, therefore, recommend repeal of most of the earlier legislation that dealt with the legal status of tenants of residential occupation. These will include:

(1) Part I of the Housing Act 1988 (assured and assured shorthold tenancies)

(2) Part IV of the Housing Act 1985 (secure tenancies)

(3) Chapter 1 of Part V of the Housing Act 1996 (introductory tenancies).

Converting existing agreements

6.51     A consequence of this recommendation is that existing agreements will be converted into one of the two types of agreement under the scheme. We anticipate that there will be a reasonably long period before the key parts of the new Act come into force. During that time there should be an education campaign to prepare landlords, tenants and others for the conversion. The conversion should then all take place at once rather than being staggered. This was strongly urged by consultees.

The Rent Act 1977

6.52     Logically, Parts I and VII of the Rent Act 1977, which deal with the definition of tenants protected by the Rent Acts and their security of tenure, should also be repealed and tenancies still protected by it should be brought into our new scheme. With rare exceptions, no new Rent Act protected tenancy has been able to be created since 15th January 1989 (the date on which the Housing Act 1988 came into force). The population of tenants with Rent Act protection is ageing and declining in numbers.
6.53     This very fact resulted in strong representations being made to us during the consultation, that there would be considerable political danger to making this an integral part of the new scheme. Even if all rights of Rent Act protected tenants were to be fully preserved in the new legislation, including rights to fair rents, there was considerable worry that they could become confused about their rights and that landlords might take advantage of that confusion. We will therefore recommend that a power for the Secretary of State to repeal relevant parts of the Rent Act 1977 should be included in the Bill, but that the question of repeal of the Rent Act 1977 should be taken no further at this stage.
6.54     The Rent (Agriculture) Act 1976 provides for agricultural labourers equivalent protection to that in the Rent Act 1977. Our general reasoning on Rent Act 1977 tenancies therefore applies equally to the 1976 Act.

Agricultural occupancies

6.55     Just as the Rent (Agriculture) Act 1976 is equivalent to the Rent Act 1977, so chapter 3 of Part I of the Housing Act 1988 is the agricultural equivalent of the general assured regime in the Housing Act 1988. However, the way in which the assured tenancy regime was applied in the agricultural context was significantly different from the general regime. Agricultural occupancies are a specialised and particularly complex area of housing law, with a unique political history. To understand the practical implications of this, we engaged in discussions with the National Farmers' Union, the Country Landowners' Association, the agricultural division of the Transport and General Workers Union and Shelter. We now appreciate that a particular feature of the system is the inter-relationship between the functions of the Agricultural Wages Board and the current low rent threshold for assured shorthold tenancies, which does not apply to assured agricultural occupancies. Thus, the tenure position of agricultural labourers is intimately inter-woven with the system designed to determine wage levels. The result is that any attempt to change significantly the substantive rights of occupiers under the tenure regime would have an impact on labour relations within farming. In the light of this, we have concluded that it would be inappropriate for us, as a law reform body, simply to apply our standard system to agricultural occupiers.
6.56     We therefore recommend that the current legal settlement in this area should be reviewed by the Government, so that the proper policy considerations can be considered, with a view to simplifying the law on agricultural occupancies in such a way as to fit them more straightforwardly within our new scheme. In the meantime, we make the following recommendations to ensure that agricultural occupation agreements are brought into the scheme in such a way as to preserve as far as possible the features of the current assured agricultural occupancy.
6.57     We recommend continuing to use the definitions of property in "qualifying ownership" occupied by a "qualifying worker", which set the scope of which agreements are covered by special provisions on agriculture. The new scheme should deem such arrangements to be contracts even where they are not, in order to reflect the breadth of the current position.
6.58     At present such an agreement qualifying as agricultural will produce an assured agricultural occupancy, unless the landlord can and does choose to use an assured shorthold tenancy instead, and unless it is excluded altogether by the special provisions on sharing. Use of an assured shorthold is only possible where there is a tenancy. Many such arrangements will be service occupancies which constitute licences despite giving exclusive possession. It is also only possible where other requirements for ordinary assured status are met, in particular where the rent is above the low rent threshold, which will normally involve the Agricultural Wages Board protecting the wages to be paid.
6.59     We recommend that agricultural occupancies in future should be under type II agreements. The type II agreement should be in a modified and written up form to reflect the assured agricultural occupancy. It should not allow inclusion of the notice-only ground for possession or of a term enabling the landlord to repossess merely because of termination of the employment. It should include an estate management ground based on the landlord's current ability to apply to a housing authority to rehouse the tenant "in the interests of efficient agriculture" under section 27 of the Rent (Agriculture) Act 1976, as also applied to assured agricultural occupancies.
6.60     The exception, where a normal type II agreement can be used to reflect the current assured shorthold tenancy, should be where the landlord notifies the occupier that he has chosen not to use the modified agreement in two sets of circumstances. Those are where:

(1) the agreement constitutes a tenancy rather than a licence, so that service occupancies can still benefit from the modified type II agreement; and

(2) rent is payable which is above the current low rent thresholds in paragraph 3A of Schedule 1 to the Housing Act 1988, so that the Agricultural Wages Board will be engaged in the same circumstances as at present.

Mapping the current status of existing agreements on to the new types

6.61     The main principles which we recommend for converting existing agreements to the new scheme are as follows.

(1) In general, existing tenancies and licences should convert to the type of agreement which they would have been if the new Act had already been in force when the tenancy or licence was originally granted.

(2) Despite an element of retrospectivity, the compulsory-minimum terms and the fairness and transparency principles of the UTCCR should be applied to existing agreements on conversion.

(3) Following conversion the occupier should be able to require the landlord to provide the existing occupier with a fresh written statement of the agreement which complies with the new Act, and face the normal sanctions for failure to do so.

(4) If a landlord seeks to vary the agreement, beyond the changes necessitated by the conversion process, any such variation shall only be made in accordance with the terms on variation included in the occupation agreement.

(5) Notices issued and proceedings for possession started before conversion should be able to be continued after conversion, except where they are incompatible with the new scheme.

6.62     Subject to detailed exceptions in marginal cases, we make the following recommendations.

(1) Regulated tenancies under the Rent Act 1977 should not convert, and should remain governed by that Act.

(2) Any remaining protected shortholds and restricted contracts under that Act should convert to type II agreements on appropriate terms.

(3) Rent (Agriculture) Act 1976 occupancies should not convert.

(4) Assured agricultural occupancies should convert to modified type II agreements of the kind described above.

(5) Introductory tenancies or licences should remain as such. They should be promoted into type I agreements in the circumstances where they would currently become secure. This should mean they will all cease to exist within a year of the new scheme coming into force, except those still subject to ongoing court proceedings. The relevant parts of the Housing Act 1996 should be repealed in due course.

(6) Secure tenancies or licences should convert to type I agreements, with their right to buy and right to manage preserved.

(7) Fully assured tenancies should convert to type I agreements where the landlord falls within the definition of social landlord under our rules on the use of the types of agreement. Any right to acquire and similar rights should be preserved.

(8) Fully assured tenancies with other landlords should convert to "written up" type II agreements. These are on similar terms to type I agreements. The main difference from type I is that they also include the type II mandatory repossession for substantial rent arrears. The notice-only ground for possession would not be available.

(9) Assured shorthold tenancies should convert to type II agreements, subject to the following rule on social landlords. Any fixed term will be taken over into the converted agreement.^[29] The abolition of the six months' moratorium would affect periodic shortholds, or those with fixed terms for less than six months, if they had been granted less than six months before the conversion. In these cases transitional provisions should preserve the effect of the moratorium.

(10) Assured shorthold tenancies with social landlords (as defined under the rules relating to the use of agreement types) should convert to type I, unless they fall within the list of exceptions permitting use of type II by social landlords. We recommend that Housing Corporation guidance should regulate attempts by registered social landlords to evict under section 21 of the Housing Act 1988 to avoid existing shorthold tenants acquiring type I status.

(11) Those tenancies and licences which currently fail to meet the requirements for secure or assured status,^[30] but which fall within the scope of either or both of sections 3 and 5 of the Protection from Eviction Act 1977 (not being excluded by section 3A), should convert to type II agreements. For agreements with a social landlord, this will create an additional transitional class of allowable exceptional uses of type II, but this will only last until those original agreements end. In some cases, particularly fully mutual housing co-operatives, the conversion will be to a form of "written up" type II agreement.

(12) Those tenancies and licences which are currently not secure or assured and not covered by sections 3 or 5 of the Protection from Eviction Act 1977 (mainly because of being excluded by section 3A) should remain outside the scope of housing legislation.^[31] They will be subject only to general leasehold law, if they are leases, or any applicable law for licences, to the Unfair Terms in Consumer Contracts Regulations 1999 where applicable, and to the restrictions on entry in sections 6 and 7 of the Criminal Law Act 1977.

(13) Our scheme does not generally apply to trespassers. However, on conversion there are two groups which will change from being counted as trespassers to being occupiers under the new Act. So-called "tolerated trespassers"^[32] should convert to type I occupiers, but still subject to the suspended possession order.^[33] Under the new scheme the agreement, and its statutory status, do not terminate until the possession order is enforced. Given the time before the Act can come fully into force, landlords will in appropriate cases be able to evict any such tolerated trespassers before they gain the rights, such as rights on repairs, that are associated with type I status. The other special case is when someone let in by the tenant or licensee remains in occupation after the termination of the tenancy or licence (either by death of the occupier without a successor, or in some other way not involving a possession order), and the landlord does not evict but takes "mesne profits" without creating a fresh tenancy or licence. Our scheme makes special rules for imposing a type II agreement in some cases where this will happen in future.^[34] We recommend a similar approach to convert arrangements to type II agreements where a tenancy or licence terminated in those circumstances before commencement of the new Act.

Note 1    This will not, of course, apply if the agreement is for a fixed term of more than six months. The rule only applies to the first agreement of the same premises with the same tenant. Housing Act 1988 s 21(5).    [Back]

Note 2    See discussion in CP 162, paras 8.15 – 8.27, 9.92 – 9.162.    [Back]

Note 3    Twelve month fixed term tenancies, for instance, are the standard in the student market.    [Back]

Note 4    Although it is also true that there is a comparatively high level of ignorance of the law: many landlords apparently still believe that to be an assured shorthold, a tenancy must be (at least) a six-months fixed term, as was the case before the Housing Act 1996 came into force.    [Back]

Note 5    Copies of the research are available on request from the Law Commission.    [Back]

Note 6    We hope to consider, in phase 2 of this project, ways in which landlords who are unwilling to fulfil their contractual obligations under occupation agreements may be persuaded to do so.    [Back]

Note 7    The problem identified by Professor Szymanski would not apply where a person became eligible for housing benefit after the initial six months of a periodic letting, in that such a person would be no more vulnerable if the moratorium were to be abolished than they are now. While it is conceivable that it would apply if the occupier became eligible shortly after the start of a periodic agreement, the effect is likely to be marginal, in that it is very unlikely that this possibility alone would dissuade landlords from their current practise of generally letting on six months fixed terms.    [Back]

Note 8    This phrase may cause problems in a small number of cases where a person lives, on a long-term basis, in an hotel. We have not sought to try to define periods of residence in hotels that are clearly excluded (eg as holiday lets, or because they are so short-term that they could not possibly be regarded as a giving the right to occupyas a home) from those where it could be argued that the nature of the occupation wasas a home. We think that in such rare cases, the matter would be a matter of fact, to be determined if necessary by a court.    [Back]

Note 9    Lord Templeman in Street v Mountford [1985] AC 809, 816 provided the following definition of a tenancy, “My lords, there is no doubt that the traditional distinction between a tenancy and a licence of land lay in the grant of land for a term at a rent with exclusive possession.”    [Back]

Note 10    See the early, formative case of Oakley v Wilson [1927] 2 KB 279.    [Back]

Note 11    Housing Act 1985, s 79(3) states: “The provisions of this Part apply in relation to a licence to occupy a dwelling-house (whether or not granted for a consideration) as they apply in relation to a tenancy”. However, in Westminster City Council v Clark [1992] 2 AC 288, the House of Lords held that a licensee could only qualify as a secure tenant if he or she had been granted exclusive possession of a separate dwelling house. In that particular case Mr Clarke had signed a “licence” agreement containing a statement that he did not have exclusive possession of the self contained bedsitting room he was renting in a rehabilitation hostel owned by the plaintiffs. The agreement also contained a mobility clause entitling the plaintiffs to move Mr Clarke to another room without notice. The House of Lords found that the plaintiffs had retained possession of all the rooms of the hostel in order to supervise and control the activities of the occupiers.    [Back]

Note 12    This is the result of the creation of the concept of the assured shorthold tenancy by the Housing Act 1988; as this reduced the level of regulation on private landlords, so the incentive on them to seek to avoid the provisions of the legislation by the purported use of licences has also sharply reduced.    [Back]

Note 13    These are the classes of agreement discussed in paras 5.28 – 5.51 above.    [Back]

Note 14    The principal issue raised by respondents representing co-operatives was that those provided with accommodation by a housing co-operative should not remain entitled to that accommodation if they were themselves no longer members of the co-operative. We conclude that this outcome is reasonable and can be achieved by appropriate use of type II agreements.    [Back]

Note 15    [1998] 1 WLR 1093.    [Back]

Note 16    Housing Act 1985, s 115 and Schedule 1, para 1.    [Back]

Note 17    Housing Act 1988, Schedule 1, para 3.    [Back]

Note 18    See para 6.62 below.    [Back]

Note 19    Under the Protection from Eviction Act 1977, accommodation means any accommodation other than storage, a staircase, passage, corridor or other means of access. See s 3A (4) & (5).    [Back]

Note 20    Secure tenancies under the Housing Act 1985 can only be created by landlords who satisfy the “landlord condition”: Housing Act 1985, s 80 (1).    [Back]

Note 21    Discussed in paras 5.15 – 5.51 above.    [Back]

Note 22    We accept that one use to which the current “only or principal home” formula is put is to limit the rights of secure tenants to buy their property. By recommending that our scheme should apply to all agreements granting a right to occupy, we are not proposing any change to the law on the extent of the right to buy. This will remain limited to the person’s “only or principal” home. This will be dealt with in particular provisions relating to the right to buy.    [Back]

Note 23    See eg Brown v Brash [1948] 2 KB 247; Crawley B C v Sawyer (1987) 20 HLR 98; Ujima Housing Association v Ansah (1997) 30 HLR 831; Hammersmith and Fulham LBC v Clarke (2001) 33 HLR 77.    [Back]

Note 24    It would be possible for student lettings to be provided on a termly or semester basis, rather than a full academic year basis; but we are not attracted by this idea as it would add a very considerable administrative burden which we regard as unjustifiable.    [Back]

Note 25    This builds on the approach of the House of Lords in Uratemp Ventures v Collins [2001] UKHL 43, [2002] 1 AC 301.    [Back]

Note 26    See para 6.29(2) above.    [Back]

Note 27    See paras 15.23 – 15.33 below.    [Back]

Note 28    See CP 162 paras 3.4 – 3.73.    [Back]

Note 29    The effect would not be that a wholly new term starts to run. Rather, the end date of the new type II agreement would be the same as it would have been had the full term of the assured shorthold tenancy been allowed to run.    [Back]

Note 30    Other than because they are covered by other statutory regimes, such as those for long leases, business tenancies, agricultural holdings and so on. So this will cover those excluded by Schedule 1 to the Housing Act 1985 or Schedule 1 to the Housing Act 1988, and those who do not meet the current requirements, not reproduced in the new scheme, that the property is let as a separate dwelling and occupied as the only or principal home.    [Back]

Note 31    These include: holiday lettings, lettings by resident landlords, accommodation provided as a temporary expedient to a trespasser, and hostel accommodation.    [Back]

Note 32    Burrows v Brent London Borough Council [1996] 1 WLR 1448.    [Back]

Note 33    In theory, it would be possible for a private landlord, who is not a social landlord, to have a former assured tenant as a tolerated trespasser; in this case, the tolerated trespasser would become a “written up” type II occupier.    [Back]

Note 34    Paras 10.9 – 10.10 below.    [Back]