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You are here: BAILII >> Databases >> The Law Commission >> Renting Homes (Report) [2006] EWLC 297(2) (May 2006)
URL: http://www.bailii.org/ew/other/EWLC/2006/297(2).html
Cite as: [2006] EWLC 297(2)
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PART 2
THE SCHEME IN OUTLINE
2.1 In outline the scheme provides as follows.[1]
COVERAGE
2.2 Unless otherwise excluded,[2] all contracts to occupy premises for residential purposes come within the scheme.
CONTRACT TYPES
2.3 There are two types of occupation contract:
(1) the secure contract, modelled on the present secure tenancy, giving substantial security of tenure protected by statute; and
(2) the standard contract, modelled on the present assured shorthold tenancy, where the duration of the occupation is determined by the contract.
Community landlords will be required to enter into secure contracts, except where the Bill allows them to enter into standard contracts (for example as probationary contracts, or following a court order after the anti-social behaviour term has been breached).
Conversion of existing tenancies and licences to occupation contracts
Exceptions
2.5 There are two exceptions. First, following public consultation, we do not recommend automatic conversion of agreements still protected by the Rent Act 1977 (protected and statutory tenancies). Their conversion to secure contracts would be logical. But there is considerable resistance to the idea from the tenants who would be most affected. Nevertheless, we include a power enabling the appropriate authority to bring this group into the new scheme.[3]
WRITTEN STATEMENT OF THE CONTRACT
2.7 Landlords are required to provide the occupier (known in the Bill as the "contract-holder") with a written statement of the contract. Model contracts are prescribed, which will be readily and cheaply available. Parties can complete them simply by filling in the front page. Assuming that the terms relating to key matters are in plain intelligible language, the model contracts will not be subject to the unfair terms regulations.[4]
2.8 Landlords are not required to use the relevant model contract. If they choose not to, the fundamental terms and any supplementary terms which incorporate supplementary provisions without modification will still not be subject to the unfair terms regulations.[5]
2.9 Landlords who do not provide the written statement are subject to proportionate (non-criminal) sanctions: financial and procedural.[6]
TERMS OF THE CONTRACT
2.10 Occupation contracts contain four classes of term:
(1) terms relating to key matters;
(2) fundamental terms;
(3) supplementary terms; and
(4) additional terms.
Terms relating to key matters
2.11 The key matters are those which go to the heart of the occupation contract. They include the name and address of the property and the amount of the rent. As they are unique to each contract, they cannot be statutorily prescribed, though the Bill defines the key matters that must appear in the contract.[7]
Fundamental terms
2.12 Fundamental provisions in the Bill are incorporated in occupation contracts as fundamental terms. They deal with the essential rights and obligations of landlords and contract-holders. Parts 3 to 11 of this Report discuss each of the fundamental provisions and terms separately. Most fundamental terms can be modified or varied, but only in favour of the contract-holder.[8]
Supplementary terms
2.13 Supplementary provisions set out in delegated legislation are incorporated in occupation contracts as supplementary terms. These deal with all the practical matters needed to make the contract work, for example, requirements that the occupier pays the rent and that the occupier looks after the premises and fixtures and fittings. In this Report we include our recommendations for provisions we think the appropriate authority should prescribe in regulations.[9] The list will not be finalised until there has been a consultation with appropriate bodies.[10]
Additional terms
MODIFYING AND VARYING THE CONTRACT
Modification
2.17 Modification of fundamental provisions relating to prohibited conduct, to the securing of a contract by deception, to survivorship and to the death of the contract-holder is not permitted at all.[11]
2.18 Modifications to other fundamental provisions are permitted, so long as the result of the modification is to enhance the position of the contract-holder.[12] Indeed, it is possible for a fundamental provision to be omitted so long as the omission enhances the position of the contract-holder. If parties agree to modify a provision, it is incorporated into the contract as modified.
2.19 Modification of supplementary provisions is also permitted. Here, modification can be either for or against the interests of the contract-holder.[13] Any modified supplementary term must be compliant with the unfair terms regulations.
Variation
2.20 The Bill also contains detailed provisions enabling the parties to vary the contract once it has been agreed.[14] Obviously parties must be able to alter the rent payable. In addition, particularly where occupiers live in premises for a long time, it is important that the parties can vary other details of the contract. Variation refers to changes to the terms after the contract has been entered into. Variation can, depending on the terms of the contract, occur following notice from the landlord (except for the fundamental terms of a secure contract and a fixed term standard contract) or by agreement between the parties. Fundamental terms in the contracts provide for this.[15] The provisions on variation also apply to any additional terms which the landlord and contract-holder choose to include.
TRANSACTIONS RELATING TO THE CONTRACT
Lodgers
2.22 At present, local authority tenants have a statutory right to take in lodgers. This is retained and extended to all secure contracts.[16]
Adding a party to the contract
2.23 The Bill provides that contract-holders have the right to ask permission to add another party or parties to the contract. These provisions primarily affect social landlords. We accept that these landlords must be able to control who are parties to the contract. Otherwise premises may be occupied by those who lack the required degree of housing need. Thus any request is subject to the giving of consent by the landlord. But landlords cannot unreasonably refuse consent.[17]
2.24 While consent must not be unreasonably withheld, it can be given subject to conditions. Here we recommend one important change to the current law. Our scheme gives the landlord power to impose as a condition of giving consent that a contract-holder should forego the right to succeed that would otherwise arise on the death of the contract-holder.[18]
2.25 The landlord is not required to agree to any request that is not made in writing. Where a request is made in writing, we think the landlord should respond to a request within a reasonable time. If the landlord fails to respond in writing within a defined time period, consent is deemed to have been given without conditions.[19] Details of these provisions are set out in Part 6.
Sub-letting and transfers
Leaving the agreement
OBLIGATIONS UNDER THE CONTRACT
Repairing obligations
2.28 The Landlord and Tenant Act 1985 section 11 currently imposes obligations on the landlord to keep in repair certain essential matters relating to the structure of and facilities within the premises and/or common parts. We have modernised the language of these provisions, while adapting them to meet the requirements of the scheme. In addition, we recommend incorporation of recommendations made in the Law Commission report Landlord and Tenant: Responsibility for State and Condition of Property,[20] amended to take account of the enactment of the Housing Act 2004.
2.29 We also make clear that, in addition to the contract-holder(s), other "permitted occupiers" have the right to take proceedings for breach of these terms of the contract.[21] Full details of the landlord's repairing obligations are set out in Part 8.
Improvements
Prohibited behaviour
2.32 We recommend that it should be a fundamental term in all contracts that contract-holders may not:
(1) use or threaten to use violence against a person lawfully living in the premises;
(2) do anything which creates a risk of significant harm to such a person;
(3) engage or threaten to engage in conduct that is capable of causing nuisance or annoyance to a person;
living in the locality of the premises; or
engaged in lawful activity in the premises or the locality of the premises;
(4) use or threaten to use the premises, or any common parts that they are entitled to use under the contract, for criminal purposes.[22]
Obtaining a contract by deception
Uninterrupted occupation of the accommodation
Landlord's name and address
Consultation on management matters
2.38 Current obligations to consult tenants on management matters are also brought into our scheme. Community landlords are under an obligation to consult their contract-holders on management matters and to provide a statement of consultation arrangements.[23] For details see below Part 11.
TERMINATING THE CONTRACT
Possession notices
2.40 We recommend a number of detailed changes to the law relating to possession notices.
(1) Under the principle of "use it or lose it", if the possession notice is not followed up by actual proceedings within six months, the notice lapses. (The period is four months where possession is sought on the notice-only ground.) Contract-holders should not be kept in a state of uncertainty for unreasonably long periods.
(2) The scheme provides that proceedings cannot, save in two cases, be started until one month after the possession notice has been given to the contract-holder. This rationalises the present law which contains a number of time differences that are hard to justify.
(3) As currently happens with assured shorthold tenancies, landlords under standard contracts can give a two months' "no-fault" notice that they want to recover possession. The inability of a private landlord to obtain a possession order from the court on this notice-only ground for the first six months of an assured shorthold tenancy is removed.[24]
Grounds for possession
2.41 We anticipate that the extensive statutory lists of grounds for possession, which have long existed in successive Rent and Housing Acts will be repealed.[25] They are replaced by two classes of grounds for possession, which become fundamental terms of the contract:
(1) breach of the occupation contract; and
(2) estate management grounds.
Termination by the contract-holder
Termination by joint contract-holders
2.46 While such an outcome may often be satisfactory, this is not a transparent way of achieving it. Indeed, there can be cases where the process is unfair.[26] We recommend that the landlord should - in full knowledge of the facts - take proceedings against the man in the normal way. Assuming his violence can be proved, it will be reasonable for a court to order possession. The outcome has been achieved directly rather than indirectly. The position of joint tenants is discussed below in Part 4.
Abandonment
POWERS OF THE COURT
(1) cases where the court may order possession if it considers it reasonable to do so ("discretionary grounds"); and
(2) cases where the court must order possession ("mandatory grounds").
2.49 During consultation it was frequently suggested to us that courts currently exercise their discretion inconsistently.[27] To meet this, we recommend that the court's discretion be statutorily structured. The judge will, in effect, have a check-list of questions he or she must answer in coming to a decision whether or not to order possession. The powers of the court are discussed in detail in Part 5.
2.50 In the first Consultation Paper,[28] we asked whether the current power of the court to grant suspended possession orders was appropriate. Many consultees accepted that proceedings taken essentially to recover rent arrears, where there was no serious intent to obtain possession, were not always a sensible use of court process. However, the general response was against fundamental reform of the law. Our scheme gives the Secretary of State power to pilot new procedures. These are discussed in Part 5.
DEATH OF THE CONTRACT-HOLDER
Joint contract-holders: survivorship
Succession
EXCLUDED CONTRACTS
2.56 Our broad policy objective is that, unless there are compelling reasons for exclusion, all contracts to occupy premises as a home should come within the scheme. Thus a number of types of agreement, which currently fall outside existing statutory schemes, are brought within the recommended scheme. These include, for example, service occupancies and student accommodation provided by universities and local authorities.[29]
2.57 Nevertheless, there have to be exceptions. These are listed in schedule 1 to the Bill.[30] They fall into two broad classes: contracts covered by other legislation; and contracts excluded on social policy grounds.
Contracts covered by other legislation
2.58 These include:
(1) business tenancies;
(2) tenancies protected by the Rent Act 1977 or the Rent (Agriculture) Act 1976;[31]
(3) long tenancies; and
(4) agricultural tenancies.
Contracts excluded on social policy grounds.
2.59 These include:
(1) tenancies or licences relating to direct access accommodation;[32]
(2) tenancies or licences where no rent or other consideration is payable;[33]
(3) holiday lets;[34]
(4) provision of accommodation in a care institution;[35]
(5) provision of accommodation in barracks;[36]
(6) provision of accommodation as a temporary expedient to persons who entered premises as trespassers;[37] and
(7) accommodation shared with the landlord.[38]
2.61 Special rules also apply to:
(1) accommodation for the homeless;[39] and
(2) supported accommodation.[40]
OTHER MATTERS
Housing benefit
2.64 Many consultees argued that housing law cannot be reformed without addressing housing benefit. We accept that housing benefit is a key factor in sustaining many landlord-tenant relationships. We also know that failings in administration frequently trigger claims for possession, which are not really about seeking possession but are about getting housing benefit problems sorted out.[41] But these issues are outside the scope of this project. The Government is currently undertaking a major review of housing benefit.[42]
Rent regulation
2.65 A number of consultees criticised the Commission for not revisiting the law relating to rent control and regulation. This was never envisaged as part of our remit. The present Government accepted that the policy of market rents in the private rented sector is not to be disturbed. It may be noted, however, that an important consequence of the ability of landlords to charge market rents for their lettings is that it is reasonable to expect landlords to adhere to their contractual obligations.[43]
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Note 1 In Renting Homes (2003) Law Com No 284, the scheme in outline, and the scope of the scheme, were discussed in Parts 3 and 6 respectively. [Back] Note 2 See below, at paras 2.56 to 2.62. [Back] Note 3 Cl 221. The appropriate authority is defined in cl 228 as the National Assembly for Wales, in relation to Wales, and in any other case the Secretary of State. [Back] Note 4 This term is defined in para 1.36 above. [Back] Note 5 Cls 13 and 23(1) and the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999 No 2083). [Back] Note 6 These are discussed in detail at paras 3.55 and 3.56. We do not think use of the criminal law is appropriate in this context. The criminal sanctions in the current law are, in any event, rarely used in practice. [Back] Note 8 Cls 81, 86 and 89. [Back] Note 9 See Appendix A for our recommendations. The appropriate authority is defined in cl 228 as the National Assembly for Wales, in relation to Wales, and in any other case the Secretary of State. [Back] Note 10 In the illustrative model contracts attached to this Report, some of the supplementary terms correspond to matters we have recommended should be in the contracts. Others are illustrative of the types of provision landlords and tenants currently include in secure and assured shorthold tenancies, which are likely to become supplementary provisions following consultation. We have included them all as supplementary terms to give readers a better sense of what the model contracts will look like. [Back] Note 14 See Rented Homes Bill, part 3, ch 1. [Back] Note 15 Discussed below, at paras 3.58 to 3.72. [Back] Note 17 Cls 74 and 109. [Back] Note 18 This is discussed in more detail at paras 6.72 to 6.76 below. [Back] Note 19 Cl 74(8). We are not making special provision for cases where the contract-holder says they have written to ask permission and the landlord denies receiving the written request. We think that in the rare cases where this becomes a problem it should be dealt with as a matter of evidence and proof. [Back] Note 20 (1996) Law Com No 238. Even if the Government fully implements the renting homes recommendations, this would not involve the full implementation of the recommendations set out in Responsibility for State and Condition of Property (1996) Law Com No 238. [Back] Note 24 The controversy surrounding this issue is discussed above, in Part 1, at paras 1.51 to 1.56. [Back] Note 25 As a framework Bill, our draft Bill does not currently make specific provision for repeals. [Back] Note 26 The current law was found not to contravene the Human Rights Act 1998 in Qazi v Harrow LBC [2003] UKHL 43, upheld in Kay v Lambeth LBC [2006] UKHL 10. [Back] Note 27 A recent empirical study looked at this issue: C Hunter, S Blandy, D Cowan, J Nixon, E Hitchings, C Pantazis and S Parr, The Exercise of Judicial Discretion in Rent Arrears Cases, DCA Research Series 6/05 (October 2005), http://www.dca.gov.uk/research/2005/6_2005sm1.pdf (last visited 5 January 2006). [Back] Note 28 Renting Homes 1: Status and Security (2002) Law Commission Consultation Paper No 162. [Back] Note 29 Though excluded from the current principal schemes, these are still covered by the terms of the Protection from Eviction Act 1977 and are thus not wholly outside statutory regulation. [Back] Note 30 Power is given to the appropriate authority to amend this list of exceptions: sch 1 para 15. [Back] Note 31 Discussed above, at paras 2.5 and 2.6. [Back] Note 33 S 1(1)(b) and sch 1 para 1(2). [Back] Note 34 Sch 1 para 6(2)(a). [Back] Note 35 Sch 1 para 6(2)(b); “care institution” is defined in sch 1 para 7. [Back] Note 36 Sch 1 para 6(2)(c); “barracks” is defined in sch 1 para 8. [Back] Note 37 Sch 1 para 6(2)(d); “temporary expedient” is defined in sch 1 para 9. [Back] Note 38 Sch 1 para 6(2)(e); “shared accommodation” is defined in sch 1 para 10. [Back] Note 39 Sch 1 paras 11 and 12. [Back] Note 40 Sch 1 paras 13 and 14. [Back] Note 41 The Civil Justice Council is currently developing a housing possession protocol which, if approved, should go a long way to ensure that cases that are really only about housing benefit do not get to court. [Back] Note 42 See A New Deal for Welfare: Empowering People to Work (2006) Cm 6730, ch 6 ("A radical new approach to Housing Benefit"). [Back] Note 43 We revisit these issues in our Ensuring Responsible Renting project. [Back]
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