The Law Commission

PART 6

DEALING

INTRODUCTION

6.1      We have been very conscious of the need for our scheme to reflect the varieties of ways in which people actually live their lives. It needs to recognise the realities resulting from the formation and break down of relationships. A contract-holder may want to bring a new person into the agreement. People may want companionship, or someone to help pay the rent, so may want to share their accommodation with others, or take in a lodger. People may want to move around the country and exchange the premises where they currently live for another. At the same time we accept that landlords must be able to retain a sensible degree of control over the property they are letting.

6.2      Because periodic standard contracts can be ended on the landlord's notice ground,^[1] private landlords retain a high degree of control. The situation is less clear-cut for community landlords who rent on secure contracts. They must be able to ensure that the people living in their accommodation have the requisite degree of housing need. At the same time, contract-holders under secure contracts must have an appropriate degree of autonomy in their use of the accommodation.

6.3      This Part considers the extent to which contract-holders may "deal" with their contracts. As with many other aspects of the scheme, these provisions build on the current law which applies to the secure tenants of local authorities. We have taken the opportunity to rationalise the law, and to clarify the powers of community landlords to control the circumstances in which they will permit dealing in social housing. There are therefore important amendments to the current position noted in the discussion.

ADDING A CONTRACT-HOLDER TO THE CONTRACT^[2]

6.4      It is a fundamental term of all occupation contracts that a contract-holder may, but only with the consent of the landlord,^[3] add another person to the contract. The person added becomes entitled to all the rights and subject to all the obligations of the contract from the date they are added.^[4]

6.5      The addition of a contract-holder to the contract is of no effect unless:

(1) it is made in a written document^[5]; and

(2) the document is signed by each individual and executed by each corporation which is party to the transaction.^[6]

The addition of a new contract-holder to the contract may also be effected by an electronic document that complies with prescribed formalities.^[7] DEALING

6.6      Dealing is the term used in the Bill to describe the circumstances we are considering. Dealing is defined to include:

(1) creating a tenancy or a licence which confers the right to occupy the premises;

(2) transferring; and

(3) mortgaging or otherwise charging.^[8]

6.7      The starting point is that a contract-holder may not deal with the occupation contract or the whole or any part of the premises, save as provided for by the contract, or in accordance with a family property order.^[9] Similarly, joint contract-holders may not deal with the contract, or their rights and obligations under it, or the premises or any part of the premises save as provided for by the contract, or in accordance with a family property order.^[10]

Impact on the landlord

6.8      The current law is very unclear as to when a landlord becomes bound by an action taken by a tenant. Our scheme makes this clear. Quite simply, the landlord is not bound if a contract-holder or joint contract-holder deals with the contract except in a way permitted by the contract or in accordance with a family property order.^[11] Indeed the Bill makes clear that a contract-holder who attempts to deal in ways not permitted by the contract or a family property order is in breach of the contract,^[12] which will expose them to the risk of possession proceedings on the breach of contract ground.

PERMITTING A PERSON TO OCCUPY AS A LODGER^[13]

6.9      Currently, secure tenants of local housing authorities have an absolute right to take in a lodger. This is the one issue on which the consent of the landlord is not required. In accordance with our landlord-neutral approach, we recommend that this right be extended to all secure contracts.

6.10      It is a fundamental term in every secure contract that the contract-holder can allow another to reside in the premises as a lodger. If there is room, more than one lodger may be possible.^[14] This is not subject to obtaining consent from the landlord.^[15]

6.11      The right to occupy is personal to the lodger. The landlord never takes over any responsibility for or obligation to a lodger. If the contract-holder's contract ends, for example because the contract-holder dies, or has a possession order made against him or her, so too does the right of the lodger to remain in the premises.

6.12      For standard contracts, we recommend that the right of a contract-holder to take in a lodger should be included as a supplementary term of the contract.^[16] Such a term should require the contract-holder to seek the consent of the landlord, which the landlord may reasonably withhold.^[17]

CREATING A SUB-OCCUPATION CONTRACT^[18]

6.13      The current law is that a lease may forbid the tenant from granting a sub-tenancy (either at all or without the requisite consent). Granting a sub-tenancy without consent is a breach of the terms of the lease, which may give the landlord the right to forfeit the lease, but the sub-tenancy will be effective, subject to what is said below about the effect if the head lease is terminated.

6.14      Under our recommended scheme, there is no fundamental provision, and thus no fundamental term, relating to the ability of a contract-holder to enter into a sub-occupation contract. At most there will be a supplementary term to deal with this. We have included in the model contracts appended to this Report a supplementary term permitting sub-occupation, subject to the consent of the landlord.^[19] We have given the landlord an absolute right to refuse to permit sub-occupation: their consent is not subject to the reasonableness requirements which apply, for example, to consent to permit a contract-holder under a standard contract to have a lodger.

6.15      The Bill deals with a number of complex consequences that can arise where this form of dealing is permitted. The legislation is drafted in terms of the simple model of head contract and sub-occupation contract. A definition section makes it clear that the same principles apply to a chain of sub-occupation contracts.^[20]

6.16      A sub-occupation contract will be effective as between the contract-holder and the sub-occupier, even if it was entered into without the landlord's consent (where the landlord's consent was required). Where a sub-occupation contract is entered into without the landlord's consent, where consent was required, the contract holder is in breach of the contract.^[21] The landlord could make a possession claim on this ground.^[22] A sub-occupation contract entered into otherwise than in accordance with the head contract (for instance without the landlord's consent, where this was required under the terms of the head contract) does not bind the head landlord.^[23]

6.17      Where a tenant grants a sub-tenancy, the basic principle at common law is that they cannot grant a greater interest than they have.^[24] This means that they cannot grant a sub-tenancy for longer than the head tenancy. At common law, if a tenant under a fixed term tenancy purports to grant a sub-tenancy that is equal to or longer than the length of their tenancy, the grant of the sub-tenancy is treated as an assignment of the tenancy to the sub-tenant. For the purpose of our scheme, we think that contract-holders should decide whether a dealing is to be a transfer (under which the transferee is normally expected to pay the rent to the landlord directly) or a sub-occupation contract (where rent under the sub-occupation contract is normally be paid to the contract-holder, who remains liable to pay the rent under their own occupation contract to the (head) landlord). Where the contract-holder under an occupation contract (the head contract) enters into a sub-occupation contract, and the term of the sub-occupation contract ends at the same time as the term of the head contract, the sub-occupation contract takes effect as such and not as a transfer to the sub-holder.^[25]

6.18      Under our scheme, it will also be possible for a contract-holder to grant a sub-occupation contract giving greater security than the contract-holder has, where the landlord consents to this. This will only be possible if the contract-holder and landlord had modified or varied the relevant supplementary term in the model contract to permit this. Assuming that the supplementary term had been modified:^[26]

(1) a contract-holder under a standard periodic contract could grant a secure sub-occupation contract, or a fixed term standard sub-occupation contract; or

(2) a contract-holder under a fixed term standard contract could grant a sub-occupation contract for a fixed term longer than the unexpired period of the head contract.

Failure to comply with conditions

6.19      We considered, however, that it would be overly harsh to the sub-holder if the head landlord was not bound at all where he or she had given consent to the sub-occupation contract, but with conditions, and the conditions had not been met. In this situation, the sub-occupation contract is still treated as properly made.^[27] If the contract-holder has purported to create either a secure contract or a standard fixed term contract, in breach of the landlord's consent conditions, then as between the contract-holder and sub-holder, the contract will indeed be a secure contract or standard fixed term contract, but the head landlord may elect to treat the sub-occupation contract as a periodic standard contract only.^[28] The standard periodic sub-occupation contract thus created has the following characteristics:

(1) all the fundamental and supplementary provisions applicable to a periodic standard contract are incorporated without modification (including the provisions for the landlord's notice-only possession ground);

(2) any terms of the secure or fixed term standard contract that are incompatible with the standard periodic contract are of no effect;

(3) otherwise the terms of the contract are the same as those of the secure or standard fixed term contract.^[29]

6.20      This "election" by the landlord only really has a practical effect when the head occupation contract ends, and the contract-holder's rights and obligations under the sub-occupation contract are transferred to the head landlord as described in paragraph 6.23 below. The obvious consequence of this provision is that, once the head contract has ended and where the landlord is the direct landlord of the (former sub) contract-holder, the landlord can quickly assert control over the property through the availability of the landlord's notice ground for possession.^[30]

Termination of head contract

6.21      At common law, the basic principle that a tenant cannot grant a greater interest than they have means that if the head lease falls, the sub-lease also falls. The effects of the common law are modified where the sub-lease is an assured tenancy: if the head lease comes to an end, the sub-tenant is treated as having an assured tenancy as against the head landlord.^[31] Under current law if the tenant surrenders the head lease to the landlord, the effect is that the tenant drops out and the lease is thereafter treated as being between landlord and (sub) tenant.^[32] If the head lease is forfeited during the period of the sub-tenancy, the sub-tenant can apply for relief against forfeiture.^[33]

6.22      Under our recommended scheme, if the occupation contract is ended for whatever reason, a sub-occupation contract may be of some effect as between sub-occupier and (head) landlord. What, if any effect, it has, as between the sub-occupier and (head) landlord will depend on whether the sub-occupation agreement was entered into:

(1) with the landlord's consent (where this is required), and in accordance with any conditions imposed by the landlord on giving his consent;

(2) with the landlord's consent, but the contract-holder did not comply with all the conditions imposed by the landlord on giving his consent; or

(3) without the landlord's consent (where this is required), or otherwise not in accordance with the head contract.

6.23      Where:

(1) a contract-holder has properly entered into a sub-occupation contract with a sub-holder;^[34] and

(2) the head contract comes to an end after its effective date; and

(3) the sub-occupation contract is in existence immediately before the head contract ends,

the sub-occupation contract continues.^[35] The contract-holder's rights and obligations under the sub-occupation contract are transferred to the head landlord.^[36] These rules do not, however, apply if the head contract is a fixed term standard contract which ends at the end of the fixed term.^[37]

6.24      The policy objective is to ensure that head landlords do not find themselves taking over responsibility for any arrangement to which they have not consented. Thus,

(1) the operation of the rules set out in the previous paragraph do not affect the ability of the head landlord to elect to treat the sub-occupation contract as a standard periodic contract where the sub-occupation contract was entered into in breach of one of the conditions imposed by the landlord when consenting to the sub-occupation;^[38]

(2) the head landlord is not liable to the sub-holder for any breach of the sub-occupation contract by the contract-holder;^[39]

(3) the sub-holder is not liable to the head landlord for any breach of the sub-occupation contract before the head contract ended;^[40] and

(4) the head landlord may be liable to the sub-holder (or vice versa) for any breach of the sub-occupation contract continuing after the head contract has ended.^[41]

6.25      Where, however, the sub-occupation contract was entered into improperly (for example, the contract-holder should have obtained the head landlord's consent to sub-occupation, but failed even to ask for the head landlord's consent), the head landlord does not step into the contract-holder's shoes, and is not bound by the sub-occupation contract.

Extended possession order

6.26      There may be circumstances where a contract-holder has properly entered a sub-occupation contract, where the contract-holder's (head) landlord claims possession against the contract-holder.^[42] In such a case, the head landlord may also apply for an order for possession against the sub-holder.^[43] This may be particularly necessary where, for example, the landlord is aware that both the contract-holder and the sub-holder are not behaving in accordance with their contracts (for example using the premises for unlawful purposes).

6.27      The court may only consider making an order against the sub-holder – an extended possession order – where

(1) it has decided to make a possession order against the contract-holder;^[44] and

(2) it would have made a possession order against the sub-holder, had a claim for possession been brought by the contract-holder against the sub-holder.^[45]

6.28      In deciding whether or not to make the extended possession order, the court may take into account whether the head landlord had given the sub-holder any notice of their intention to apply for an extended possession order, and the length of any such notice.^[46]

Exclusion of contract-holder

6.29      There may also be circumstances in which a contract-holder has quite properly entered into a sub-occupation contract with a sub-holder, but where the contract-holder has disappeared.^[47] This may make it hard for the sub-holder to ensure that their landlord (the original contract-holder) fulfils the landlord's obligations under the sub-occupation contract, for example to repair the property. Indeed, in such a case the head landlord will also find it hard to enforce the obligations of the contract against the contract-holder.

6.30      In such a case, and by analogy with our recommendations on abandonment,^[48] the sub-holder may give the contract-holder a notice in writing which

(1) states the belief of the sub-holder that the contract-holder no longer considers him or herself a party to the original contract and the sub-contract;

(2) requires the contract-holder to tell the sub-holder, within four weeks,^[49] if he or she still regards him or herself as a party to one or both of the contracts; and

(3) informs the contract-holder that after the warning period is over, the original contract may be brought to an end and the rights and obligations under the sub-occupation contract may be transferred to the head landlord.^[50]

6.31      A copy of the notice must also be given to the head landlord.^[51] During the warning period, the sub-holder must undertake any necessary inquiries to satisfy himself that the contract-holder no longer considers himself to be a party to the contract.^[52]

6.32      At the end of the warning period, the sub-holder may apply to the court for an order that the original contract has come to an end and that the rights and obligations of the contract-holder as landlord under the sub-occupation agreement are transferred to the head landlord.^[53] If the court is satisfied that the contract-holder no longer considers him or herself a party to both contracts, it may make the order applied for. This must specify the date from which the head contract is treated as having come to an end.^[54]

6.33      The court may not make the order in favour of the sub-holder where, had a claim for possession been brought against the sub-holder by the contract-holder, the court would have made a possession order against the sub-holder.^[55]

Excluded contract-holder's remedies

6.34      As the consequences of such an order for the original contract-holder could be serious, the scheme provides a right of appeal. Where an order has been made, the original contract-holder may, within six months, apply to the court to rescind the order, declare that the sub-occupation contract continues, and make such other order as it thinks fit.^[56]

6.35      The grounds on which the contract-holder may apply to the court are:

(1) that the sub-holder failed to give the requisite notice;

(2) that the sub-holder failed to make the appropriate inquiries;

(3) that the contract-holder did consider him or herself still to be a party to one or both of the contracts and that the failure to respond (or to respond adequately) to the notice was justified; or

(4) that the sub-holder did not have reasonable grounds for being satisfied that the contract-holder considered him or herself not to be a party to either of the contracts.^[57]

TRANSFERRING THE CONTRACT^[58]

6.36      Long leaseholders, whose interest in land is akin to that of the owner-occupier, need to be able to deal with that interest. Otherwise they would find themselves trapped. The transfer of leases from one tenant to another is achieved by the process of assignment, usually for a premium. This is a key feature of the law of landlord and tenant.

6.37      In the rental market, these considerations are less important. Landlords enter into agreements with particular individuals on the basis that those individuals will meet the obligations of the tenancy (such as to pay the rent) or, in the case of social housing, have a proven social need for that accommodation. Landlords must control the identity of the tenant in a way that does not apply with long leaseholders. For this reason, as noted at the start of this Part, the starting point for our scheme is that contract-holders cannot deal with their contracts, other than as permitted by their contracts (or in accordance with family property orders).

6.38      Nevertheless, current law provides for some circumstances in which rights under a tenancy may be transferred. We have adapted these to our recommended scheme. We think they strike the right balance between the interests of the landlord and the contract-holder.

6.39      As regards formalities, we think that the formalities of assignment are too complex to fit into our consumer approach. Similarly, in relation to licences, where transfer depends on contractual principles of novation and the assignment of benefits of contracts, the rules are complex and poorly understood. Thus we have created a process of transfer which is set out in the Bill.

Transfer to potential successor^[59]

6.40      At present, secure tenants are able to assign their secure tenancy to a potential successor.^[60] This enables a frail parent to transfer their secure tenancy to a member of the family before going into residential care.

6.41      In accordance with the principle of landlord-neutrality, we think this right should apply to all secure contracts, not just those entered into by local authorities. The Bill provides that, subject to the consent of the landlord,^[61] it is a fundamental term of a secure contract that any sole contract-holder can seek to transfer their contract to a person or persons who would have the statutory right to succeed if the current occupier died.^[62] This also enables a contract-holder to pass their contract on to a carer-successor.

6.42      At present any succession, and thus any transfer, must be to a single person. In our scheme, joint succession is possible. Thus, any transfer can be to all the potential successors who wish to be included in the transfer.^[63]

6.43      The principle of survivorship applies to joint contract-holders. Nevertheless, if they all act together, they can apply to transfer the agreement to a potential successor. Again, any transfer is subject to obtaining the landlord's consent.^[64]

6.44      It is only necessary for a contract-holder to use the right to transfer to a potential successor where he or she does not intend to remain as an occupier. Otherwise they can seek to add a potential successor to the contract as a joint contract-holder.

6.45      A landlord may well be reluctant to give consent if they fear losing control of the premises for a substantial period. To address this, we accept that the giving of consent may be subject to conditions. Specifically, we recommend that a landlord can impose a condition that consent is subject to the contract-holder giving up their right of succession.^[65]

Transfer to another secure contract-holder — exchanges

6.46      At present, secure tenants are able to seek permission to exchange their tenancy with another secure tenant or with an assured tenant of a registered social landlord.^[66] This gives some flexibility to both landlords and tenants. It is a right that tenants appreciate. We think it should be retained in the recommended scheme.

6.47      Currently, the right to ask to exchange is done by an assignment of the tenancy from one qualifying tenant to another, who also wants to exchange. There can either be a direct swap, or a circle of three or more, all of whom want to transfer, but the last tenant must move into the property vacated by the first. This "mutuality condition" results in inflexibility. We recommend that it be relaxed. In future it will be possible for there to be a simple chain of transfers, where there is potentially a void at both ends. This will encourage mobility and choice-based letting.

6.48      The right to ask to exchange an occupation contract extends to all secure contracts made by community landlords.^[67] All such contracts have a fundamental term that the contract-holder may seek to transfer the contract to another person. The other person must also be a contract-holder under a secure contract from a community landlord who, immediately before the transfer, will cease to be the contract-holder under that contract.^[68] No transfer can take place without the consent of the landlord.^[69]

Transfer of fixed term standard contracts

6.49      Where parties enter into a fixed term contract, their contractual obligations persist, unless the contract provides otherwise, for the full term of the contract. In some cases, peoples' circumstances may change. Thus the contract itself may enable the parties to escape from their obligations in defined circumstances. Any such provision will have to be agreed between the landlord and the contract-holders. They will not arise from any statutory fundamental or supplementary provision. A landlord who agrees to the inclusion of such a clause is entitled to make any escape route from the contract subject to their giving consent.

6.50      The Bill contains two provisions that relate to these possible circumstances.

(1) A fixed term standard contract may provide that if there are joint contract-holders, one or more of them may require the other joint contract-holder(s) to join in a transfer of the contract to another person.^[70] In such a case, the joint contract-holder(s) wishing to transfer the contract may seek a court order that the other contract-holders join in the transfer.^[71] The court may make such order as it thinks fit.^[72]

(2) A fixed term standard contract may provide that a joint contract-holder may transfer their rights and obligations under the contract to another, without joining all the other joint contract-holders.^[73] In such a case, the contract must provide that such a transfer may not be made unless the transferor gives notice of the proposed transfer to the other joint contract-holders.^[74] This is to prevent any change in the liabilities of the remaining joint contract-holders occurring without notice. Furthermore, the transferee is not entitled to occupy the premises without the consent of the other joint contract-holders.^[75]

6.51      The Bill also contains provisions dealing with the transfer of a fixed-term standard contract on the death of the contract-holder.^[76] These are discussed in Part 7.

FORM AND EFFECT OF TRANSFER Form

6.52      Under current law, a tenancy can only be assigned by deed, even where the original tenancy did not have to be granted by deed.^[77] If no deed is used, a contract to assign a tenancy may be enforceable in equity, but only if it complies with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989, section 2. It must be in writing, signed by both parties and containing all the terms of the contract (subject to the possible effect of equitable estoppel). We do not regard the requirement for a deed as appropriate in the context of residential renting.

6.53      The Bill provides that any transfer by a contract-holder or a joint contract-holder must be made in writing,^[78] signed by each of the parties to the transfer.^[79] If the contract requires the consent of the landlord, the landlord must be a party to the contract.^[80] These rules do not apply to transfers in the course of the administration of the contract-holder's estate.^[81]

Effect

6.54      If transfer of an occupation contract is made in compliance with the terms of the contract and the formalities set out in the preceding paragraphs, on the date of the transfer:^[82]

(1) the transferee becomes entitled to all the rights and subject to all the obligations of the contract-holder under the contract; and

(2) the contract-holder ceases to be entitled to any rights or subject to any obligations under the contract.^[83]

6.55      The same principles apply where the transferor is a joint contract-holder. This is subject to the qualification that, where a fixed-term standard contract is transferred either while the contract-holder is alive, or following the contract-holder's death, the transferee is not entitled to occupy the premises without the consent of the other joint contract-holders.^[84]

6.56      Rights and liabilities accruing before the transfer date are not affected by the process of transfer.^[85]

Unauthorised transfer

6.57      In accordance with our aim of ensuring that a landlord does not end up with a contract-holder they have not consented to, the Bill provides that a transfer that does not comply with the formal requirements is of no effect.^[86] The landlord is not bound by any purported transfer or other dealing by a contract-holder which required, but did not have, the landlord's consent.^[87] The landlord can take proceedings against a purported transferee who will have no legal entitlement to occupy the premises as against the landlord. Alternatively, the landlord can agree to enter into an agreement with the purported transferee; but this is entirely a matter for the landlord.

6.58      An exception is provided where the transfer is not in accordance with what the contract permits (whether or not the formalities requirements have been complied with).^[88] If the landlord accepts payments from the transferee in respect of the transferee's occupation of the premises, while

(1) knowing that the transfer was made otherwise than in accordance with the contract; or

(2) when the landlord ought reasonably to have known that the transfer was made otherwise than in accordance with the contract

the transfer has effect as follows.^[89] The transfer becomes binding on the landlord two months after the day on which the landlord first accepted payments from the transferee.^[90]

6.59      This will not happen if, within the two month period the landlord either:

(1) takes steps to end the occupation contract; or

(2) brings proceedings to evict the transferee as a trespasser or otherwise shows an intention to treat the transferee as a trespasser.^[91]

Landlord and Tenant (Covenants) Act 1995

6.60      If the occupation contract is a tenancy, the Bill provides that the Landlord and Tenant (Covenants) Act 1995 does not apply to:

(1) any transfer by a contract-holder of the contract, the premises or any part of the premises, or any transfer by a joint contract-holder of any of those things or of their rights and obligations under the contract, or

(2) any transfer which would be treated by that Act as a transfer of the premises.^[92]

LANDLORD'S CONSENT^[93]

6.61      As noted above, where a contract-holder seeks permission to deal with the contract, landlords often have good reason either to refuse consent or to give consent subject to conditions. Where the contract requires that the landlord's consent be obtained before something can be done, including dealing with the contract, the Bill sets out a general rule. That rule is that while the landlord may give consent subject to conditions,^[94] he or she may not unreasonably refuse consent (or give consent subject to unreasonable conditions)^[95]. The rule applies unless the contract:

(1) explicitly excludes the clause setting out the general rule;

(2) makes inconsistent provision with the general rule; or

(3) provides that if the landlord does not give or refuse consent, they are to be treated as having refused it. ^[96]

6.62      A request for consent must be in writing.^[97] Before reaching a decision, the landlord may ask for further information, but this must be within 14 days of the request for consent being made by the contract-holder.^[98]

6.63      Once a request is made, the landlord should respond; the contract-holder should not be left in the dark. Failure to give or refuse consent in writing by the end of two months from the day on which the request was made, or from the day on which the further information which the landlord requested is provided, is treated as the giving of consent without conditions.^[99]

6.64      In accordance with our general policy of transparency, if the landlord gives consent subject to conditions, the landlord must provide written notice of the conditions at the time the consent is given. Failure to do this is also treated as giving consent without conditions.^[100]

6.65      Where consent is refused, or granted subject to conditions, the person who made the request may ask for a statement of reasons. To encourage landlords to respond, if the statement is not forthcoming within two months, the landlord is treated as having given consent without conditions.^[101]

Reasonableness

6.66      In the same way that guidance is provided to judges when they are required to make decisions based on reasonableness,^[102] so too the Bill provides guidance to landlords on reasonableness in this context.^[103] This guidance must be applied sensibly to the individual case; they are not rigid rules. The purpose is to help landlords understand that the Bill does not prevent them from making sensible decisions, and to help contract-holders appreciate that not every request is going to be met positively.

6.67      The provisions on reasonableness relate both to the reasonableness of a refusal by the landlord, and the reasonableness of any condition imposed by a landlord.^[104] The factors set out in the schedule include the following general matters:

(1) the status of the occupation contract;

(2) the premises;

(3) the circumstances of the contract-holder; and

(4) the circumstances of the landlord.

The schedule also sets out special factors which apply where the contract-holder seeks consent to adding a joint contract-holder, transferring a contract to a potential successor, or transferring a contract to a secure contract-holder. The status of the occupation contract^[105]

6.68      It is relevant to know whether steps have been taken by any party to bring the contract to an end, or whether something has been done by any party which might cause the contract to end. Thus, for example, it will be more reasonable to refuse consent where a term of the contract has been broken and possession proceedings are in contemplation than where that has not happened.

The premises^[106]

6.69      It is relevant to consider the size and suitability of the premises; whether the act for which consent is required will lead to premises becoming overcrowded, or under-occupied, or not being suitable to the needs of the person who will occupy the premises; and whether if the transaction were to take place one of the estate management grounds for possession would become available to the landlord. Thus it would not be reasonable to expect an able-bodied person to be given consent to take over a contract for premises adapted for the disabled.

The circumstances of the contract-holder^[107]

6.70      It is relevant to consider the probable effect of the transaction on the lives of the parties to the transaction, and others who occupy the premises. It is also relevant to consider whether or not the contract-holder is in breach of the contract. In such a case, it may be reasonable to impose a condition that the breach must cease. Thus it might be reasonable to provide that rent arrears must be paid off as a condition to the giving of consent.

The circumstances of the landlord^[108]

6.71      It is relevant to consider the financial interests of the landlord; where the landlord is a community landlord, the impact of any transaction on its ability to perform its housing functions; any rules or other criteria the landlord may have about its allocations policies; or whether the transaction accords with its management code. It is specifically provided that a local authority will act reasonably if it refuses consent to a transaction (other than a transfer to a potential successor or secure contract-holder) that would result in a person ineligible for an allocation of housing becoming a contract-holder.

The proposed joint contract-holder^[109]

6.72      Where a contract-holder seeks consent to add another to the contract it is relevant for the landlord to consider whether the proposed newcomer is suitable (including their past record of contract compliance); whether the proposed newcomer is a member of the contract-holder's family; whether they may become the sole contract-holder and whether they might (if they did not become a contract-holder) become a successor to the contract.

6.73      We recognise that, in this latter case, the result may be that the landlord could lose control of the premises for some considerable time. (If the newcomer succeeded to the contract, a right of succession would be used up. But if the newcomer is made a joint contract-holder, they can become sole contract-holder by survivorship without using up a right of succession. On that person's death succession is still possible and the contract may continue.) We therefore recommend that, in such a case, it is reasonable for the landlord to impose a condition whereby the newcomer to the contract would be treated as a priority successor or reserve successor, thereby foregoing their entitlement to pass the contract on to another on their death.^[110] We think this strikes a sensible balance. The newcomer is assisted to acquire the premises they are currently seeking which may be their most pressing concern, while the landlord does not lose the ability to regain possession of the premises beyond a reasonable period.

Transfer to a potential successor^[111]

6.74      Similarly, the Bill provides that in considering whether to give consent to transfer to a potential successor, the landlord should be able to impose a condition that the potential successor is to be treated as a priority successor or reserve successor, thus precluding the possibility of a further right of succession on the potential successor's death.

Transfer to a secure contract-holder

6.75      Where consent to a transfer of a secure contract is sought from a community landlord, two particular provisions are set out in the Bill. First, where the transfer is part of a series of transactions, it is reasonable to impose a condition that the transfer may only take place if the whole series of transactions goes ahead.^[112]

6.76      Second, if the person to whom the transfer is to be made is already a priority or reserve successor in relation to their current contract, it is reasonable to impose a condition requiring that the transferee be treated as having the same status in relation to the contract transferred to him or her.^[113]

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Note 1    Discussed above, at paras 4.57 to 4.63.    [Back]

Note 2    Adding a contract-holder was discussed in Part 11 of Renting Homes (2003) Law Com No 284.    [Back]

Note 3    Provisions relating to landlord’s consent are discussed below, at paras 6.61 to 6.76.    [Back]

Note 4    Cl 108.    [Back]

Note 5    Cl 215(2). Cl 215(3) gives the appropriate authority power to prescribe a form for the document.    [Back]

Note 6    Cl 110.     [Back]

Note 7    Referred to in cl 215.    [Back]

Note 8    Cl 120(4).    [Back]

Note 9    Cl 120(1). Family property order is defined in cl 237.     [Back]

Note 10    Cl 120(2).    [Back]

Note 11    Cl 120(3).    [Back]

Note 12    Cl 120(3)(b).    [Back]

Note 13    Lodgers are discussed in Part 12 of Renting Homes (2003) Law Com No 284.    [Back]

Note 14    Where the contract has a supplementary term limiting the number of persons who can reside in the premises, the total must not exceed that number.    [Back]

Note 15    Cl 122.     [Back]

Note 16    See eg term 77 of the draft standard contract attached to this Report.     [Back]

Note 17    As to landlord’s consent, see below, at paras 6.61 to 6.76.    [Back]

Note 18    Sub-occupation is discussed in Part 12 of Renting Homes (2003) Law Com No 284.    [Back]

Note 19    As to landlord’s consent, see below, at paras 6.61 to 6.76.    [Back]

Note 20    See cl 130.    [Back]

Note 21    Cl 120(3).    [Back]

Note 22    Cl 183.    [Back]

Note 23    Cl 120(3).    [Back]

Note 24    This principle was modified to some degree by the decision of the House of Lords in Bruton v London and Quadrant [2000] 1 AC 406, in which a mere licensee was held to have granted a sub-tenancy (although not an estate in land).    [Back]

Note 25    Cl 123.    [Back]

Note 26    As compared with term 78 in the draft standard periodic contract, and term 75 in the draft secure contract in Appendix B to this Report.    [Back]

Note 27    Cls 124(1) and (2).    [Back]

Note 28    Cl 124(3). If the landlord does so elect, the sub-occupation contract is also treated as a standard periodic contract in any question arising between the sub-holder and any person other than the contract-holder: cl 124(4).     [Back]

Note 29    Cl 124(5).    [Back]

Note 30    See above, at paras 4.57 to 4.60.    [Back]

Note 31    Housing Act 1988, s 18(1).    [Back]

Note 32    Law of Property Act 1925, s 139.    [Back]

Note 33    Law of Property Act 1925, s 146(4).    [Back]

Note 34    The sub-occupation contract is still treated as having been entered into “properly” for this purpose where the contract-holder has not complied with the conditions subject to which the landlord gave consented to sub-occupation: see cl 124(2).    [Back]

Note 35    Cls 125(1) and (2)(a). This does not apply where the head contract was a fixed term contract which comes to an end on the expiry of the fixed term: cl 125(4).     [Back]

Note 36    Cl 125(2)(b).    [Back]

Note 37    Cl 125(4).    [Back]

Note 38    Cl 126(1). See above, at para 6.19. Even though the contract-holder, in breach of a landlord’s consent condition, may have granted a fixed term standard contract or secure contract, when the (former head) landlord steps into the contract-holder’s shoes at the end of the head contract, they can treat the sub-occupation contract as a periodic standard contract. This means they can seek to recover possession of the premises on the notice-only basis.    [Back]

Note 39    Cl 126(2).    [Back]

Note 40    Cl 126(3).    [Back]

Note 41    Cl 126(4). These last two provisions do not affect any power conferred on the head landlord by the sub-occupation contract: cl 126(5).    [Back]

Note 42    Cl 127(1).    [Back]

Note 43    Cl 127(2).    [Back]

Note 44    Cl 127(3).    [Back]

Note 45    Cl 127(4).    [Back]

Note 46    Cl 127(5).    [Back]

Note 47    Cls 128(1) and (2).    [Back]

Note 48    See above, at paras 4.37 to 4.43.    [Back]

Note 49    This is called the warning period, which starts with the day on which the notice is given to the contract-holder: cl 128(9).    [Back]

Note 50    Cl 128(3).    [Back]

Note 51    Cl 128(4).    [Back]

Note 52    Cl 128(5).    [Back]

Note 53    Cl 128(6).    [Back]

Note 54    Cl 128(7).    [Back]

Note 55    Cl 128(8).    [Back]

Note 56    Cls 129(1), (2) and (4).    [Back]

Note 57    Cl 129(3).    [Back]

Note 58    Transferring rights of occupation is discussed in Part 13 of Renting Homes (2003) Law Com No 284.    [Back]

Note 59    Cl 131. The right of succession, and the definition of who can be a successor, is discussed below, at paras 7.8 to 7.30.    [Back]

Note 60    Housing Act 1985, s 91(3)(c).    [Back]

Note 61    Landlord’s consent is discussed below, at paras 6.61 to 6.76.    [Back]

Note 62    Cl 131.    [Back]

Note 63    Cl 131(2)(b).    [Back]

Note 64    Cl 131(4). Consent, and its reasonableness, is discussed below, at paras 6.61 to 6.76.    [Back]

Note 65    Sch 4 para 9.    [Back]

Note 66    Housing Act 1985, ss 91(3)(a) and 92, and sch 3 (as amended).    [Back]

Note 67    Community landlord is defined at cl 226.    [Back]

Note 68    Cl 132(2).    [Back]

Note 69    Cl 132(1).    [Back]

Note 70    Cl 134(1).    [Back]

Note 71    Cl 134(2).    [Back]

Note 72    Cl 134(3).    [Back]

Note 73    Cl 135(1).    [Back]

Note 74    Cl 135(2).    [Back]

Note 75    Cl 135(3).    [Back]

Note 76    Cls 133 and 136.    [Back]

Note 77    Law of Property Act 1925, s 54(2) allows the creation, but not the assignment, by parol of certain short leases. See Crago v Julian [1992] 1 WLR 372 on whether the Law of Property Act 1925, s 53(1)(a) can enable assignment by writing without a deed.    [Back]

Note 78    Electronic writing may be used: cl 215(4). The appropriate authorities are given power to prescribe the form to be used.    [Back]

Note 79    Cl 137(2). Cl 140(2) specifically disapplies the Law of Property Act 1925, s 52 from occupation contracts.    [Back]

Note 80    Cl 137(3).    [Back]

Note 81    Cl 137(6).    [Back]

Note 82    The date of the transfer is the day agreed by the transferor and the transferee as the day on which the transfer takes effect: cl 138(5).    [Back]

Note 83    Cl 138(1).    [Back]

Note 84    Cl 138(3), applying cls 135(3) and 136(3).    [Back]

Note 85    Cl 138(4).    [Back]

Note 86    Cl 137(5).    [Back]

Note 87    Cl 120(3).    [Back]

Note 88    Cl 139(1).    [Back]

Note 89    Cl 139(2).    [Back]

Note 90    Cls 139(2) and (4).    [Back]

Note 91    Cl 139(5).    [Back]

Note 92    Cl 140(3).     [Back]

Note 93    Consent requirements are discussed in Part 10 of Renting Homes (2003) Law Com No 284.    [Back]

Note 94    Cl 74(4).    [Back]

Note 95    Cl 74(5).    [Back]

Note 96    Cls 74(1) and (2).    [Back]

Note 97    Cl 74(3).    [Back]

Note 98    Cl 74(6). A request for information for which it is unreasonable to ask is deemed not to have been made: cl 74(7).     [Back]

Note 99    Cls 74(8) and (9).    [Back]

Note 100    Cl 74(10).    [Back]

Note 101    Cls 74(11) and (12).    [Back]

Note 102    See paras 5.31 to 5.42 as to reasonableness in the context of possession claims.    [Back]

Note 103    Sch 4.    [Back]

Note 104    Sch 4 para 1.    [Back]

Note 105    Sch 4 para 2.     [Back]

Note 106    Sch 4 para 3.     [Back]

Note 107    Sch 4 paras 4 and 5.     [Back]

Note 108    Sch 4 paras 6 and 7.    [Back]

Note 109    Sch 4 para 8. As to succession rights see Part 7 below.     [Back]

Note 110    Sch 4 paras 8(4) to (6).    [Back]

Note 111    Sch 4 para 9.    [Back]

Note 112    Sch 4 paras 10(2) and (3).     [Back]

Note 113    Sch 4 paras 10(4) and (5).    [Back]

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