Housing Law – the bigger picture – longer fixed terms (2)

Last week I took a look at the issues surrounding security of tenure.

The conclusion I came to was that there are a number of conflicting interests.

In some cases long fixed terms (or in any case a greater security of tenure) is preferable. In other cases it is not.

However what are the current legal rules in housing law? What can landlords do and tenants ask for?

Housing law – security of tenure

Generally a landlord and tenant will sign a contract which gives the tenant a specific period of time during which both parties are tied to the agreement – the fixed term.

So a landlord cannot normally evict and the tenant has to remain in the property, or at any rate pay rent, during that time.

After this fixed term comes to an end, unless it is replaced with another fixed term, under the current housing law the tenant is entitled to remain under a ‘periodic tenancy’ which is normally created under statute (and will be implied anyway if the tenant stays on paying rent which the landlord accepts).

The ‘period’ of this ‘periodic’ tenancy depends on how rent is paid. In the vast majority of cases rent is paid monthly so the periodic tenancy will be a monthly one. However this is not always the case. Quarterly or even annual periodic tenancies are possible.

Housing law – ending a tenancy

Here is a quick summary of the ways a tenancy can end (looking at ATs and ASTs only):

During the fixed term:

• under a break clause
• landlords claim to the courts for a possession order under the statutory grounds (the ground for unpaid rent is by far the most common)
• agreed surrender (ie both parties agreeing to end the tenancy)
• landlords accepting an implied surrender from tenants (usually where the tenants have moved out)

Also, after the fixed term:

• tenants leaving at the end of the fixed term / after service of a tenants notice to quit
• Section 21 (ASTs only)

Although note that a possession order under s21 cannot be made during the first six months (say if the fixed term was very short) after the tenant first moves into the property.

Fixed term periods:

There is actually no reason in housing law why a landlord cannot grant a fixed term for any period of time the parties want.

So they could grant, say, a fixed term of two weeks, seven months, four years or fourteen years.

However housing law treats different terms in different ways:

• Although a tenancy agreement is a ‘document of title’ which normally would have to be signed as a deed, there is a special dispensation in the Law of Property Act 1925 which provides that this is not necessary for tenancies with a term of three years or less.  This is why you can create an ‘oral’ tenancy agreement with no written document.

• However tenancies with a fixed term of over three years must be created by deed

• Fixed terms of seven years or more need to be registered at the Land Registry and the landlords’ statutory repairing covenants will no longer apply.

So what is possible?

Apart from the usual 6 or 12 months fixed term:

• A fixed term of just a few weeks or months. This is known as a short let. Although note that the landlord cannot evict the tenant until after the first six months under s21, no matter how short the fixed term

• A long fixed term of say 2 to six years. This could also be purchased by a ‘premium’ like long leases, although if so, the landlord would not be able to forbid assignment

• A long fixed term of between seven and say 20 years. This would be significantly different however, as the landlord could impose repairing obligations on the tenant.  Again it could be ‘purchased’ by a premium payment, and would operate under the same legal regime as a long 99 year lease save that it would be for a shorter period.

The reasons why the second two rarely happen is landlords not wanting to lose control over their property for so long, landlord fears of being stuck with a bad tenant and the prohibitions of the mortgage lenders.

I’ll be looking at this further next week.