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          How Secure Is Your Residential Tenancy?

          We write for Estates Gazette about the differences between the types of residential tenancy which are important when granting a new tenancy, and ending a tenancy.

          Date: 03/11/2016

          In most cases, the type of tenancy held by a tenant will depend on when it was granted and the legislation that was in force at that time. The types of tenancy range from regulated tenancies, which have a high level of security of tenure, to assured shorthold tenancies ("ASTs"), which have minimal security of tenure.

          Regulated tenancies

          Until 15 January 1989, most residential tenancies were regulated by the Rent Act 1977 ("RA"). A tenant under the RA is a regulated tenant.

          There are two expressions that describe a regulated tenant:

          • During the contractual tenancy, the tenant is a protected tenant.
          • Once the contractual term ends, the tenant becomes a statutory tenant, as long as certain conditions set out in the RA are met.

          The types of tenancy that cannot be a regulated tenancy and include (amongst others):

          • Certain shared ownership leases;
          • Lettings to students;
          • Holiday lettings;
          • Lettings of licensed premises; and
          • Lettings with resident landlords.

          At the end of the contractual term, the tenancy will continue as a statutory tenancy. To recover possession, the landlord must obtain a court order for possession. The grounds for possession are set out in Schedule 15 to the RA. Some of the grounds are discretionary, so the court can only order possession if the court considers it reasonable. The remaining grounds are mandatory, so the court must grant an order for possession if the landlord can prove the ground.

          These tenancies give a tenant considerable security of tenure and also regulate the level of rent payable by the tenant. In some circumstances, members of a tenant's family can also claim succession rights to the tenancy. Accordingly, these tenancies are unattractive to a landlord because of the security of tenure they afford to a tenant. In fact, a property with a sitting RA tenant is likely to be worth considerably less than the vacant possession value.

          Assured Tenancies

          Assured tenancies were introduced by the Housing Act 1988 ("HA"), which came into force on 15 January 1989. From that date, a tenancy under which a dwelling-house was let as a separate dwelling was automatically an assured tenancy ("AT") if all of the following conditions were met:

          • The tenant, or each of the joint tenants, was an individual.
          • The tenant, or at least one of the joint tenants, occupied the dwelling-house as their only or principal home.
          • The tenancy was not one that could not be an AT.

          Between 15 January 1989 and 28 February 1997, a landlord could serve a notice on the tenant stating that the tenancy would be an AST, rather than an AT. However, the Housing Act 1996 reversed the default position, so that an AT that was granted on or after 28 February 1997 would automatically be an AST.

          Tenancies that cannot be an AT (or, by definition, an AST) are:

          • Tenancies made before 15 January 1989;
          • High value properties, that is:
            • if the tenancy was granted before 1 April 1990, those with a rateable value over £750, or £1,500 in Greater London; or
            • if the tenancy was granted on or after 1 April 1990, those with an annual rent of more than £100,000.
          • Tenancies at a low rent, that is:
            • tenancies for no rent;
            • if the tenancy was granted before 1 April 1990, those where the annual rent is less than two-thirds of the rateable value on 31 March 1990; or
            • if the tenancy was granted on or after 1 April 1990, those where the annual rent is £250 or less, or £1,000 or less in Greater London.
          • Business tenancies to which the Landlord and Tenant Act 1954 applies;
          • Tenancies of premises that are licensed for the supply of alcohol;
          • Tenancies of agricultural holdings or farm business tenancies;
          • Lettings to students by certain landlords;
          • Holiday lettings; or
          • Lettings by resident landlords.

          The HA also contains anti-avoidance provisions to stop a landlord downgrading a tenancy from a regulated tenancy to an AT simply by granting a new tenancy after 15 January 1989.

          Security of tenure for an AT

          1. Fixed term AT

          At the end of a fixed term AT the tenant has the right to remain in the property, unless the landlord can establish one of the grounds for possession in Schedule 2 to the HA.

          During the contractual term of a fixed term AT, the landlord can only end the tenancy by:

          • Obtaining a court order for possession on a specific number of the grounds set out in Schedule 2 to the HA. Although, note that the court will only grant the order if the tenancy provides for it to be terminated on the ground in question.
          • Exercising a power in the tenancy agreement to determine the tenancy in certain circumstances, for example a break clause. On the termination of a fixed term tenancy in this way, the tenancy becomes a statutory periodic tenancy and a court order is still required to recover possession.

          2. Periodic AT

          The landlord of a periodic AT may seek an order for possession on any of the grounds set out in Schedule 2 to the HA.

          An AT therefore provides a tenant with security of tenure but enables the landlord to charge a market rent and to regain possession on certain grounds under Schedule 2 of the HA, for example, if more than 2 months' rent arrears exist.

          Assured Shorthold Tenancies

          ASTs are a type of AT that allow the landlord to let the property whilst retaining the right to repossess the property at the end of the term. This contrasts with regulated and assured tenancies, where the tenant may be entitled to stay in the property at the end of the term. Since 28 February 1997, most assured tenancies will be ASTs. As ASTs are a type of AT, a tenancy cannot be an AST if it does not satisfy the criteria to be an AT.

          An AST provides less security of tenure for tenants as they provide landlords with an additional ground for possession after the initial 6 month period, as long as the landlord gives two months' notice pursuant to section 21 HA. If the tenant remains in occupation of the property after the fixed term expires, a statutory periodic tenancy will arise.

          Note that any deposit taken in connection with an AST since 6 April 2007 must be protected in a government-approved tenancy deposit scheme. Failure to do so will prevent a landlord from serving a valid section 21 notice.

          Common Law Tenancies

          A common law tenancy is one that falls outside the statutory regimes. For example, a letting to a company cannot be an AT (or an AST) because of the criteria set out in section 1(1) of the HA. So, the grant of a residential tenancy to a company is usually done using a common law tenancy. This might be used where a company rents a property for the use of an employee who is working away from their usual location.

          A common law tenant has reduced protection compared to a tenant occupying under an AST. Also, a common law tenant is not subject to the deposit protection rules and the complicated HA possession procedure. A landlord can merely forfeit for breach of contract. However, the landlord of a common law tenancy may still have to obtain a court order to gain possession of the property if the tenant fails to vacate.

          A common law tenant has reduced protection compared to a tenant occupying under an AST. Also, a common law tenant is not subject to the deposit protection rules and the complicated HA possession procedure. A landlord can merely forfeit for breach of contract. However, the landlord of a common law tenancy may still have to obtain a court order to gain possession of the property if the tenant fails to vacate.

          Key Points:

          1. A court possession order must always be obtained if the tenant fails to vacate;
          2. Once a tenancy has been created, it cannot be changed to another type of tenancy by or on renewal; and
          3. An AST offers the least amount of security to a tenant.

          Key Legislation:

          1. Housing Act 1998;
          2. Housing Act 1996;
          3. Rent Act 1977.

          Why This Matters?

          It is an offence to evict an occupier of residential premises without a court order or to harass an occupier of residential premises pursuant to section 1 of the Protection from Eviction Act 1977 ("PEA").

          Various types of residential tenancies are regulated by statute and can only be brought to an end in a certain way. Irrespective of the PEA, a landlord can only obtain possession of a property let on a statutory or protected tenancy by obtaining an order of the Court. As such, a landlord may need to serve the appropriate notice on the tenant to terminate the tenancy and then issue proceedings.

          It is fundamental for landlords to be certain of the legal basis of the tenant's occupation to establish if possession can be recovered, and how? If the landlord does not follow the correct procedure or the tenant occupies under a regulated tenancy, then he may not be able to recover possession easily.

          This article was originally written for Estates Gazette, October 2016