Part XI           

Using the new agreements

Introduction

                          11.1              In preceding two partsParts VII and VIII, we have set out our proposals for the structure and contents of the two agreement types. In this part we consider whether there is a need to impose requirements relating to their use.

                          11.2              The basis of our approach to status is that there should be, as far as possible, landlord neutrality, so that usethe definition of a particular agreement type is not determined automatically by the identity – private, public or social – of the landlord. Only thus isThis approach offers the greatest flexibility given to landlords to provide housing for rent.

                          11.3              Nevertheless, social landlords are performing a public duty when they provide housing. We accept that there will be circumstances where it is appropriate for social landlords to let accommodation with only minimal security of tenure. But the reality is that it is this sector which – in the main – provides accommodation on a long-term rental basis. Given this factWe envisage it may be necessary to impose some limitations on the freedom of choice of social landlords.

Social landlords

                          11.4              The range of options are as follows as follows.

                                                        (1)      To impose no statutory requirement to use any particular agreement type. This option would allow all social housing landlords complete freedom to choose which agreement type to grant to their occupiers. While as a matter of practice, we would anticipate that the emphasis would remain on long-term provision with security of tenure, this would not be a legal requirement.

                                                        (2)      To impose a statutory requirement on local authorities only to use type I agreements. This requirement would be subject to defined exceptions, when they would be permitted to use type II agreements. The statutory requirement would be limited to local authorities. Housing associations and other providers of social housing would have freedom to choose which agreement type to grant to their occupiers, as in option (1) above.

                                                        (3)      To impose a statutory requirement on all local authorities and other social landlords[1]to use type I agreements, subject to the same exceptions as indicated in option (2) above.

                                                        (4)      To impose a statutory requirement on all providers of “not for profit” housing to use type I agreements. This requirement would therefore cover a wider range of social housing landlords than option (3). They would be subject to the same exceptions as outlined in option (2) above.

                          11.5              The firstO option (1) would pprovides the greatest flexibility to social landlords. They would be free to choose the appropriate agreement type for the particular occupier, locality and property. It would achieve the landlord neutrality we consider appropriate to a modern system of tenure. It However, it would mark a radical change in the housing powers of social landlords, who have been restricted in responding to housing need in the past by the limits imposed by the secure and assured tenancy regimes.

                          11.6              We would expect that, despite the statutory freedom, extended to  social landlords, they would  would choose to let on type I agreements for the vast majority of social occupiers for two reasons. First, social landlords are in general committed to the long-term security of tenure provided by the secure and assured tenancy regimeschemes. Second, it is highly probable that other funding and policy requirements would impose effective constraints upon the landlord’s choice of agreement type.

                          11.7              The second optionOption (2) springs from the current statutory position. It reflects the public status of local authorities. It places registered social landlords and other providers of social housing in the same position as private landlords. Thus both private landlords and non-local authority social landlords would have freedom of choice of tenure types.

                          11.8              However, our provisional view is that the current position, is based on a distinction between local housing authorities and housing associations,  which is increasingly irrelevant in practice. Registered social landlords are in receipt of large volumes of state funding, their role and aspirations are similar to those of local authorities and even their status within public law is becomingly increasingly aligned.[2] Therefore weWe do not think that a distinction between local authorities and other social landlords is defensible in a modernised system of housing law system.

                          11.9              Our thirdO option (3) is based upon recognising the fact that financial support from the state should do more than merely influence the nature of social housing provision. A consequence of the provision of state funding is that social landlords’ freedom of choice of tenure type should be specifically limited by statute. We have articulated in Part sdfkj an approach toWe set out in Part I the principle that social housing should attract a high degree of security of tenure. This social housing which is consistent with current policy concerns for social housing to provide for stable and diverse communities. This option, particularly if our proposals relating to probationary agreements are accepted,[3] would provide sufficient flexibility for social landlords to respond appropriately to local conditions, while remaining consistent with the broad approach.

                      11.10              In referring this project to us, the Department for Transport, Local Government and the Regions made it clear that this reference was the means by which the Government were taking forward their intention to look further at the possibility of a “single form of tenure for the social housing sector”.[4] Our provisional proposals in this paper clearly go well beyond that. But it is reasonable to observe that it is only this option for the use of the agreements in the social sector that really establishes what could be said to be a single legal status for the mainstream majority of what are now tenants of social landlords.

                      11.11              The fourth suggestedO option (4) is more prescriptive still. We consider that there is no justification for imposing requirements over and above those demanded by the standard type II agreement on charitable or other landlords who wish to provide housing on a not-for-profit basis but without recourse to state funding. This does of course mean that such landlords will be excluded from the summary eviction procedures that are available to social landlords who let on type II agreements for cases of anti social behaviour.[5] 

                      11.12              This analysis leads us to the conclusion that the only realistic options are either option (1) – free choice – andor option (3) – a requirement on both local authorities and registered social landlords (as recipients of state development funding) to use the type I agreement, subject to a range of exceptions.

                      11.13              Accordingly, we provisionally reject two of the four options available, option 2, to require local authorities generally to use the type I agreement, subject to specified exceptions, but to give other social landlords a free choice between using type I or type II agreements; and option 4, to require all social landlords, including purely private charities, generally to use type I agreements, subject to the specified exceptions.

                      11.14              We invite views as to which of the following two options would be preferred:

                                                        (1)      allowingall social landlords, including local authorities, free choice between using the type I or the type II agreement (option (1)); or

                                                        (2)      imposinge a statutory requirement on all local authorities and registered social landlords to use type I agreements, subject to a range of exceptions (option (3)).

                      11.15              If consultees respond in favour of option (3) if favoured, then it is necessary for there to be some elaboration onto identify the range and purpose of those exceptions to the statutory requirement.

Exceptions

Probationary agreements

                      11.16              We consider first the desirability of a general probationary agreement which could be used as a precursor to a type I agreement, replacing the introductory tenancy.

Introductory tenancies

                      11.17              The introductory tenancy regime provides local authorities – but not registered social landlords – with a means of imposing a low-security probationary period on tenants, before they are promoted to secure tenancies. But they operate inflexibly. First, once local authorities and housing action trusts have elected to operate introductory tenancies, every periodic tenancy entered into or adopted by the authority or trust must be an introductory tenancy.[6] Second, the introductory tenancy must last for one year after which it must become a secure tenancy.

                      11.18              During the period of the introductory tenancy, the landlord can seek a possession order from the county court subject to certain procedural requirements but without proving grounds. The procedural requirements[7] are different from the notice requirements for the termination of a secure tenancy[8] or one covered by the Protection from Eviction Act 1977, save that the notice must be served at least four weeks before it is intended to take effect. It must set out the landlord’s reasons for applying for the order, inform the tenant of the right to request a review of the landlord’s decision to seek an order for possession and of the time within which such a request must be made.[9] The tenant has 14 days from the service of the notice to request a review of the landlord’s decision.[10] Tenants have the right to attend the hearing and a right to be represented. The tenant may call witnesses and cross-examine the landlord’s witnesses. However the regulations do not give the tenant the right to know who may have complained about the anti social behaviour, or to force witnesses to attend, thus reducing potential witness intimidation. A housing officer, who may rely on hearsay evidence without having to identify the complainants, may present the landlord’s case.

                      11.19              Provided the landlord has served a notice in accordance with section 128 of the Housing Act 1996 and conducted a review, if requested, the court must make an order for possession.[11]

                      11.20              Although the introductory tenancy regime has been limited to local authority landlords and housing action trusts, registered social landlords have used assured shorthold tenancies as probationary tenancies in a similar way.

                      11.21              The interface between the introductory tenancy regime, the public law obligations of local authority landlords and the courts has been examined in a number of cases, as we discussed in Part V above. We consider that the result is a regime that is very much less effective than Parliament originally intended. The result of recent case law is that a decision by a local authority to terminate an introductory tenancy will only be lawful if it was a proportionate response to the actions of the tenant, and it will always be open to tenants to test proportionality in the Administrative Court. Procedurally, that requires the county court to adjourn the case to allow for an application for judicial review rather than order immediate possession, as originally intended by Parliament.[12]

A general probationary agreement

                      11.22              We are of the view that a more flexible general probationary agreement should be available. We see no reason why it should not apply equally to all social landlords, other than those not-for-profit organisations not in receipt of public funds. Use of the general probationary agreement would be available to landlords wishing to test the capacity of occupiers to comply with the full range of occupiers’ responsibilities, not just those in relation to anti social behaviour.

                      11.23              There are two principal ingredients to our proposed probationary period. The first is to ensure that social landlords have available a low-security agreement to deal with general probationary matters. The second is a summary possession procedure to remove seriously anti social tenants.

                      11.24              We consider that the type II agreement, as outlined in Part VIII above, would provide an appropriate vehicle for use as a probationary agreement, but only if there were no six months’ moratorium.[13] The point of a probationary agreement is that the agreement will come to an early end if the occupier fails to live up to required standards or fails to respond to other social service intervention designed to improve their behaviour. A provision which blocked the termination of the agreement for six months would not meet that requirement.[14]

                      11.25              If the six months’ moratorium is retained, then we would propose an adaptation of the type II agreement specifically for this probationary purpose, so that there was no moratorium.

                      11.26              We provisionally propose that a general probationary agreement be available to local authorities and registered social landlords.

                      11.27              If local authorities and registered social landlords are given freedom to choose when to use type I or type II agreement, and the six months’ moratorium is removed, there is no need to make additional provisional proposals in respect of a general probationary period. Landlords will have the freedom to act that they require.

                      11.28              If local authorities and registered social landlords are required to use type I agreements, subject to specific exceptions allowing them to use type II agreements (option (3)), or if there is general freedom of choice (option 1), but the six months’ moratorium is retained, we provisionally propose that

                                                        (1)      local authorities and registered social landlords should be able to let to a new occupier on a probationary agreement for up to 12 months (in the first instance); and

                                                        (2)      if there is no six months’ moratorium, the type II agreement would be suitable as the general probationary agreement, but that if there is a moratorium, local authorities and registered landlords should be able to use a variant of the type II agreement that did not include the moratorium, for the purpose of creating a probationary agreement.

                      11.29              In what follows, we refer to a “probationary agreement” to mean any of the types so proposed.

Use of the probationary agreement

                      11.30              The current requirement that all new tenancies must come within the introductory tenancy scheme is unnecessarily inflexible. Social landlords should have greater discretion to use probationary agreements as local conditions require. A landlord could adopt a general policy of always using them, or of using them for only certain categories of occupier or even of making a decision on a case by case basis.

                      11.31              Normal administrative law remedies would be available to prevent capricious, unfair or discriminatory decision making where the landlord was a local authority or – depending on the decision of the court in a particular case – a registered social landlord.

                      11.32              The current introductory tenancy regime makes provision for a single period of 12 months. We propose using the same time limit as a standard from which divergences may be made in appropriate circumstances. In the first place, it should always be possible to promote an occupier to a type I agreement earlier than 12 months after the start of the probationary period. Again, the objective is flexibility.

                      11.33              Authorities may wish to have a standard of only six months’ probation for all occupiers or for certain categories of occupiers, where others are required to undergo a 12 month period. We can imagine that some authorities might wish to put all occupiers on the 12 months probationary period, but have a scheme allowing promotion at six months for exemplary occupiers.

                      11.34              At the other end of the probationary period, we consider that there should be some scope for extending the period for occupiers whose behaviour has caused concern, but whom the landlord does not think it necessary or desirable to evict. Such a provision would give landlords a third choice at the end of the probationary period, so that they were not required to either evict or promote. It should therefore result in fewer unnecessary evictions, and fewer inappropriate promotions.

                      11.35              We provisionally propose that, after 12 months on a probationary type II agreement, a landlord could extend the probationary period for a further 6 months, but only if it is of the opinion that the behaviour of the tenant was such as to warrant such an extension. This limit on the discretion of the landlord is important. It would mean that 18 month probationary agreements could not feature in a general probation policy adopted by the local authority, since it would have to be decided on a case by case basis, and public law remedies would be available to prevent the misuse of the power.

                      11.36              We invite views on the periods suggested here. Would an 18 month period for the initial probationary agreement be more appropriate, with a six month extended period? On one view it would promote further flexibility. On the other hand, it may be objected that, particularly if there is serious anti social behaviour, then the landlord should address it swiftly and a two year period undermines that objective.

General probationary agreements and registered social landlords

                      11.37              While administrative law remedies are available to enforce the fair application of probationary agreement policies by local authorities, the position in relation to registered social landlords is less certain.[15] If a registered landlord is found not to be a public body, in relation to a particular occupier, then these remedies would not be available.

                      11.38              An alternative would be to give the Housing Corporation the power to approve and regulate schemes for use of probationary agreements. Housing Corporation approval of probationary agreement schemes would partly compensate for the lack of administrative law remedies in respect of non-public body registered social landlords. A further advantage would be that it could be used to allow registered social landlords a greater degree of flexibility in developing new approaches to the probationary use of agreements. Such licensed innovation could then feed back into the mainstream procedure. On the other hand, such an approach would go against our preference for equal treatment of local authorities and registered social landlords.

                      11.39              We invite views on whether the Housing Corporation should be given powers to approve probationary agreement schemes for use by registered social landlords.

Judicial review

                      11.40              As we have seen in Part V, decisions by “public authorities” to terminate a probationary agreement could be subject to challenge, on the basis of proportionality, by way of judicial review.[16] We consider that it would be more appropriate to locate such a challenge in the county court rather than the Administrative Court. The county court is closer and more accessible to both parties and their lawyers, and it has regular experience in housing cases. It would also be cheaper for the jurisdiction to lie with the county court. Such an approach would be similar to that recently adopted in respect of homelessness determinations.[17]

                      11.41              This jurisdiction has attracted the attention of the Court of Appeal in two recent cases. In one, the Court considered, obiter, that the terms of the reviewing power – on a point of law – were insufficiently wide to render the required internal review procedure compliant with Article 6, where the determination required the finding of primary facts. In the second, the Court found that the procedure was compliant. A judicial-review type process was adequate because the subject matter of the scheme as a whole did not “generally or systematically” require primary fact finding.[18] The Court considered that the county court was able to subject the decision arrived at in the internal review to “a close and rigorous analysis”. It may well be that the case law in this area will continue to develop.

                      11.42              It would seem prudent to ensure that the provision creating the jurisdiction is sufficiently wide to allow the county court to develop whatever level of intensity of review is necessary to satisfy the requirements of the Human Rights Act 1998.

                      11.43              We provisionally propose that challenges to a landlord’s decisions under a probationary agreement scheme should be to the county court, not the Administrative Court.

                      11.44              We further recommend that the powers of the county court should be framed sufficiently flexibly to allow it to develop whatever level of intensity of review by the landlord is required under human rights law.

Agreements falling outside the scope of the type I agreement.

                      11.45              The second group of exceptions derives from our provisional proposals that the type II agreement should be used for a range of letting arrangements that are currently excluded from the secure tenancy regime and which would not be appropriate as type I agreements. Part IX providess a full discussion of these exclusions.

                      11.46              The number of exclusions that can be brought into our scheme as type II agreements depends on whether or not there is to be a six months’ moratorium. Accordingly, in some cases, what follows should be read as applying only if the relevant category is in the system at all, which in turn depends on whether or not the moratorium is to be a feature of type II agreements.

                      11.47              In summary if there is no six months’ moratorium, we provisionally proposeed that   social landlords should be permitted to let on type II agreements to:

                                                        (1)      to service occupiers,

                                                        (2)      to asylum seekers,

                                                        (3)      to homeless persons to whom the local authority owes duties under Part VII to the Housing Act 1996, and

                                                        (4)      in circumstances where the social landlord is letting on a temporary basis as currently set out in paragraphs 3 and 5 to 7 of Schedule 1 of the Housing Act 1985.

                      11.48              In Part ##IX we also provisionally proposed that certain letting arrangements should be wholly excluded from statutory protection. These arrangements are similar to the current exclusions from the Protection from Eviction Act 1977.

                      11.49              We have provisionally proposed a modernised version of the hostel exception which would be available for all “not for profit” landlords who wish to provide supported housing for vulnerable people, which should fall within the type II agreement.[19]

                      11.50              Further, we raise the question whether asylum seekers currently excluded from the Protection from Eviction Act should be included within our scheme onfor type II agreements.[20]

Other cases

                      11.51              There may be other circumstances when local authorities and registered social landlords require additional flexibility. For example, when letting to key public sector workers in health and education or other groups who have a particular localised need for accommodation, social landlords should arguably be able to decide whether to let on type II or type I agreements dependent on local circumstances.

                      11.52              It may also be advantageous for social landlords to be able to let a proportion of their properties on a commercial type II agreementbasis in order to provide housing for young employed people, to promote more diverse communities and to provide an income stream for maintenance or development purposes.

                      11.53              We invite views on the other circumstances in which social landlords should be entitled to use type II agreements.

Default position

                      11.54              If a social landlord fails to provide a written agreement[21] or the written agreement provided does not make it clear which agreement type is being granted, then we consider that the agreement should be by default a type I agreement. Our presumption of type I agreements rests upon the critical role of social landlords in the provision of long term rented housingand continues the long tradition in housing law of favouring the occupier when the landlord has failed to produce the correct paperwork.

                      11.55              The default position should apply regardless of the response to our proposals on the limitations on the use of agreement types, set out in paragraphs 11.13 and 11.14 above, and whether or not the occupier falls within an exception to our proposals for the scope of the type I agreement regime.

                      11.56              We provisionally proposeWe provisionally propose that in the absence of a clear written agreement specifying the agreement type social landlords will be presumed to let on type I agreements..

Private landlords

                      11.57              As has been explained already, one of the objectives of these proposals is to create a scheme in which different types of landlords can use different types of agreement. Any constraints on use should, where possible, not be part of the definition of the agreement type, but be contained in separate provisions. These might be in separate legislative provisions, in a Sstatutory Iinstrument or in a regulator’s requirements.

                      11.58              The private rented sector does not have a direct regulator in the sense that the local authority sector has the Department for Transport, Local Government and the Regions (and the Housing Inspectorate and the Local Government Ombudsman) or the registered social landlord sector has the Housing Corporation (and the Independent Housing Ombudsman[22]). It may therefore currently be more appropriaterealistic for any constraints on private landlords to be contained in the Act or a Sstatutory iInstrument, rather than in a regulator’s requirements. This might change if the role of the Housing Corporation were to develop into a more broadly based housing regulator, setting industry standards across the board.

                      11.59              NeverthelessAt present, private landlords are subject to some regulatory activity, mostly from local authorities. In particular,local authorities are responsible for takeing action following allegations of illegal eviction and harassment; they deal with environmental health issues, which may include aspects of private occupier nuisance, noise and the like; they administer housing benefit, a key issue for many private landlords; trading standards authorities are responsible for taking action for alleged breaches of unfair contract terms regulations.

                      11.60              In addition, housing authorities are directly responsible where there are licensing requirements. These are currently limited to houses in multiple occupation but may be extended to other private landlords in areas of low demand. Many local authorities are also involved in voluntary accreditation and deposit schemes.

                      11.1              At some stage in the future it may be possible to foresee the emergence of a more “holistic” regulatory body which would take on the role of deciding on rules as to which types of tenancy can be used by private landlords. However such a body does not at present exist.

                      11.61              We provisionally proposeWe provisionally propose that any restrictions on which types of agreement can be used by private landlords should, at least for the time being, be contained in statutory provisions.

Type I agreements

                      11.62              Having adopted the principle of landlord neutrality, our starting point is to assume all types of agreement should in principle be available to private landlords to use. Given that the law should allow markets to develop, we believe private landlords should be able to grant type I agreements if they choose to do so.

                      11.1              We appreciate that the current state of the housing market means that hardly any private landlords choose to offer fully assured tenancies instead of assured shortholds. But we see no reason to enshrine this current practice in law. We believe the way should be left open in case a differently structured rented housing market should develop.

                      11.63               

                      11.64              We provisionally proposeWe provisionally propose that private landlords should able to grant type I agreements if they choose, but should not be required to do so.

Type II agreements

                      11.65              We anticipate that type II agreements will most commonly be used in the private rented sector. The type II agreement, as explained above, bears a close resemblance to the current assured shorthold tenancy. Both the previous Conservative and the present Labour Government have believed this should be available as the  default agreement forto private landlords.  as a default tenancy. There are differences between type II agreements and assured shorthold tenancies, particularly if there were no six months’moratoriumin the former. Nevertheless we believe that they are sufficiently similar to justify similar treatment on the issue of whether they should be regarded as the default agreement infor the private sector.

                      11.1              We are not aware of any evidence that private landlords’ awareness of the law has developed to the point where no default position would be needed because they could be relied on to make a appropriate choice.

                      11.66              While we are putting emphasis on the idea that landlords should have to putting agreements into writing and that they will be encouraged to use a readily available form of default agreement. However, we anticipate from past experience that, even if our new scheme is successful, there will still be a substantial minority ofsome private landlords, at least initially, who will fail to make a clearchoice of type of agreement. It appears therefore thatWe think there still needs to be a default position.

                      11.67              We provisionally proposeWe provisionally propose that agreements granted by private landlords should be type II unless the landlord states that it is to be type I..

                      11.68              We deal with anti social behaviour later in this paper in Part XIII. We suggest there a summary procedure in type II agreements for dealing with anti social behaviour. We also explain there the reasons for our view that this summary procedure should not be available to private landlords.[23]

Scope for operation of the market

                      11.69              The type IIagreement would therefore be abe the basis of regulating the private sector. The default terms and the Unfair Terms in Consumer Contracts Regulations1999 would provide minimum rights and a system of fairness and transparency. We hope that use of the defaultmodel agreements would become general because of their widespread availability and their deemed fairness. We hope that the increase in clarity will increase confidence and encourage more people to enter the rented sector as landlords, as well as making it more attractive for occupiers.

                      11.70              Our new legal framework may not, on its own, lead to a major increase in the size of the private rented sector. It should providethe foundation for any revival. Our proposals maintain the freedom of landlords to enhance by contract the levels of protection afforded by the type II agreement, grant more than the minimum type II tenancy if they so choose. They will be able to grant contractual fixed terms of whatever length[do we really mean this? Where do we draw the borderline with leasehold?] up to 21 years in type II agreements, or type I agreements if they wish to caterprovide for an even longer periods of residencegreater degree of security of tenure..

                      11.71              They will be able to make flexible use of these options. For instance, if they wish to have a probationary period (whether probationary in terms of assessing the occupier or assessing the market or both) they could start with a periodic type II before moving to a fixed term for the same occupier, and then giving longer fixed terms as their confidence and commitment to the sector or the occupierincreased.

Incentives for use of fixed terms

                      11.72              Six month fixed terms appear still to be being used by many landlords, either out of habit or ignorance of the changes effected by the Housing Act 1996. We believe that the ready availability of our model agreements should help to encourage private landlords (and their agents) to abandon out-moded habits, and their clarity should help to cure any ignorance.

                      11.73              Some landlords, particularly those letting to students or those where there is a shortage of demand, already feel an incentive to give fixed terms so that they can be more confident of guaranteeing their income and avoiding the costs of finding new occupiers.

                      11.74              There remains a problem of the effect of the relationship between the Unfair Terms Regulations and section 15 of the Housing Act 1988.[24] We will return to this issue in our later consultation paper on succession and transmission of agreements.