Tenancy Agreements 33 days of tips – Day 4 – tenancy types

Legal background

In their consultation paper on housing law, the Law Commission identified 13 different tenancy/occupation types, and their recommendation was to cut these down to two. This never happened in England (although the Renting Homes (Wales) Act 2016 will change things in Wales when it comes into force).  So we are left with an over complicated and confusing system.

This series (as discussed on Day 1) only covers residential tenancies, and the series is really just about tenancy agreements for the private rented sector.  Note that I am not going to discuss the Welsh reforms as they are not yet in force.

Common law and statute

In this country (England and Wales) we have what is known as the ‘common law’. This is the underlying law which was built up over centuries by the Judges hearing cases. This still happens, but it is often hard for non-lawyers to find out about (without buying expensive legal textbooks), as it is set out mostly in the legal case reports, and develops from case to case (although most important cases are now reported online on BAILII).

However often this underlying common law is changed by an act of Parliament/legislation which imposes a different set of rules, which apply either in all circumstances or sometimes just in some circumstances.  So our law is a mixture of the common law and statute.

Tenancy types

This is the case with tenancies. There are still ‘common law’ tenancies, but in most cases, a tenancy will be regulated by one or other of the two main ‘statutory codes’ which have been set up by legislation.

The older code is set out in the Rent Act 1977, which applies to tenancies created before 15 January 1989,  The Housing Act 1988 applies to tenancies created after that date.  15 January 1989 is, therefore, an important watershed date in housing law.

• Rent Act tenancies are often known as protected tenancies.
• Housing Act 1988 tenancies are generally either assured tenancies or assured shorthold tenancies (ASTs).
• So when I say ‘common law tenancies’ I mean tenancies where neither of these statutory codes set up by these two acts applies.

This will be mostly in the following circumstances:

• Where the tenant is a limited company (because the statutory codes were set up to protect individuals, not businesses)

• Where the tenant occupies self-contained accommodation in the same building where the landlord lives (provided the landlord has lived there since before the tenancy starts and provided the building is not a purpose built block of flats where the landlord lives in one flat and the tenant in another)

• Where the rent is either higher or lower than levels set out in the legislation. This is currently under £250 (£1,000 in London) or over £100,000, pa.  Note that prior to December 2010 the upper limit was £25,000 and many tenancies changed from common law to assured shorthold tenancies at that time.

• Where the tenant is a student who is going to study a course provided by his landlord, where the landlord is “a specified educational institution” (which includes most colleges and universities)

• Holiday lets which are where a property is let for the purpose of a holiday

• There will also be a common law tenancy where the tenant has lost the protection of the act. This will normally be because they have moved out and sub-let it to someone else.  Or it could happen if the annual rent is increased to above the current limit of £100,00.

The importance of selecting the right tenancy agreement

It is important to know what sort of tenancy you have, as you need to select the correct type of tenancy agreement.

If, for example, you use a standard AST for a common law tenancy, this will not mean that somehow you have no tenancy at all.

However, it will be misleading, as some of the terms will be irrelevant. Also, some things, such as eviction and the treatment of tenancy deposits, vary according to the tenancy type, so it is important for everyone to know what tenancy type they are dealing with. It is good practice to make this clear in the tenancy agreement.

For example, if a tenant with a resident landlord is served a notice to quit and takes legal advice on it, the tenant may not tell the legal adviser that the landlord lives in the same building. The adviser, not realising that this is a common law tenancy, particularly if the tenancy agreement appears to be for an assured shorthold tenancy, may then advise the tenant that the notice served is incorrect and tell him to defend the proceedings for possession.

Although the tenant will not succeed in his defence (assuming the landlord has got things right) the defence will cause delay and additional work for the landlord, and will probably cost him extra in legal fees. This would have been avoided if the tenancy agreement had stated clearly that the tenancy is not an AST because there is a resident landlord.  The advisor would then have given the correct advice to the tenant.

Note that on my Landlord Law site, I have a >> Which Tenancy agreement ‘trail’ which will guide you by question and answer, to find out which is the most appropriate type of agreement for your situation.

Tomorrow we will be looking at shared houses