There are a number of types of residential tenancies in relation to which there are statutory provisions, as well as common law tenancies. This note provides a brief background to the law on renting residential property, before focussing on the main types of tenancy available. The law in this area is, however, likely to change. In 2015 the Renting Homes (Wales) Bill was introduced in the National Assembly, a Bill that is intended to make wholesale changes to the way people rent homes.
Background: the Rent Acts
The Rent Acts were the primary form of statutory protection in the private rented sector from 1915 until 1988. The purpose of the statutory protection afforded by the Rent Acts was to mitigate the hardship to tenants in the private sector which resulted from a scarcity of housing. The Rent Acts provided three types of protection: firstly, restrictions on rent being raised above a permitted statutory maximum; secondly, security of tenure as landlords required a court order, which was only granted on certain grounds, to evict a tenant; and thirdly, prohibiting the charging of ‘premiums’. A ‘premium’ is essentially a charge associated with the granting, continuation, renewal or assignment of a tenancy.
The Rent Acts were phased out, starting with the creation of assured and assured shorthold tenancies under the Housing Act 1988, such that only the Rent Act 1977 now continues to have effect. The protections afforded by the Rent Act 1977 now apply only to a minority of private sector tenancies which meet certain conditions and were entered into before 15 January 1989.
Secure tenancies are provided for by Part 4 of the Housing Act 1985 (HA 1985). These are the principal type of tenancy granted by local authorities and certain other public sector bodies. A tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy where the conditions in sections 80 and 81 of HA 1985 are satisfied. Secure tenants in general have security of tenure, certain rights of succession, certain rights to assign their tenancies, and the right to buy their homes.
Security of tenure
Secure tenants have security of tenure. This means that the tenancy can only be brought to an end (and the tenants evicted) in certain ways (see section 82 of HA 1985):
1) by an order of the court for possession of the house;
2) by a demotion order; or
3) where the tenancy is for a term certain, by an order determining the term certain (though even if a term certain is brought to an end, unless the court orders both termination and possession to take effect on the same date a periodic tenancy will follow).
The grounds on which the landlord can apply to the court for an order to bring the tenancy to an end can be found in sections 84 and 84A of, and Schedules 2 and 2A to, HA 1985. Section 84 provides that a court may not make a possession order on one of the grounds set out in Schedule 2 unless it is satisfied that it is reasonable, or that there is suitable alternative accommodation for the tenant available, depending on the ground which is being relied upon.
Section 84A provides that the court must make an order if it is satisfied the conditions in that ground, which relate to serious anti-social behaviour, are met. Although the court does not have any discretion to decide not to make such an order if the conditions are met, the court’s decision is subject to any available defence of the tenant which is based on their rights under the European Convention on Human Rights. There is also a requirement in section 85ZA that the landlord must, if the tenant requests it, carry out a review of their decision to seek possession on the grounds of serious anti-social behaviour under section 84A. This reflects case law, in particular the case of Manchester City Council v Pinnock  UKSC 45, which held that tenants of public authorities have the right to raise the proportionality of a decision to evict as a defence to possession proceedings.
There are notice requirements and procedures that need to be followed by a landlord in seeking possession (see sections 83 and 83ZA of HA 1985).
Right to buy
Part 5 of HA 1985 provides secure tenants with the right either to buy the freehold, or to be granted a lease, of their dwelling house (though this is subject to certain conditions set out in that Part being met). A tenant must have been a public sector tenant for the requisite ‘qualifying period’ which is currently five years (see section 119 of, and Schedule 4 to, HA 1985). However, if the tenant was a public sector tenant before 18 January 2005 the qualifying period is two years (see sections 180(5) and (6) of Housing Act 2004 (HA 2004)). Some properties are exempt from the right to buy (see section 119 of, and Schedule 5 to, HA 1985).
Secure tenants who exercise their right to buy their freehold are entitled to a discount on its value. The amount of discount to which a person is entitled is different in Wales compared with England, and is also different depending on when the person in question became a public sector tenant. Section 129 of HA 1985 sets out the relevant discount as well as a power for the Welsh Ministers to specify different percentages, or maximum and minimum percentage discounts to be applied in certain prescribed cases. The current discount is provided for in section 129 of HA 1985, as amended by section 180 of HA 2004:
- for public sector tenancies entered into before 18 January 2005:
- in the case of a house, the discount is 32% for up to three years as a public sector tenant, plus 1% per year thereafter to a maximum of 60%,
- and in the case of a flat, the discount is 44% for up to three years, plus 2% per year thereafter to a maximum of 70%;
- for public sector tenancies entered into on or after 18 January 2005:
- in the case of a house, the discount is 35% for up to three years as a public sector tenant, plus 1% per year thereafter, to a maximum of 60%,
- in the case of a flat, the discount is 50% for up to three years, plus 2% per year thereafter to a maximum of 70%.
There are also provisions which relate to the calculation of the discount where a discount has been claimed previously (section 130 of HA 1985). In addition, section 131 of HA 1985 provides for limits on the amount of discount that can be claimed. In particular the so called 'cost floor' provisions limit the right to buy discount to ensure the purchase price reflects what has been spent on building, buying, repairing or maintaining a property over a period of ten years. The Welsh Ministers may make an order under section 131 of HA 1985 specifying the time to be taken into account in limiting the discount, and the maximum sum by which the purchase price can be reduced. The Housing (Right to Buy) (Limits on Discount) (Wales) Order 1999 was made under section 131, and is amended with effect from 14 July 2015 by the Housing (Right to buy and right to acquire)(Limits on Discount)(Amendment)(Wales) Order 2015. It prescribes that the maximum amount of (financial) discount available in Wales is £8,000.
Where a local authority denies that a tenant is entitled to exercise the right to buy, the tenant may apply to the County Court for it to determine any question arising under Part 5 of HA 1985 (section 181 of HA 1985).
The right to buy may be exercised by certain family members (section 123 of HA 1985).
There are also set procedures and time limits that need to be followed by tenants and landlords in seeking to exercise the right to buy.
There may also be restrictive covenants attached to the sale of a home under the right to buy. For example, if the property is sold within the first 10 years the former landlord must be offered the chance to buy the property, or, in certain areas the home must be sold to someone from the local area, see sections 156A and 157 of HA 1985 and the Housing (Right of First Refusal) (Wales) Regulations 2005 for further information.
Preserved right to buy
On the transfer of land to the private sector, for example where a local authority has transferred all of its housing stock to registered social landlords (also known as a ‘large scale voluntary transfer’), a secure tenant’s right to buy is 'preserved' (see sections 171A to 171H of HA 1985). The Housing (Preservation of Right to Buy) Regulations 1993, as amended by the Housing (Preservation of Right to Buy) (Amendment) (Wales) Regulations 2001, modify the provisions relating to the right to buy in relation to the preserved right to buy, by making further provision about cost floor provisions.
Suspension of right to buy
The Housing (Wales) Measure 2011 (HWM 2011) enables local authorities in Wales to apply to the Welsh Ministers to suspend the right to buy and related rights in the whole, or in certain parts of their area, or in relation to a particular type or types of social housing in the whole, or in certain parts, of its area. Before applying to the Welsh Ministers, a local authority must consult certain specified persons in their area (see section 2 of HWM 2011). HWM 2011 also inserted sections 122A and 122B of HA 1985 which deal with the handling of applications to exercise the right to buy whilst any suspension is being considered by the Welsh Ministers, or is in operation.
Demotion orders were introduced by the Anti-social Behaviour Act 2003 which inserted section 82A into HA 1985. The effect of a demotion order is that the secure tenancy is brought to an end and is replaced by a demoted tenancy. A demotion order can only be ordered by the court if it is satisfied the tenant, or a person residing in or visiting the dwelling house, has engaged, or threatened to engage in:
- housing related anti-social behaviour (as defined in section 153A of the Housing Act 1996 (HA 1996)); or
- conduct to which section 153B of HA 1996 applies (unlawful use of premises); and
- it is reasonable to make the order.
The provisions relating to demoted tenancies can be found in Part 5 of HA 1996. The tenant will remain in occupation of the dwelling house and any arrears of rent payable at the termination of the secure tenancy become payable under the demoted tenancy. A demoted tenancy will generally last for one year, during which time it is easier for the landlord to seek possession of the dwelling house if requested to do so. The court must grant an order for possession of a demoted tenancy if the relevant procedural requirements have been followed under section 143D of HA 1996. Although not specifically stated, as in the case of possession for serious anti-social behaviour under section 84ZA of HA 1985, the Court will take into account any relevant defence the tenant has on the basis of their rights under the European Convention on Human Rights. This is a result of the law as established by Manchester City Council v Pinnock  UKSC 45, which held that tenants of public authorities have the right to raise proportionality as a defence to possession proceedings.
There are certain succession and assignment rights in relation to demoted tenancies; see sections 143H to 143K of HA 1996.
A local authority (or housing action trust) may elect to operate an introductory tenancy regime (see Part 5 of the Housing Act 1996 (HA 1996)). If an authority is operating an introductory tenancy regime then instead of granting secure tenancies, a new tenant can be granted an introductory tenancy. An introductory tenancy lasts for a trial period of one year, extendable by six months after which the tenant will normally be granted a secure tenancy. In order to gain possession of a dwelling house subject to an introductory tenancy a landlord must follow certain procedural requirements: notice, including reasons, must be given and a review must be carried out by the landlord if requested by the tenant. As long as these requirements have been followed, the court must grant an order for possession if requested to do so (see section 127 of HA 1996). Although not specifically stated, as in the case of possession for serious anti-social behaviour under section 84ZA of the Housing Act 1985, the court will take into account any relevant defence the tenant has on the basis of their rights under the European Convention on Human Rights. This is a result of the law as established by Manchester City Council v Pinnock  UKSC 45, which held that tenants of public authorities have the right to raise proportionality as a defence to possession proceedings.
There are certain rights to succession and assignment of introductory tenancies, please see sections 131 to 134 of HA 1996.
The Housing Act 1988 (HA 1988) introduced assured tenancies. Assured, and in particular the related assured shorthold, tenancies are currently the standard tenancies in the private rented sector. An assured tenancy is granted where a house is let as a separate dwelling, and the tenant occupies the dwelling as their only or principal home, subject to certain exceptions (see section 1 of HA 1988). Schedule 1 to HA 1988 sets out the circumstances in which tenancies cannot be assured tenancies. This includes tenancies granted by certain landlords, for example local authorities (paragraph 12 of Schedule 1).
Assured tenants in general have security of tenure, certain rights of succession, certain rights to assign their tenancies, and the right to acquire their homes.
Assured tenancies are principally granted by registered social landlords (RSLs) (registered under Part 1 of the Housing Act 1996 (see section C1A)). Assured tenancies have a similar security of tenure (see section 5 of HA 1988) to secure tenancies in that they can only be brought to an end by:
- the landlord by obtaining a possession order from the court on certain specified grounds (see section 7 of, and Schedule 2 to, HA 1988) and by executing that order;
- the landlord obtaining a demotion order, which has the effect of making the assured tenancy an assured shorthold tenancy (see section 6A of HA 1988);
- in the case of a fixed term tenancy which contains power for the landlord to determine the tenancy in certain circumstances, the exercise of that power.
The grounds on which the landlord can apply to the court to obtain an order to bring the tenancy to an end are set out in Schedule 2 to HA 1988. Part 1 of Schedule 2 lists the grounds on which the Court must order possession if it is satisfied that the ground has been established, subject to any available defence of the tenant on the basis of their rights under the European Convention on Human Rights. Part 2 of Schedule 2 lists the grounds under which the Court may order possession if it considers it reasonable to do so.
There are also notice requirements and procedures that need to be followed by a landlord in seeking possession, see sections 8 and 8A of HA 1988.
Right to acquire
Section 16 of HA 1996 provides that assured tenants of RSLs have a right to acquire their home if it was originally developed using public money, subject to certain other conditions. The provisions in Part 5 of the Housing Act 1985 (HA 1985) relating to the right to buy apply also to the right to acquire as modified by the Housing (Right to Acquire) Regulations 1997. In particular, these Regulations:
- remove the exceptions to the right to buy in paragraphs 1, 3 and 11 of Schedule 5 to HA 1985 (charities; certain housing associations; certain dwelling houses for the elderly);
- add exceptions to the right to acquire in paragraphs 1A, 9A and 13 of Schedule 5 (dwelling houses in designated rural areas; dwelling houses for persons with special needs; dwelling houses charged with debts equal to or greater than the purchase price plus discount);
- provide for the tenant to acquire the dwelling house at a discount as specified in an order made by the Welsh Ministers under section 17 of the Housing Act 1996. Under the Housing (Right to Acquire) (Discount) (Wales) Order 1997, which is amended with effect from 14 July 2015 by the Housing (Right to Buy and Right to Acquire) (Limits on Discount) (Amendment) (Wales) Order 2015, the maximum discount available in Wales will be £8000.
The Housing (Wales) Measure 2011 discussed above in relation to the right to buy allows a local authority to apply to the Welsh Ministers to suspend the right to acquire in its area (see the paragraphs above relating to right to buy for more information).
Assured shorthold tenancy
An assured shorthold tenancy (AST) is an assured tenancy which can be terminated on notice, in other words without having specific grounds for obtaining possession. ASTs are often granted for a fixed term, often for 6 months or a year, on the expiry of which, an AST will automatically turn into a statutory assured periodic tenancy, operating on the same conditions as the fixed term tenancy if the tenant remains in occupation (see section 5 of the Housing Act 1988 (HA 1988)).
As an AST is an assured tenancy, the grounds for possession in Schedule 2 to HA 1988 are available to a landlord seeking possession, however, the landlord may also terminate the tenancy by giving the appropriate notice to obtain a court order for possession. This is provided for in section 21 of HA 1988 and is commonly known as serving a 'section 21 notice'. The landlord cannot give notice under section 21 unless, if a fixed term tenancy, the fixed term has expired, and the landlord is required to give at least 2 months notice of possession.
In relation to an assured periodic shorthold tenancy, the court cannot grant an order for possession to take effect earlier than six months after the beginning of the tenancy.
Due to this flexibility ASTs are commonly granted in the private sector. In addition, Registered Social Landlords commonly use ASTs in a similar way to introductory tenancies, as a trial period for new tenants.
Any assured tenancy granted on or after the 28 February 1997 is automatically an AST, unless certain conditions are fulfilled (see section 19A of, and Schedule 2A to, HA 1988).