by Delyth Williams
The Housing Act 1988, some parts of which come into force on January 15 1989, contains six Parts, 141 sections and 18 Schedules and makes significant changes both to the law of landlord and tenant and to housing law. This article attempts to draw the practitioner’s attention to the main changes but cannot hope to discuss each element of the Act in great detail and the reader is advised to make reference to the Act before embarking on any course of action within its scope.
The Act in outline
The 1988 Act comprises the following Parts:
- Part I, dealing with rented accommodation and, in particular, the introduction of assured tenancies, assured shorthold tenancies and assured agricultural occupancies and the phasing out of the existing Rent Act regime under the Rent Act 1977.
- Part II, consisting of changes to the permissible purposes, objects or powers of housing associations and to the functions of the Housing Corporation (in relation to grants) and dealing with the establishment of a body called “Housing for Wales” as a successor to the Housing Corporation in Wales.
- Part III, establishing the notion of housing action trust areas within which it is expedient to establish a housing action trust. Both the housing action trust areas and the housing action trusts are to be designated by the Secretary of State for the Environment.
- Part IV, conferring on any approved person the right to acquire from public sector landlord the fee simple estate in any buildings each of which comprises or contains one or more dwelling-houses which are occupied by qualifying tenants of the public sector landlord.
- Part V, dealing with a multitude of miscellaneous matters including, inter alia, changes to the Landlord and Tenant Act 1985 regarding repairing obligations in short leases; amendments to the Landlord and Tenant Act 1987; changes to the appointment of rent officers; changes to the “right to buy” under the Housing Act 1985; and changes to repair notices and improvement grants.
Commencement of the Act
The commencement dates of the various Parts of the 1988 Act are as follows:
- Parts I and V (other than sections 119, 122, 124, 128, 129, 132, 133, 134, 135 and 138 onwards) come into force on January 15 1989.
- Parts II and IV and sections 119, 122, 124, 128, 135 and 140 come into force on the day(s) appointed by statutory instrument(s). The Housing Act 1988 (Commencement no 1) Order 1988 (SI 1988 no 2056) brought sections 46(1) and (2), 47(2), 47(6) (so far as relating to section 47(2)), Schedule 5, various paragraphs of Schedule 17 and section 140(1) (so far as relating to these provisions) into effect on December 1 1988.
- Part III came into force on November 15 1988.
Rented accommodation: assured tenancies
The 1988 Act introduces the notion of the assured tenancy, which is subject to a new regime of security of tenure, much more favourable to the landlord than that under the Rent Act 1977 (as amended), and is not subject to the fair rent provisions of the 1977 Act. In addition, a new form of tenancy is introduced in the form of an assured shorthold tenancy (see p 30 post). For an assured tenancy to satisfy the conditions of the 1988 Act:
- it must be a tenancy under which a dwelling-house is let as a separate dwelling;
- the tenant(s) must be an individual(s);
- the tenant must occupy the dwelling-house as his only or principal home; and
- the tenancy must not be excluded under Schedule I.
In addition, the tenancy must satisfy the following tests as to the rateable value limits:
- the dwelling-house must have a rateable value not exceeding £750 (£1,500 in Greater London); and
- a rent must be payable which is not less than two-thirds of the rateable value.
It is to be noted that there are various exclusions from the operation of the assured tenancy regime, contained in Schedule 1 to the Act. These are too detailed to be considered in an article of this nature but are summarised in Appendix A (see p 64 post).
Two important factors for the practitioner to consider concerning the operation of the assured tenancy regime are security of tenure and the rent which can be obtained for a dwelling-house held under such a tenancy.
(A) Security of tenure
An assured tenancy cannot be brought to an end by the landlord except by obtaining an order of the court: section 5(1). The court cannot entertain proceedings for possession unless the landlord has served a notice on the tenant stating that he intends to bring proceedings for possession on one or more of the grounds specified in the notice. If a fixed term assured tenancy comes to an end either by effluxion of time or because the landlord has exercised the right to bring it to an end, a statutory periodic tenancy arises. However, a statutory periodic tenancy does not arise if the tenant quits the premises at the end of the term or an order of the court for possession is obtained or the tenant is granted another tenancy of the same dwelling-house.
The terms of the statutory periodic tenancy are the same as those of the fixed term tenancy immediately preceding it save that the power of the landlord (or tenant) to determine the tenancy is excluded. An order for possession cannot take effect at a time when the dwelling-house is let as an assured fixed term tenancy save in respect of Ground 2 or 8 in Part I of Schedule 2 or of any of the grounds in Part II other than Grounds 9 and 16 and the terms of the tenancy make provision for it to be brought to an end on the ground in question (whether that provision takes the form of a provision for re-entry, for forfeiture, for determination by notice or otherwise).
But where a fixed term tenancy has ended, any statutory periodic tenancy which has arisen on the ending of the fixed term tenancy shall end (without any notice and regardless of the period) on the day on which the order for possession takes place. Grounds for possession are divided into those in which the court has no discretion and those in which it has. The former are set out in Part I of Schedule 2 as Grounds 1-8; the latter are set out in Part II as Grounds 9-16.
Once the court is satisfied that any Part I ground is established it must make an order for possession. In the case, however, of Part II grounds, the position remains as it is under Part I of Schedule 15 to the Rent Act 1977 so that even though the court is satisfied that a ground is established, it may make an order only if it considers it is reasonable to do so.
(B) Rent under assured tenancies
At the date of the initial letting the rent under the assured tenancy is the amount agreed between the parties. In the case of assured periodic tenancies, there are provisions in sections 13-16 of the 1988 Act to enable a landlord under such a tenancy to serve a notice on the assured tenant proposing a new rent. This applies to a statutory periodic tenancy, and any other periodic tenancy which does not have a provision for reviewing the rent contained in it.
The new rent is to take effect at the beginning of a new period of the tenancy specified in the notice and such new period must not begin earlier than:
- the minimum period after the date of the service of the notice which is
- six months in the case of a yearly tenancy;
- one month in the case of a periodic tenancy of less than one month;
- a period equal to the period of the tenancy in any other case; and
- the first anniversary of the date on which the first period of the tenancy began (except in the case of a statutory periodic tenancy) and
- if the rent under the tenancy had previously been increased, by a notice under section 13(2) or a determination under section 14, the first anniversary of the date on which the increased rent took effect.
Where a notice to increase the rent is served, the new rent takes effect as specified in the notice unless:
- the tenant refers the notice to a rent assessment committee, or
- both parties agree on a variation of the rent which is different from that proposed.
The rent assessment committee is to determine the rent at which it considers that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy: section 14(1). In making its determination the rent assessment committee must disregard:
- any effect on the rent attributable to the granting of a tenancy to a sitting tenant;
- any increase in the value of the dwelling-house attributable to a relevant improvement carried out by a person who at the time it was carried out was the tenant, if the improvement —
- was carried out otherwise than in pursuance of an obligation to his immediate landlord, or
- was carried out pursuant to an obligation to his immediate landlord being an obligation which did not relate to the specific improvement concerned but arose by reference to consent given to the carrying out of that improvement; and
- any reduction in the value of the dwelling-house attributable to a failure by the tenant to comply with any terms of the tenancy.
It is possible for the landlord and tenant under an assured tenancy to vary by agreement any term of the tenancy including a term relating to rent: section 13(5). In the case of a fixed term assured tenancy the provisions of section 13(2) of the 1988 Act do not apply.
(C) Fixing the terms of the statutory periodic tenancy
In the case of a statutory periodic tenancy the landlord may serve on the tenant (or vice versa) a notice proposing terms of the statutory periodic tenancy which are different from the terms of the expired fixed term assured tenancy (as modified by section 5(3)(e) of the 1988 Act). This notice must be served not later than the first anniversary on which the former fixed term assured tenancy came to an end; section 6(2).
Where the notice has been served, the landlord or tenant may, within a period of three months, refer the notice to a rent assessment committee. If the matter is not referred, the proposed terms become the terms of the statutory periodic tenancy. If the matter is referred, the rent assessment committee considers whether those terms are such as might reasonably be expected to be found in an assured periodic tenancy of the dwelling-house concerned. The rent assessment committee may make an adjustment of the rent to take account of the terms so determined.
Rented accommodation: assured shorthold tenancies
The 1988 Act introduces a new form of tenancy entitled an assured shorthold tenancy which provides the landlord with a facility for repossessing the demised premises at the end of the term. The provisions also allow the tenant to refer the question of the rent payable under the assured shorthold tenancy to a rent assessment committee if the tenant considers that the rent payable is significantly in excess of rents payable under either assured tenancies or assured shorthold tenancies in the locality.
A tenancy is an assured shorthold tenancy if the following conditions are met:
- it is granted for a term certain of not less than six months; and
- a notice is served which is one which
- is in such form as may be prescribed;
- is served before the assured tenancy is entered into;
- is served by the person who is to be the landlord under the assured tenancy on the person who is to be the tenant under that tenancy; and
- states that the assured tenancy to which it relates is to be a shorthold tenancy.
In general, the same rules apply to the determination of the rent, by a rent assessment committee, under an assured shorthold tenancy as in the case of an assured tenancy: section 20(7). The rent assessment committee has two functions in the case of an assured shorthold tenancy, namely
- the determination of the rent following a notice served by the landlord proposing an increase in rent and
- the determination of the rent where the tenant considers that the rent payable under the tenancy is significantly higher than the rents payable under assured or assured shorthold tenancies of similar dwelling-houses in the locality.
It appears that the disregards in section 14(2) do not apply to the matters under section 22. If a tenant under an assured shorthold tenancy has received a notice proposing a new rent which satisfies section 13(2) of the 1988 Act an assured shorthold tenant may refer the notice to a rent assessment committee. The rent assessment committee is to determine the rent at which it considers that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy: section 14(1).
If a tenant under an assured shorthold tenancy which satisfies the qualifying conditions outlined in section 20 considers that the rent payable under the tenancy is significantly higher than the rents payable under assured tenancies or assured shorthold tenancies of similar dwelling-houses in the locality, he may make an application to the rent assessment committee for the determination of the rent which, in the committee’s opinion, the landlord might reasonably be expected to obtain under the assured shorthold tenancy: section 22(1).
A landlord under an assured shorthold tenancy can recover possession under the provisions of either sections 5-12 and Schedule 2 or section 21. Under section 21, on or after the coming to an end of a fixed term assured shorthold tenancy a court must make an order for possession if it is satisfied (section 21(1)(a) and (b)):
- that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than a statutory periodic tenancy; and
- the landlord or, in the case of joint landlords, at least one of them has given to the tenant not less than two months’ notice stating that he requires possession of the dwelling-house.
The notice referred to in section 21(1)(b) may be given before or on the day on which the tenancy comes to an end and notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises. If the court makes an order for possession of a dwelling-house under section 21 any statutory periodic tenancy which has arisen on the coming to an end of the assured shorthold tenancy ends on the day on which the order takes effect.
Under section 21(4)(a) and (b) there are provisions for dealing with the case of a periodic assured shorthold tenancy. In such a case the court must make an order for possession if it is satisfied that the landlord has given to the tenant a notice stating that, after a date specified in the notice (which must not be earlier than the earliest day on which the tenancy could be brought to an end by a notice to quit given by the landlord on the same day as that notice), which is to be (i) the last day of the period of the tenancy and (ii) not earlier than two months after the date the notice was given, possession of the dwelling-house is required.
It is to be noted that the Finance Act 1988 applies the Business Expansion Scheme to a company which makes available qualifying assured tenancies for a period of at least four years from the date it issues its BES shares. The BES scheme does not apply to assured shorthold tenancies.
There is also a modified form of assured tenancy introduced by sections 24 to 26 of the Housing Act 1988 in the form of an assured agricultural occupancy, which is a tenancy or licence of a dwelling-house which complies with the qualifying conditions and for which the agricultural worker condition is fulfilled.
Appendix A
Exclusions from assured tenancies
The following tenancies cannot be assured tenancies under section 1(1)(c) of and Schedule I to the 1988 Act:
- Tenancies entered into before the commencement of the 1988 Act
A tenancy entered into before, or pursuant to a contract made before the 1988 Act came into force, except, of course, most assured tenancies under the 1980 Act. In addition certain existing tenancies may become assured tenancies under section 38 where there is a transfer of the landlord’s interest from the public to the private sector or where a housing association tenancy ceases to be one.
- Tenancies of dwelling-houses with high rateable values
A tenancy under which the dwelling-house has for the time being a rateable value which,
- if it is in Greater London, exceeds £1,500; and
- if it is elsewhere, exceeds £750.
- Tenancies at a low rent
A tenancy under which either no rent is payable or the rent payable is less than two-thirds of the rateable value of the dwelling-house for the time being cannot be an assured tenancy. In determining whether a tenancy is a tenancy at a low rent there shall be disregarded such part (if any) of the sums payable by the tenant as is expressed (in whatever terms) to be payable in respect of rates, services, management, repairs, maintenance or insurance, unless it could not have been regarded by the parties to the tenancy as a part so payable.
- Business tenancies under the 1954 Act
A tenancy to which Pt II of the 1954 Act applies.
- Licensed premises
A tenancy under which the dwelling-house consists of or comprises premises licensed for the sale of intoxicating liquors for consumption on the premises.
- Tenancies of agricultural land
A tenancy under which agricultural land, exceeding 2 acres, is let together with the dwelling-house. In this context the term “agricultural land” is as defined in section 26(3)(a) of the General Rate Act 1967.
- Tenancies of agricultural holdings
A tenancy under which the dwelling-house
- is comprised in an agricultural holding within the meaning of the Agricultural Holdings Act 1986; and
- is occupied by the person responsible for the control (whether as tenant or as servant or agent of the tenant) of the farming of the holding.
- Lettings to students
A tenancy which is granted to a person who is pursuing, or intends to pursue, a course of study provided by a specified educational institution and is so granted either by that institution or by another specified institution or body of persons. This is intended to cover the situation where the institution owns the premises.
- Holiday lettings
A tenancy the purpose of which is to confer on the tenant the right to occupy the dwelling-house for a holiday.
- Resident landlords
A tenancy in respect of which the following conditions are fulfilled cannot be an assured tenancy where it is let by a resident landlord:
- that, subject to Part III of Schedule 1, the dwelling-house forms part only of a building and, except in a case where the dwelling-house also forms part of a flat, the building is not a purpose-built block of flats; and
- that the tenancy was granted by an individual who, at the time when the tenancy was granted, occupied as his only or principal home another dwelling-house which,
- in the case mentioned in paragraph (a) above, also formed part of the flat; or
- in any other case, also formed part of the building;
- that, subject to Part III of Schedule 1, at all times since the tenancy was granted the interest of the landlord under the tenancy has belonged to an individual who, at the time he owned that interest, occupied as his only or principal home another dwelling-house which,
- in the case mentioned in paragraph (a) above, also forms part of the flat; or
- in any other case, also forms part of the building; and
- that the tenancy is not one which is excluded from this sub-paragraph by sub-paragraph (3) below.
Sub-para (3) provides:
“(3) A tenancy (in this sub-paragraph referred to as ‘the new tenancy’) is excluded from sub-paragraph (1) above if —
- it is granted to a person (alone, or jointly with others) who, immediately before it was granted, was a tenant under an assured tenancy (in this sub-paragraph referred to as ‘the former tenancy’) of the same dwelling-house or of another dwelling-house which forms part of the building in question; and
- the landlord under the new tenancy and under the former tenancy is the same person or, if either of those tenancies is or was granted by two or more persons jointly, the same person is the landlord or one of the landlords under each tenancy.”
- Crown tenancies
A tenancy under which the interest of the landlord belongs to the Crown or to a government department or is held in trust for the Crown for the purposes of a government department cannot be an assured tenancy. But the exclusion does not apply where the interest belongs to the Crown and is under the management of the Crown Estate Commissioners.
- Local authority tenancies
A tenancy under which the interest of the landlord belongs to one of the following:
- a local authority, namely
- the council of a county, district or London borough;
- the Common Council of the City of London;
- the Council of the Isles of Scilly;
- the Broads Authority;
- the Inner London Education Authority; and
- a joint authority, within the meaning of the Local Government Act 1985.
- the Commission for the New Towns;
- the Development Board for Rural Wales;
- an urban development corporation established by an order under section 135 of the Local Government, Planning and Land Act 1980;
- a development corporation, within the meaning of the New Towns Act 1981;
- an authority established under section 10 of the Local Government Act 1985 (waste disposal authorities);
- a residuary body, within the meaning of the Local Government Act 1985;
- a fully mutual housing association, within the meaning of Part I of the Housing Associations Act 1985; or
- a housing action trust established under Part III of the 1988 Act.
- Transitional cases
The following existing tenancies cannot be assured tenancies:
- A protected tenancy, within the meaning of the Rent Act 1977
- A housing association tenancy, within the meaning of Part VI of the 1977 Act
- A secure tenancy
- Where a person is a protected occupier of a dwelling-house, within the meaning of the Rent (Agriculture) Act 1976, the relevant tenancy, within the meaning of that Act, by virtue of which he occupies the dwelling-house.
