Tenancy Factsheet15 August, 2007
This summary is by no means exhaustive and must not be relied upon without seeking further advice in relation to your individual circumstances. There are subtle reasons as to why a particular scenario may appear to fall squarely within a particular statutory regime when, in fact, it may be an exception to the rule. Accordingly, this note should only be read as a precursor to seeking further and more detailed legal advice.
Where a tenancy is of property that is or includes premises occupied by the tenant for the purposes of his business, the tenancy will be protected by the security of tenure provisions contained in Part II of the Landlord & Tenant Act 1954 (“the 1954 Act”) unless it falls within one of the few exceptions listed below. If the tenancy is protected by the 1954 Act, the tenant will be entitled to remain in occupation of the premises beyond the expiry of the fixed term of the tenancy and until such time as the tenancy is brought to an end by one of the methods set out in the 1954 Act or unless the tenancy is forfeited (terminated by the landlord as a result of a breach of the tenancy) or surrendered (where the tenant simply hands back and the landlord accepts the premises). The methods for termination set out in the Act are as follows:
Section 25 notice: Section 25 of the 1954 Act allows the landlord to terminate the tenancy by serving a written notice (in the prescribed form) specifying a termination date of no less than 6 and no more than 12 months from the date of service of the notice.
Section 26 request: Section 26 of the 1954 Act allows the tenant to bring the tenancy to an end by serving written notice requesting a new tenancy to commence on a date no less than 6 and no more than 12 months from the date of service of the notice.
Section 27 notice: Section 27 allows the tenant to terminate the tenancy (a) (where the fixed term not yet expired) by serving written notice terminating the tenancy 3 months thereafter (but no sooner than the expiry of the fixed term) or (b) (where the fixed term has expired) by serving at least 3 months’ notice to expire on a quarter day.
In the case of a Section 25 notice or Section 26 request, a tenant can apply to the court for a new tenancy (to commence on expiry of the Section 25 Notice and Section 26 Request) by following the strict timetable set out in the 1954 Act. Failure to comply strictly with the timetable will result in the tenant losing his right to renew the tenancy.
Provided that the tenant follows the timetable and applies for a new tenancy, the landlord can only oppose the application for a new tenancy if he can satisfy one of the grounds set out in the 1954 Act. The most commonly used grounds are (i) where the tenant has committed a substantial breach of the tenancy (ii) where the landlord intends to redevelop the premises or (iii) where the landlord intends to occupy the premises for his own use. There are other grounds set out in the Act and these should be considered carefully in the event that the landlord wishes to oppose an application for a new tenancy.
Not all tenancies of business premises will be protected by Part II of the 1954 Act. The following exclusions should be noted (although the list is not exhaustive):
- Agricultural tenancies
- Service tenancies (being tenancies to those employed by the landlord)
- A tenancy for a fixed term of 6 months or less (unless the tenant has the right to renew the tenancy beyond that period or unless the tenant has already been in occupation for a period that exceeds 12 months on expiry of the proposed term)
- Tenancies that are excluded by order of the court (it is possible to obtain an order from the court before the grant of the tenancy thereby excluding the security of tenure provisions outlined above; in other words, the tenancy will simply expire on expiry of the fixed term and the tenant will have no right to renew it) [NB: this procedure is due to change within the next 2 years from April 2002: legal advice should be sought as to the nature and timing of these changes]
- Arrangements that do not amount to a tenancy (eg a licence to occupy)
- Tenancies at will (a temporary arrangement whereby either party can terminate the tenancy without reason and without notice)
There are other arrangements that may or may not be protected by the 1954 Act. In cases of doubt, legal advice should be sought immediately and preferably before entering into a legal commitment of any kind.
In summary, three statutory regimes govern residential tenancies:
- The Rent Acts govern residential tenancies granted on or before 14 January 1989 (subject to several exceptions)
- The Housing Act 1988 (as amended by the Housing Act 1996) governs residential tenancies granted on or after 15 January 1989 (with several exceptions).
- The Housing Act 1985 governs residential tenancies granted by (public sector) landlords. This particular regime is not dealt with in this paper.
Rent Act Tenancies (Protected Tenancies)
A tenancy will be protected by the Rent Acts where it is granted on or before 14 January 1989 and where the tenancy is of a “dwellinghouse” let as a “separate” dwelling. Each of these terms have been interpreted in different ways over the years; accordingly, legal advice should be sought if there is any doubt as to whether or not a particular set of premises comprise a dwelling. In addition, the premises must be occupied as the tenant’s residence. Accordingly, a “holiday” home will not be protected by the Rent Acts.
One of the consequences of being protected by the Rent Acts is that, on termination of the contractual tenancy, the “protected” tenant becomes a “statutory” tenant (with security of tenure) for as long as he continues to occupy the premises as his residence. The only way in which a landlord can obtain vacant possession against a protected or statutory tenant is by issuing proceedings and persuading the court that the landlord can establish one of the grounds set out in the Rent Act, many of which are difficult to satisfy. The procedure is complex and it is not possible to deal with each of the grounds (and the procedure for dealing with possession) in this paper. Quite simply, the tenant is very well protected under the provisions of the Rent Acts and detailed legal advice should be sought in the event that the landlord wishes to secure vacant possession against a “protected” or “statutory” tenant. In addition, there are various exclusions listed in the Rent Acts and it is important that these are understood before making a decision as to the status of a particular tenancy.
Housing Act Tenancies (Assured Tenancies)
Any tenancy of residential premises granted on or after 15 January 1989 will be governed by the Housing Act 1988 (as amended by the Housing Act 1996). Unlike “protected” tenancies, these tenancies are referred to as “assured” tenancies. Assured tenants are also well protected by the Housing Act 1988 although it is easier for the landlord to satisfy one of the grounds set out in the 1988 Act in order to obtain possession as against an assured tenant. The most commonly used grounds are Ground 8 (more than 2 months/8weeks rent arrears) Ground 9 (suitable alternative accommodation) Ground 10 (some unpaid rent) Ground 11 (persistent rent arrears) Ground 12 (breach of other tenant’s obligations).
Assured Shorthold Tenancies
In addition, there is a sub-species of assured tenancy which is referred to as an “assured shorthold” tenancy which confers less security of tenure on the tenant. Until 28 February 1997, it was necessary to serve a prescribed form of notice (Section 20 notice) on any assured tenant before the grant of the tenancy for the assured tenancy to be treated as an assured shorthold tenancy. Since 28 February 1997, no such Section 20 notice need be served so that the tenancy will automatically be an assured shorthold tenancy unless a notice is served (before the grant of the tenancy) confirming that it is an assured tenancy.
Recovering Possession – ASTs or ATs
Section 21 route
Assuming a notice has been served (if it is an ‘old’ tenancy) or no notice has been served (if it is a ‘new’ tenancy), and assuming the assured shorthold tenant was not previously an assured tenant of the same landlord, the landlord is entitled to terminate the tenancy by serving two months’ notice (in accordance with Section 21 of the 1988 Act) expiring no sooner than the expiry of the fixed term of the tenancy. Alternatively, if the fixed term has expired, the two months’ notice must also expire on a rent payment day. There is no need for the landlord to satisfy any grounds for possession. Quite simply, the landlord is entitled to issue proceedings for possession on expiry of the Section 21 notice and the court will grant the landlord possession on being satisfied that the proper procedure has been followed. Needless to say, the assured shorthold tenancy is by far the most desirable option from the landlord’s point of view. The only restriction is that the landlord cannot obtain vacant possession before the first 6 months have expired or the expiry of the fixed term (whichever is sooner).
Section 8 route
Taking a classic example, where a tenant is in arrears in excess of two month’s rent (as at the date of issue and as at the date of the hearing), the landlord of any assured tenant (including an assured shorthold tenant) will be able to obtain possession by relying on Ground 8 of Schedule 2 of the Housing Act 1988.
Before it is possible to issue possession proceedings, a Section 8 notice needs to be served, giving the tenant a minimum of two weeks’ notice of the issue of proceedings. Unlike the Section 21 notice, a Section 8 notice needs to rely upon certain grounds for possession. Ground 8 is a mandatory ground which (provided that it is satisfied at the time of the hearing) will give the court no discretion but to grant a possession order. It is not possible for the Section 8 route to be dealt with by an accelerated possession procedure. The court will set a hearing date for the possession hearing in order that it can be satisfied that the relevant ground for possession can be proven by the landlord at the time of hearing. The whole procedure (from the service of the Section 8 notice to the possession hearing) is also likely to take between two to three months.
The advantage of the Section 21 procedure is that once a valid Section 21 notice is served, the tenant has no defence to a possession order being granted. By contrast, a tenant could pay just enough rent to bring the level of rent arrears below the “two month” level thereby depriving you of your mandatory right to possession. In such circumstances, it is possible to persuade a judge to grant a possession order in any event, although it is in the judge’s discretion which is much harder to predict.
Exceptions to Housing Act
Where the tenancy is let to a company or at a rent in excess of £25,000 pa (or lower than £250 pa) it cannot be an assured tenancy. It is a mere common law tenancy and will be governed by the terms of the tenancy only without any statutory protection from the Housing Act.
- Protection from Eviction Act – if there is any sign of someone living in the property then you cannot simply change the locks – you must obtain a court order
- Some courts insist that witnesses (as to arrears of rent) appear in person. We need to educate the courts not to require this (proportionalilty)
- Schedule of Costs to be filed before the hearing in order to get your costs
- Check landlord’s details – have they changed since
Where the premises comprise agricultural land or residential accommodation for agricultural workers, the provisions of the Agricultural Holdings Act 1986, Agricultural Tenancies Act 1995 and possibly the Rent (Agricultural) Act 1976 will need to be considered. These types of tenancies are not dealt with in this paper. Legal advice should be sought immediately in the case of any doubt.
The above summary is by no means exhaustive and must not be relied upon without seeking further advice in relation to your individual circumstances. There are subtle reasons as to why a particular scenario may appear to fall squarely within a particular statutory regime when, in fact, it may be an exception to the rule. Accordingly, this note should only be read as a precursor to seeking further and more detailed legal advice.
Reviewed in 2015