Will we see the end of the long shorthold?

Joseph Meethan Joseph Meethan 4th September 2024

Despite many promises to abolish them, assured shorthold tenancies are a major feature of the private rented sector in England. Their name suggests a short relationship, and the common use is for six-month and one-year rentals.

Assured tenancies are governed by the Housing Act 1988. Their scope is set by section 1. It includes the familiar provisions about use as an only or principal home and the letting being to an individual or individuals. The other criterion for assured status is that nothing in schedule 1 of the Act excludes it.

Most long leases are excluded for having either rents that are too low (paragraphs 3-3C schedule 1 Housing Act 1988) or rents or rateable values that are too high (paragraphs 2-2A schedule 1 Housing Act 1988.

A rent falling between the two provisions can result in a long lease being an assured shorthold without a theoretical limit. There is nothing at present to prevent the grant a thousand-year shorthold, for example.

Some of these longer leases may be deliberately within the security of tenure regime. Many will exist as a consequence of shared ownership schemes, as in Richardson v Midland Heart Ltd [2008] L & TR 31 (ChD). Most others are probably accidental: DIY leases by landlords without significant legal advice, or historic leases with ever-escalating ground rents.

The consequences of a long assured tenancy

Assured tenancies are protected by security of tenure: section 5 Housing Act 1988. For long leaseholders that is not as helpful as it sounds. This is because proceedings for possession of assured tenancies are not forfeiture cases: Artesian Residential Developments Limited v Beck [2000] QB 541 (CA).

While in forfeiture proceedings long leaseholders may be protected by the broad discretion to award relief, or the automatic opportunity to pay arrears instead of possession in section 138 County Courts Act 1984, an assured tenant has no such protection.

Restrictions imposed by the Commonhold and Leasehold Reform Act 2002 and the Leasehold Property (Repairs) Act 1938 are likewise of no assistance. Nor will schedule 3 Leasehold Reform Act 1967 provide a defence even where the enfranchising tenant has a contract to grant a new lease which is capable of specific performance and has acted in good faith.

Provided that the terms of the lease allow earlier termination on the ground in question (which can be a general clause allowing forfeiture in the same circumstances, as in Artesian above), then a landlord can rely on grounds 2, 7A, 7B, 8, or any in part II of schedule 2: section 7(6) Housing Act 1988. Execution of an order made under these grounds in the usual way ends the lease. There is no entitlement to a return of a premium paid.

It is an unusual quirk of the current system that a security of tenure regime can therefore make tenancies less secure for the lessees. It is likely to become less of a problem in future, given the coming into force of the Leasehold Reform (Ground Rent) Act 2022. This will be especially so once effect is given to the Leasehold and Freehold Reform Act 2024’s effective ban on new long leases of houses and right to demand a peppercorn rent.

Although likely to be extremely rare in practice, being an assured tenancy means that at the end of a fixed term a new periodic lease will form: section 5(2) Housing Act 1988. In the context of long leases this ousts the rare security of tenure regime in schedule 10 Local Government and Housing Act 1989.

The scope for reform

Section 28 of the Renters (Reform) Bill which failed to make it through the last Parliament would have removed assured status from leases over seven years. The Labour manifesto promised to immediately abolish the section 21 Housing Act 1988 eviction, and presumably the assured shorthold tenure along with it. A bill to do just that was included within the first king’s speech.

It is likely that the effect at least of section 28 will be carried over into the Renters Rights Bill when it is introduced. For one thing, a shift towards periodic tenancies as default makes long fixed terms an even stranger aberration.

Another reason is that the wording of section 28 itself recognises that the change would have an impact on schedule 10 Local Government and Housing Act 1989 tenancies. The Office of Parliamentary Counsel is clearly alive to the existence of a separate security regime tailored to long leases.

Finally, there is the experience of Welsh rental reform. The Renting Homes (Wales) Act 2016 introduced a different regime of occupation contracts in a system which is, as a brief summary, more similar to the old Rent Acts. Paragraphs 7(3)(g) and 8 schedule 1 Renting Homes (Wales) Act 2016 excluded long leases from its application.

The direction of travel seems set against these tenancies which often appear as unintended quirks. What makes them odd however also means that they may require specifically directed legislation to remove the problem. Whether they continue to exist may prove to be a matter of very pedantic statutory interpretation.

 

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