Fixed term tenancies for more than seven years
For more information, please contact:
Jatinder Bhamber Chartered Legal Executive 020 7065 1881 Email Jatinder
The Bill sets out at Chapter 2 that tenancies with a fixed term of more than seven years can no longer be assured tenancies. This means that the current position as set out in the case of Richardson v Midland Heart [2008] L&TR 31 (namely that shared ownership leases are a form of assured tenancy) will no longer be the case. Following this case, it was decided that until the shared owner acquired 100% of the leasehold interest, they were in fact an assured tenant for the term of the lease.
Accordingly, landlords under the proposed new rules in the Bill, will no longer be able to utilise the provisions within Schedule 2 Housing Act 1988 in seeking possession under the mandatory and discretionary grounds.
Currently, if a shared owner fell into arrears, the landlord could serve a Notice Seeking Possession (‘NOSP’) under section 8 of the Housing Act 1988 and pursue possession on the grounds set out in Schedule 2 Housing Act 1988. In the case of Ground 8 of Schedule 2 of the Housing Act 1988, the court must order possession, with the court having very little scope to do otherwise. However, the Bill provides that this will no longer be the case.
As landlords of shared owners will be unable to utilise the provisions within Schedule 2 Housing Act 1988 in seeking possession under the mandatory and discretionary grounds, they will need to deal with any breach of the shared ownership lease as they would do with their outright leaseholders.
However, in cases where possession proceedings have commenced against a shared owner, but not concluded, the shared ownership lease will remain an assured tenancy. Further, in cases where a valid Notice of Seeking Possession has been served and the 12-month time limit relating to such a notice under section 8(3)(c) of Housing Act 1988 has not expired, the shared ownership lease will also remain to be treated as an assured tenancy.
Landlords will need to change their policies and procedures relating to the process for the enforcement of the terms of shared ownership leases and in particular, arrears recovery. Upon the Bill coming into force, we are likely to see more claims relating to debt recovery and forfeiture and landlords will need to be aware of the rules relating to these are understood and followed. Landlords will need to be particularly aware of waiving the right to forfeit if the landlord is intent on obtaining possession.
In view of the changes proposed under the Bill, there should be an assessment of shared owner arrears cases and consideration should be given to the impact on these that will result from the upcoming changes. Landlords should also carry out a review of their policy and procedures to ensure that the correct approach is being taken in relation to the arrears recovery process, once the changes to shared ownership leases provided for by the Bill come into force.
Under the Bill as it currently stands, if you have a NOSP in place, the Shared Ownership Lease will truly only become akin to 100% leaseholder lease (or more accurately ceases to be considered an assured tenancy) at the point when either the NOSP that you have in place becomes time-barred (12 months after service so long as that NOSP was served prior to enactment of the Bill otherwise it will be defective if served after enactment) or, if possession proceedings have been instigated based on a NOSP that is not time-barred, the conclusion of those possession proceedings.
For example, in the latter example, if the Bill is enacted and you still have possession proceedings based on a NOSP then the shared ownership lease is still considered an assured tenancy. If those proceedings are dismissed then subject to their being no appeal, the shared ownership lease ceases to be considered an assured tenancy at that point.
We envisage a large shift of shared ownership leases transferring automatically at the point of enactment of the Bill and then a gradual shift from those who are subject to NOSPs and proceedings.
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