Drafting your Fixed Term Tenancy: Tips and Traps

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2 Tenancy: Tips and Traps Jonathan Hulley Partner, Head of Housing and Asset Management Clarke Willmott LLP T: E: W:

3 Where are we now? Sir Bob Kerslake - expect there to be more change and more innovation, people need to be trying out new ideas and be bold in what they do The Regulatory Framework for Social Housing in England from April 2012 the Tenancy standard; The Localism Act 2011 flexible and fixed term tenancy agreements and tenancy strategies; Registered Providers now preparing and granting Assured Short hold fixed term tenancy agreements and tenancy policies underpinning new regime

4 The Regulatory Framework for Social Housing in England from April 2012 The Tenancy Standard Registered providers shall offer tenancies or terms of occupation which are compatible with the purpose of the accommodation, the needs of individual households, the sustainability of the community, and the efficient use of their housing stock; Registered providers must grant general need tenants a periodic secure or assured (excluding periodic assured short hold) tenancy, or a tenancy for a minimum fixed term of five years, or exceptionally, a tenancy for a minimum fixed term of no less than two years, in addition to any probationary tenancy period;

5 The Regulatory Framework for Social Housing in England from April 2012 Cont.. Where a registered provider uses probationary tenancies, these shall be for a maximum of 12 months, or a maximum of 18 months where reason for extending the probationary period has been given and where the tenant has the opportunity to request a review; Registered providers shall publish clear and accessible policies which outline their approach to tenancy managements.

6 The Localism Act 2011 The Localism Act requires each local authority to develop a tenancy strategy, and Registered Providers must have regard, in their tenancy policies, to the tenancy strategies of the local authorities in those areas they operate; A duty to have regard to the local authority s strategy? Have Local Authorities you work with now published Tenancy Strategies?

7 Fixed term agreements: Key legal principles to consider Granted for a specified period of time at the end of which the tenancy will terminate; A type of an assured short hold tenancy agreement; Can be offered at Social Rent or Affordable Rent rates from the commencement of the agreement even if that agreement provides for a probationary term; A Ground 1, 3, 4, 5, 6, 9 and 16 in Schedule 2 to the Housing Act 1988 do not apply. In other words, all the mandatory Grounds are unavailable except Ground 2 (Sale by Mortgagee), Ground 7 (Death of a Tenant without a Qualifying Successor) and Ground 8 (Serious Rent Arrears). All the discretionary Grounds are available except Ground 9 (Suitable Alternative Accommodation) and Ground 16 (Tied Accommodation); Section 13 of the Housing Act 1988 does not apply; A Notice to Quit is not effective to end a fixed term tenancy agreement;

8 Fixed term agreements: Key legal principles to consider Cont.. Amendments made to Section 21 of the Housing 1988 setting out the requirement for a minded to notice to be served at six months before possession is sought, in addition to the notice requiring possession served two months before the end of the fixed term; A fixed term tenant can surrender the tenancy but the offer to surrender and any acceptance by the Landlord should be in writing and in a joint tenancy the surrender offer should be signed by all the joint tenants; Abandonment serve a Notice of Seeking Possession relying on Ground 12 in Schedule 2 to the Housing Act 1988 as amended; Probationary tenancies the probationary element cannot be a one year or 18 month fixed term because this would breach the 2-year minimum requirement. The best option is for the probationary tenancy to be an assured short hold periodic, in which case, if the probation is satisfactorily completed, a new fixed term tenancy should be issued for the appropriate fixed term.

9 Tenancy Agreement Tips on Structure and Contents Considering offering an Assured Short hold fixed term tenancy agreement with a probationary term. This means that the tenant lives in the property as a weekly periodic Assured Short hold tenant during the probationary term. The probationary term is for a period of 12 months unless the landlord serves the tenant with a notice extending the probationary term for a further period of six months. At the end of the probationary period, by this Agreement, the tenant will be granted an Assured Short hold tenancy for a fixed term of five years beginning on the first Monday following the expiry of the probationary term. If at the end of the expiry of the probationary term, the tenant is in rent arrears, but the landlord has not taken steps to end the tenancy, it is agreed that the arrears will be carried forward to the fixed term tenancy which arises by virtue of this agreement. A form of surrender and re-grant;

10 Tenancy Agreement Cont.. The tenancy will become an Assured Shorthold tenancy for a fixed term of five yearsbeginning on the first Monday following the expiry of the probationary term unless during the probationary term the landlord has served on the tenant a Section 21 notice or served on the tenant a notice of seeking possession in accordance with Section 8 of the Housing Act 1988 and then commenced possession proceedings against that tenant or has extended the probationary term for a further six months in which case the tenant will continue to be a weekly periodic Assured Shorthold tenant; Consider including in the tenancy agreement a clause affording the tenants a right to request a review of your decision to serve a notice extending the probationary term or when serving a notice requiring possession or a notice seeking possession. Inform the tenant in writing of the outcome of the review and the reasons for it before taking any further steps;

11 Tenancy Agreement Cont.. Rent and other charges clause The rent to set at a level which represents no more than 80 percent of the market rent (inclusive of service charges where they apply. This is known as an affordable rent level. The tenant must pay all other bills for the property including Council tax, water charges, gas, electricity in addition to rent payable; Changes in rent clause The landlord will increase the rent each year. The first rent will take effect on the first Monday on the April after the start date. The landlord will give the tenant at least one calendar month s notice in writing of the new rent. After the first rent change, the landlord may vary the rent by giving the tenant no less than one month s calendar notice in writing. Any annual increase in rent will not exceed the percentage annual charge in the Retail Price Index as at the previous September plus 0.5 percent.

12 Tenancy Agreement Cont.. Housing Benefit Include a clause which states that the tenant must pay any shortfall between the amount they must pay in rent and the amount of any benefit they receive. Include in this clause a requirement that the tenant sign a direct debit or standing order at the commencement of the tenancy agreement; Payment of a deposit Consider including a clause requiring the tenant to pay a deposit prior to the commencement of the agreement. Remember that the landlord will have to pay a deposit into a recognised rent deposit scheme prior to the commencement of this agreement and to provide the tenant with written proof that the landlord has done so; Fixtures and fittings Consider including a clause stating that where it is necessary replace a fixture or fitting, the landlord may use a fixture or fitting that has different features to that which was originally provided;

13 Tenancy Agreement Cont.. Nuisance and harassment Consider including a clause which states that the tenant or any member of their household must not be a member or part of the group that engages in gang-related violence as defined in Part IV of the Police and Crime Act 2003; Insurance Consider including a clause requiring the tenant to insure their personal belongings; Smoke alarms and carbon monoxide detectors Consider including a clause requiring the tenant to test any smoke alarms and carbon monoxide detectors every month and if batteries run low, requiring the tenant to replace batteries where necessary;

14 Tenancy Agreement Cont.. Roads, vehicle access and parking Considering a clause prohibiting the tenant or any family member from parking any untaxed or unroadworthy vehicle in parking spaces or on roads of the estate and not to use driveways, shared areas or car parks to carry out repairs to vehicles or to do any work on those cars which may annoy others; Smoking and drinking alcohol Consider including a clause prohibiting the tenant or family member smoking or drinking in the internal and external communal areas including any car park, shared drive or entrance hall; Personal belongings Consider including a clause requiring tenants and family members to keep areas shared with other residents clean and tidy and free from rubbish and personal belongings at all times;

15 Tenancy Agreement Cont.. Household and/or individual plan Consider including in the agreement a provision requiring a new tenant to agree to a household and/or individual plan which sets out the ambitions and aspirations the landlord has for that tenant and their household. The household ambition plan could include factors committing the tenants and household members to participating in training programmes where appropriate, employment opportunities and educational opportunities where appropriate and demonstrating a commitment to be a responsible member of the community. Surrender Consider including a clause stating that if the tenant wants to terminate the tenancy he/she must do so in writing and that any surrender of tenancy will not take effect until it has been expressly accepted by the landlord;

16 Tenancy Agreement Cont.. Ending the tenancy at the end of the fixed term 1. Include a clause stating that if the landlord decides not to reissue the tenancy, it will serve on the tenant a written notice at least 6 months before the fixedterm comes to an end informing the tenants that they do not propose to grant a new tenancy on the expiry of the fixed-term 2. Inform tenants how to obtain help and advice about the notice and informing them of their right to appeal the decision to serve the notice. 3. The landlord may then end the tenancy by serving on the tenant a notice requiring possession under Section 21 of the Housing Act 1988;

17 Concluding thoughts May you live in interesting times - Robert Kennedy