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Fixed Terms – Good for Renters, Good for Landlords

As the House of Lords debate the Renters (Reform) Bill, one thing is clear. Michael Gove, the Housing Secretary, has the green light to end no-fault evictions. But, says Politeia’s founder and Research Director, Sheila Lawlor, the Lords may ask him to ‘think again’ about ending fixed-term tenancies. These bring protection and security to landlord and tenant and do so under law.

This week the government inched forward on one of its 2019 manifesto commitments: the pledge to end no-fault evictions.  The Renters (Reform) Bill reached the House of Lords along with its proposal to abolish such evictions (other than on the ‘reasonable’ grounds listed in the bill). More generally the Bill aims to provide security for private renters to have ‘a secure and decent home’ and for landlords to be confident they can ‘repossess their properties when they have good reason to’.  But will it do so?

Already it has prompted controversy and a string of amendments in the House of Commons, including one to require the tenant to stay for a minimum of six months and a commitment by the government to delay operation of the no-fault evictions until the courts are ready.

The House of Lords,welcomed, by and large, the abolition of no-fault evictions. But a number of backbench peers were concerned that the measure could make for greater uncertainty in the private rented sector (PRS). Today there can be around 25 potential renters for every property advertised, and one in five households rent from private landlords. The danger is of an ever greater shortage of supply if landlords, now faced with the uncertainty and cost of the new bill, throw in the towel and sell up.

Under the new arrangements, once a tenancy is agreed, landlords must contend with the rolling contracts that replace the stable shorthold fixed term contract – with no certainty as to how long a tenant may stay after the first six months and the fear they may face the high costs of a series of changes of tenant.   Should they want to sell their properties, or move back in themselves there will be complicated, expensive legal procedures. There is further uncertainty, because a two- stage transition to the new arrangements is envisaged, stage 2 to wait until the courts are ready.   Few landlords are rogues, but all landlords will bear the burden of a cumbersome legal system imposed because of them.

And what of the tenants? They face equivalent uncertainties and extra costs, because a landlord may wish to recover some of the extra compliance costs through the rent. They too will be without the real security of a shorthold lease for a definite fixed term (beyond six months). Indeed, it will be illegal for them to enter into a fixed term lease which would bind their landlord into an agreed period under law.

Many on different political sides agree that no-fault evictions should be ended as now proposed. But that does not require, nor need it be the death knell of the arrangements for assured shorthold tenancy in the Housing Act 1988, which give landlord and tenant the security of knowing how long the letting is for and the option to propose and agree a variation to reflect wishes and circumstances.  That act introduced the assured shorthold tenancy, which can be fixed term or periodic but usually begin with a fixed term. The significance of such arrangements and their compatibility with the ending of no fault evictions was highlighted in the Commons by a number of MPs including Anthony Mangnall who sought to stop the ending of fixed-term tenancies and Sir Christopher Chope who explained their significance. Chope pointed  out that the shorthold is ‘a privately arranged agreement between a landlord and a tenant [during which the] tenant would be able to have exclusive possession of a property [being rented and], neither the landlord nor the tenant would be able to renege on the agreement for any reason at all.’ It also reflects the legal principle of privity of contract that only parties to a contract can sue or be sued under it. It has also led to the growth of the Private Rented Sector by and large a success story of the last three decades.

By overturning the principles on which our society is arranged, based on rights for both parties, protected by the Common Law, the new Bill will endanger the security sought by tenant and landlord alike.

The less interference in a free society by the state between people making contracts with each other, the better. Private transactions should be a politics free zone, under the principles and protection of settled law. Yes, there should be regulation against unfair contracts. People should be able to enter into a contract with full knowledge, and each party should know what they are taking on. When they make an agreement with each other with full knowledge, openly, protected by law, it should be for them to decide on its terms. Tenants should be able to stipulate their conditions and so should landlords.

The measure can and should be amended to leave in place an option of fixed term assured tenancies, so that landlords and tenants alike can, if they wish, choose this route – an assured arrangement for a fixed term lease, and thereby achieve the security to which the bill aspires. This would restore the clarity of contractual arrangements, rather than writing them off. Otherwise, without such an amendment, renters and landlords alike will be left with the big state cocktail of ‘written statements’, responsibilities, letters, property portals, in the ever more complex bureaucracy and legalistic system that will follow in the Bill’s wake –  and without a simple, clear and legally binding alternative.

Dr Sheila Lawlor

Dr Sheila Lawlor (Baroness Lawlor) is Politeia’s Founder and Research Director. She served as its executive director from 1995-2020, developing the constitutional, economic and social policy programme with UK and international specialists. Her background is as an academic historian of 20th century British political history, having started her working life as research fellow at Sidney Sussex College, Cambridge and Churchill College, Cambridge. Her academic publications include Churchill and the Politics of War 1940-41 and for Politeia she has written on social, economic and constitutional policy. She was made a Life Peer in October 2022.

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