Sitting Tenants’ Rights

MENTION SITTING TENANTS AND MOST LANDLORDS would reel in horror!

A friend of mine recently asked me how they should be dealt with. His friend had purchased a property and not realised the consequences of his actions. His solicitor must have been inept. He had bought the property with the promise that it could be vacated, only to learn about protected tenancies the hard way. I’m sure this is not an isolated incident.

In these days of assured shorthold tenancies, it is easy to forget that there are still a lot of tenancies around that are either regulated or statutorily protected.

If you know what you are doing these can make good reversionary investments. With a sitting tenant in place, the property, depending on its condition and the life expectancy of the occupier, is worth a fraction of its vacant possession value. But if you are prepared for a wait - and of course it’s a gamble -these investments can pay off handsomely.

TENANTS’ EXTRA

The story of private residential tenancies throughout much of the 20th century is one
of rental market decline. It’s a perfect example of how well-meaning, socially motivated legislation can have the exact opposite effect of what was intended.

Instead of protecting tenants’ interests it resulted in the virtual destruction of the market. It also detracted from the aim of a flexible, mobile workforce by creating tenants that never move.

It is hard to believe that giving security of tenure for life - and for the lives of spouses and offspring - while controlling rents through the ‘fair rents’ system, at uneconomic levels, could ever have been contemplated. No landlord in his or her right mind would buy and supply property to let under these terms.

Most tenancies before 15 January 1989 are governed by the Rent Act 1977. It is not possible to change them, unless the tenant can be persuaded without duress to move. Grounds for possession or eviction are discretionary and very limited. The protected shorthold tenancy, which kicked off the buy-to-let revival, was first introduced by the Housing Act 1980.

It applies to tenancies that were granted on or after 28 November 1980. These had to be for a fixed term of between one and five years and, before the start of the tenancy, the landlord had to give notice in a specified form that the tenancy was a protected
shorthold - a section 20 notice.

The tenant has fair rent protection as long as it does not break the terms and the landlord has the right to get its property back, provided these conditions are met. Evidence of service of the section 20 notice is critical, otherwise it is a protected tenancy.

The Housing Act 1988 introduced assured tenancies: either ‘full’ assured tenancies or assured shorthold tenancies, thereby giving landlords a choice.

Tenancies starting after 15 January 1989 gave assured tenants security of tenure but with no restriction on how much rent could be charged. Assured shortholds gave no security of tenure after an initial six months, but did provide some rent protection. Again a prescribed notice had to be served, otherwise the tenancy would default to a ‘fully’ assured one with protected status.

The legislation was changed again by the Housing Act 1996, which made the default tenancy the assured shorthold for any tenancy commencing after 28 February 1997.
Most tenancies will now fall into this latter category.

There is therefore little risk to the landlord, even if the tenancy was created without a proper written agreement, although the tenant has a right to one within 28 days.

This article by Tom Entwistle, editor of the rental property website LandlordZONE originally appeared in Property Week 5 May 2006.

See also: Directory - Sitting Tenants