UPDATED: The Story of “landlording” – a brief history
English Property Law
A history of land ownership in brief
Property law in England and Wales has its roots dating from Norman times. Modern statutory rules starting with the landmark Law of Property Act 1925 always override common law – property laws and the law of contract. Despite the slow and incremental process of common law decisions, judge by judge, case by case, amendments to existing rules, and seemingly endless guidelines and new rules and regulations affecting property, increasingly emerge from Parliament.
So, under the English legal system, tenancy laws are a curious mixture of the law of contract, ancient property laws, and statutory rules. Renting (or letting - Old English lǣtan “to allow, let go, bequeath, leave, rent") is based on a contractual arrangement whereby a tenant occupies and gains a "legal interest in land" exclusively (the tenant can legally exclude everyone, including the landlord) for a specified period of time, in return for the payment of rent.
Before WW1 most Britains rented their homes, farms and business properties – around 90 per cent of property was rented out. This situation changed dramatically for housing over the course of the 20th century, until at the lowest point only around 6 or 7 per cent of the household population rented their homes in 1991.
Whilst business lettings remained largely unaffected, housing was strongly influenced by social legislation. Life-time security of tenure, strict rent controls and public sector housing provision created an environment that was generally hostile to private landlords.
The history of rent control in England and Wales is a part of twentieth century English land law concerning the development of rent regulation in England and Wales. Controlling rent levels and security of tenure has formed a major element of rent regulation since 1915 until its abolition (excluding pre-existing regulated tenancies and some social housing) by the Housing Act 1988.
There have been significant changes in attitudes and legislation toward the right to housing in mainland Britain. The concepts, such as rent control, security of tenure, statutory tenancies, regulated tenancies, fair rent, rent officer control and the emergence of the concept of the assured tenancy and assured shorthold tenancy were introduced throughout the twentieth century, and are still developing to this day.
Public laws and private rights
The back and forth debate and concerns about the intervention of public law rights in private (contractual) relations between landlord and tenant present a legal conundrum for governments and lawmakers. They constantly attempt to juggle and control the landlord-tenant relationship to counteract the perceived inequality of bargaining power between private landlords and tenants.
The almost total security of tenure for residential tenants and rent controls in England and Wales introduced by the 1977 Rent Acts led to very low returns for landlords. This made letting residential property unpopular, so much so that only around 6 to 7 percent of households were renting when the Assured Shorthold Tenancy (AST) was introduced by Margaret Thatcher's government in 1988.
This change brought about a quite dramatic re-balancing of the rights between the residential landlord and tenant in the 1988 Housing Act which removed rent controls and allowed private landlords to charge market rents. It also gave landlords a mechanism to re-possess (the Section 21 paper-based eviction process known as accelerated possession) without having to give a reason.
Landlords could make a profit
Following these changes, investment returns became economically viable again, which encouraged home owners, small landlords and investors to re-enter the lettings market - the buy-to-let boom of the late 1990s and 2000s had begun.
These legislative changes in England and Wales coincided with shifts in population demographics and a modern lifestyle began to favour renting for its flexibility. The 10-year property boom which preceded the credit crunch of 2007-8 and thereafter resulted in unprecedented growth in rental property investment.
Many ordinary citizens, most of whom would never have contemplated the personal title of "landlord", as a result of the buy-to-let boom are now blessed or “saddled”, whichever way you care to look at it, with this ancient mantle. One has to remember that in some communist countries during the twentieth century, anyone with the title “landlord” around their neck, also ended up with a rope around it!
Generally speaking the term “landlord” gets a bad wrap. The stereotypical image of the role conjures up, by its ancient and more modern connotations, a negative image in the public consciousness. Some modern-day landlords are even suggesting the term be retired. But whereas the term “tenant” can be easily replaced by the term “renter”, which gives a clear unambiguous meaning, the term “landlord” is not so easily dealt with. First of all it is deeply embedded in the legal nomenclature and secondly few replacements represent the role so succinctly.
Property laws in England (and indeed in much of the English speaking world) stem from well over 1000 years of English and European history. The manorial system (seignorialism) began under the Roman Empire and in England under King Alfred (871A.D-899 A.D.). He decreed that every man should have a lord. Seignorialism should not be confused with feudalism, which was a system of military and political relationships among the lords and their vassals.
Manorialism became the relationship between landowners and people who worked on the land known as peasants or serfs and sometimes slaves. The landowners had the legal right to own land and estate, and collect taxes. They earned the title “Lord of the Manor”, a noble title and these so called landlords had the privilege of attending the royal court.
Feudalism, which came later, was a contractual system of political and military relationships existing among the nobility in Western Europe during the High Middle Ages. It entailed the granting of fiefs, chiefly in the form of land and labour, in return for political and military services – it was a contract sealed by oaths of homage and fealty (fidelity).
The lord was granted land titles from the king, and was grantor to his vassals or knights (persons under the protection of a feudal lord to whom they vowed homage and fealty: a feudal tenant), but both were free men and social peers. True feudalism became widespread and lasted in Europe until around the 15th century.
Lords had few if any rights from their king, and likewise vassals (knights, tenants) had few if any rights from their Lords. The system was open to extortion and abuse if not benevolently applied and not until the signing of Magna Carta in 1215 did England see any statutory rules on human and property rights.
The statute of Quia Emptores (1290) was a major turning point which allowed the purchase and sale of land, removing the importance of the personal relationship between lord and tenant as being basic to land tenure. The legal principles of this statute still regulate the transfer of land in England and Wales to this day. The Tenures Abolition Act of 1660 finally ended feudal tenure in England & Wales.
Land tenure today
Ultimate ownership of all land in the UK rests with the Crown. The method by which land is now held in England and Wales is still called tenure and there are only three kinds of tenure: freehold, leasehold and commonhold. In Scotland, the tenures were based on the feudal system of ownership until 2004 when the Abolition of Feudal Tenure etc (Scotland) Act 2000 was brought into force. On that date the Act replaced the feudal system with a system of outright ownership of land.
To all intents and purposes a freeholder (fee simple absolute in possession) is the outright owner of property for life. The Law of Property Act 1925 defines these ancient legal concepts: "fee" as heritability of the tenancy and "simple" meaning no restrictions as to inheritance, "absolute" being everlasting (except when the freeholder dies without heir when it reverts to the crown) and "in possession" either personal occupation or the right to take rents or profits.
The Law of Landlord & Tenant deals with leases, which are contractual agreements permitting tenants (lessees) to occupy land and premises exclusively for a period of time in return for regular rent payments. On expiry of the lease, at common law, the freeholder (lessor or landlord) is entitled to resume possession.
Modern property law
Landlord and Tenant law now has a dual nature and is rather complex. On the one hand it is based on common law contract or "judge-made" law which has evolved over the centuries. However, Parliament modifies and overrides the common law and equitable principles through the passing of statutory codes and regulations, The Law of Property Act and the Rent and Housing Acts being examples. Increasingly, European Law, Acts of Parliament, codes of conduct (consumer codes), and other statutory or non-statutory government guidelines, rules and regulations of many kinds are all affecting the business of letting property. There are well over 100 Acts of Parliament or regulations affecting the private rented sector (PRS) in England.
Modern property laws and legal codes differ throughout the Western World, and indeed, although mostly the basic legal principles are the same for those countries using the English common law system, differences increasingly exist throughout the four nations in the UK, following devolution of powers.
In the United States, Canada, Australia, New Zealand and South Africa etc, there are even more differences, and in some cases such as Scotland and much of Europe these laws are based on a quite different (Roman) legal system.
The whole process is constantly in flux, changing and evolving as social mores intervene. New legislation comes along and the courts set new precedents as they interpret statutes based on individual cases. Lawyers and property professionals keep up-to-date with the interpretation of the law by studying recent case decisions. Every now and then a landmark case sets a precedent which becomes a guiding principle, until such time as it may be further challenged and changed by a court of higher authority, ultimately the Supreme Court in England.
A business tenancy is a contractual arrangement between landlord and tenant governed by common law contract, for the period of the lease term – the parties privately draw up and agree terms. The statutory landlord and tenant legislation comes in to play when disputes arise at the end of business tenancies, regarding mainly security of tenure and grounds for possession.
Business tenancies in England and Wales are covered mainly by the Landlord and Tenant Act 1954 Part II. This Act gives business tenants a degree of security of tenure at the end of the lease term (a right to renew the lease on similar terms), unless both parties have agreed beforehand to contract out of the 1954 Act.
Private residential landlords
In the case of residential tenancies, these are governed by statutory rules and regulations from their commencement under the various housing and landlord and tenant acts. Whilst the residential agreement is still a contractual relationship (agreed rules) between two private parties, in practice much of the residential tenant / landlord relationship in England and Wales is governed by statutory rules - acts of Parliament.
Today, just under 20 per cent of households in the UK live in property provided by private landlords (one in five). This grew rapidly from the 6 or 7 per cent before the introduction of the assured shorthold tenancy (AST) in 1988.
The decline in private renting throughout most of the twentieth century can be put down largely to social policy which swung the balance of power away from the landlord in favour of the tenant. Some would argue that this process has started again in Scotland, Wales and now England with the advent of the Renters (reform) Bill.
Bad press, poor image
The landlord’s poor image is largely historical as we’ve seen above; the overbearing ancient landowner oppressing the powerless tenant. There are many examples of notoriously harsh absentee landlords of old entering the public psyche through writers such as Dickens and Trollope. This process was exacerbated in the 1960s by the notoriety and scandals of Peter Rachman et al. "Rachmanism" entered the English language as a term used to describe the activities of ruthless slum landlords, and their exploitation of hapless tenants.
Ironically, Rachmanism grew as a result of legislation introduced to do the exact opposite - protect vulnerable tenants. A small minority of landlords gained commercial advantage by circumventing legislative controls, that is lifelong security, by using violent means.
The first Rent Act was passed during the First World War (1915) as a "temporary" means of preventing landlords from exploiting the increased wages of munitions workers. This was the start of a whole series of legislative acts designed to protect tenants, but which in practice mitigated against the provision of rental accommodation and hurt the very people they were designed to protect.
Security of tenure and rent controls
Total security of tenure in England and Wales (landlords unable charge market rents or terminate tenancies, which were passed on to successive generations) swung the balance of power so far away from the landlord that over the century the decline in privately renting was relentless. It resulted in a drastically reduced and deteriorated rental housing stock.
In effect, letting residential property throughout the middle and later part of the 20th century became uneconomic for the private landlord. Too many landlords had their "figures burnt" through immoveable and uneconomic tenants, so the national stock of private residential housing virtually dried up.
Over the years several legislative attempts at relaxing controls were made to stimulate supply, but none was effective until the 1988 Housing Act brought in the Assured Shorthold Tenancy. This was a turning point enabling landlords to let at market rents and with a guarantee of getting their properties back.
The shorthold tenancy
After 1988 the assured shorthold tenancy (AST) gradually started to stimulate supply again. But it was a slow process, particularly as the legislation did not apply retrospectively, i.e., not to "Rent Act" regulated tenancies created before 15 January 1989.
However, in the years that followed, the increasing wealth of UK professionals and many working families, with inherited family property, and increasing investment funds, encouraged the move into rental property. It was a good investment alternative to the poor returns available elsewhere. This, coupled with the assured shorthold tenancy and the advent of the buy-to-let mortgage, resulted in a steady rise in the supply of privately owned rented accommodation again.
What followed after the millennium was a boom in buy-to-let investing in private rented property mostly by many middle and working class individuals – the small-scale landlord with usually under four long-term rental properties – a group comprising the 3 million or so UK landlords owning properties. This in turn is included in the 20 per cent or so of private rented housing in the UK.
Demand for renting
The other side of the coin is the tenant demand for rented housing. High property values, particularly in the hot spots of London and the south east and other major cities, resulted in first timer buyers being squeezed out of home ownership, due to the high deposits needed to buy.
Other demographic changes contributed to this rising demand. For some tenants, renting became a convenient alternative to buying, and for some it has become the only option: Job mobility, job insecurity and shorter-term work contracts have meant that many are wary about becoming locked-in to owning a property in one location.
The trend for cohabitation prior to marriage means that couples are also often reluctant to become locked-in to a property with a large mortgage, which may be difficult to unravel if there is a split.
Also, higher divorce rates, and an ageing population results in more single living, all leading to increased demand for rental housing.
What is the future of landlording?
For economic prosperity the country needs a mobile and flexible workforce and the fast-changing modern economy of the UK needs more high quality private rented accommodation. All the signs are that the increasing demand for rented residential property will continue to expand.
The long-term trend with commercial property is less clear but there will always be demand for quality property in good locations. The recession and the impact of internet trading is having a big impact on the high street and post Covid home working is affecting the demand for offices.
The Renters (Reform) Bill
The private residential sector (PRS) is due to undergo changes yet again, with the advent of the Renters (Reform) Bill. This will be the biggest change to private renting in England since the introduction of the assured shorthold tenancy in 1988.
The bill will effectively abolish the shorthold tenancy, the fixed term tenancy and the Section 21 “no reason” eviction process. In return for this loss, landlords will be given a more comprehensive set of grounds for possession which will be used to recover possession at a court hearing.
There will be a process of appeals for tenants faced with above market rents to prevent “backdoor evictions” but it is said it will be easier for landlords to evict tenants who are at fault. There is to be a Private Sector Ombudsman able to offer binding dispute resolution and a Private Rented Property Portal setting out legal obligations and more information about landlords and rentals for tenants.
Tenants are to be given a right to request a pet in the property (not to be unreasonably refused), providing they have pet insurance, and it will be made illegal for landlords and agents to have blanket bans on renting to tenants in receipt of benefits or with children – ensuring no family is unjustly discriminated against when looking for a place to live. The Bill will also strengthen local councils’ enforcement powers and introduce a new requirement for councils to report on enforcement activity – to help target criminal landlords.
Finally, in an attempt to improve the standards of housing in the PRS, The Decent Homes Standard will be applied for the first time in private renting to give renters “safer, better value homes and remove the blight of poor-quality homes in local communities.”
All this is designed to help deliver the government’s Levelling Up mission to halve the number of non-decent rented homes by 2030.
Revised: October 2023