What Exactly is a Lifetime Tenancy Agreement?
The Definition of a Lifetime Tenancy Agreement and Its Characterisation as a Tenancy at Common Law
A common form of occupation provided by councils and registered providers on housing estates is that of lifetime tenancy. A tenant granted a lifetime tenancy has security of tenure and cannot be evicted without an order from the court. It follows that council tenant beneficiaries within the housing estate are secure in their occupancies if they have been granted a lifetime tenancy. The security of tenure afforded to the tenant is an important factor in determining the nature of the occupation and the applicable legal rights and obligations. The law concerning the creation and termination of a lifetime tenancy is different to other types of tenancy. A distinction must be made between the type of tenancy given, and the nature of the tenancy. Tenure rights under a lifetime tenancy derive from a common intention of the parties which create a contract. A lifetime tenancy agreement is a contract granting use and occupation. More specifically, it is an agreement under which the tenant is granted the right to permanent occupation of a property. Granting a lifetime tenancy agreement sums up the contract. Lifetime tenancies are not tenancies at will. There is certainty as to the nature of the parties’ agreement . In contrast, a tenancy at will is a personal contract between the landlord and tenant which confers on the tenant the entitlement to occupy the property temporarily until the time specified by the landlord. It does not give the tenant a right to compensation. A break clause may be linked with the tenancy at will which grants to the landlord the right at any time and for any reason to terminate the agreement. A tenancy at will does not have the characteristic of giving the tenant a right to remain on the land indefinitely. In Davies v Wilkins [2003] EWCA Civ 1509 Davies believed that he had the benefit of a secure council tenancy. Miss Wilkins argued that a genuine common intention to create that secure tenancy did not exist, but rather there was a common intention to grant a licence, which was revocable at any time. The Court of Appeal preferred Miss Wilkins’ argument and held that in order for the claim to be determined, the Commonhold and Leasehold Reform Act 2002 could be used as a precedent so as to make the agreement binding on the parties. As such, the court held that although there was no express authority to support its decision in giving the common intention of a tenancy, the court was nevertheless entitled to follow the spirit of the statute and act on the basis that there had been a common intention to grant a licence.
Advantages and Disadvantages of Lifetime Tenancy
Lifetime tenancy can be beneficial for both the tenants and the social housing providers but it is not without drawbacks. There is much to consider before entering such an agreement to ensure that it continues to work for all parties. Lifetime tenancy is something that both tenants and stock owning and managing organisations should discuss carefully, weighing up the pros and cons. For tenants, the benefits of entering into a lifetime tenancy include: The potential drawbacks for tenants include: For stock owning and managing organisations the benefits of entering into a lifetime tenancy include: There are considerations as to the viability of any future development of properties on estate or neighbourhood level. It is perhaps also worth considering the whole-life cost of any refurbishment works, how these can be funded and whether the lifetime tenancy restricts or hinders these efforts? The potential drawbacks for stock owning and managing organisations include: And finally, the savviest tenant should consider carefully the benefits and drawbacks of entering into a lifetime tenancy to ensure that it continues to work for them.
Rights of Lifetime Tenants
Let’s first take a look at what rights a tenant has under a lifetime tenancy agreement. The most important right is security of tenure, which entitles the tenant to stay in their property for the entirety of their lifetime so long as they abide by the terms of the tenancy. Should you try to evict a tenant during their life time (without their consent), you and/or your successor would be committing a nuisance. Sitting tenants would be entitled to damages from you and your successor.
There are a few obligations, however, which could give rise to eviction on notice. Most of these relate to the state of the property itself and can be costly to the landlord. Failure to pay rents and service charges or to keep a property in good condition are two such examples. However, in practice, the chances of actual eviction during the tenant’s lifetime are very slim indeed. The barriers to serving possession notices and obtaining a court order are high. There have been a number of landmark cases in the Court of Appeal which clarify the process of serving notices on sitting tenants. The cases of Street v Mountford and Bruton v London & Quadrant Housing Trust for residential tenancies, and the House of Lords case of Lagoandor Ltd v Alliance Investments Ltd for commercial leases clarify that if a tenant has been granted a lifetime tenancy (long leasehold or freehold) by a Landlord, it is very difficult for the Landlord to regain possession without the consent of the tenant, unless there has been a fundamental breach of the agreement. To make your life that little bit easier, the following are requirements for giving notice and obtaining a court order evicting a tenant: The protection afforded to tenants under a lifetime tenancy agreement is a significant one indeed so it is crucial that, as a Landlord, you are diligent in ensuring that the original requirements are complied with. Another thing to note is that tenants leave the premises without the Landlord always having to serve a notice. See the case of Bournemouth Borough Council v McCarthy for a bit more on this. A sentence requirement for many a graduate dissertation, however, it does demonstrate that whilst the evicting a tenant during their lifetime is unlikely, it is not completely impossible! With the above in mind however, it is imperative to ensure you endorse the right tenancy agreement for your commercial properties and that the terms are strictly adhered to.
Obligations of Landlords in Lifetime Tenancies
The government has made it clear that lifetime tenancies under this new scheme are terminable only in certain circumstances, and only by certain procedures. As such, landlords must enter into lifetime tenancy agreements with a strong degree of protection for the tenant. Under the specifications outlined in the guidance issued to local authorities, a lifetime tenancy agreement may not be terminated for any reason other than breach of tenancy (as defined in the tenancy agreement), abandonment, or death of the tenant. Even in these situations, public authorities will be required to serve six months’ notice for termination, meaning tenants can live in their home rent-free for half a year at least in cases of termination. Furthermore, in any termination proceedings, landlords will be required to prove that no suitable alternative accommodation is available to the tenant (in cases where the tenant is still alive, that is). Upon the tenant’s death, termination is once again subject to six months’ notice and a review of housing options and potential relocation for the tenant. Landlords are also obligated to ensure that rent charged follows the guidelines provided, including rents charged for successor tenancies (i.e. situations where an individual named on the tenancy agreement passes away and another entity qualifies as successor under the terms of that tenancy). For original tenancies, the monthly rent must be limited to significantly below market rates, with ranges provided in the guidance issued to local authorities. Rent for successor tenancies must be based on market rate, however, pursuant to both policy objectives and legal obligations. Rents may be phased in so that they are appropriately adjusted over the life of the successor tenancy. In cases where rent for successors would be significantly higher, making the tenancy untenable, public authorities are required to facilitate talk between landlord and successor to negotiate lower rent, or provide assistance to the successor in order to find more appropriate accommodation if no tenancy can be agreed to.
How to Set up a Lifetime Tenancy Agreement
The first step to establish a lifetime tenancy is the granting of an offer of tenancy to the tenant in an appropriate legal form and signed by an authorised officer of the landlord.
In the case of a private landlord, it may be sufficient for the landlord to send to the tenant a letter confirming the principal terms of occupancy. This letter should state that the offer is intended to create a legally binding contract (which does not immediately imply a tenancy).
A private landlord may find it easier to use the tenancy documents prepared by the National Landlord’s Association (NLA) for their approved landlords.
A local authority, housing association or housing co-operative must grant the lifetime tenancy by way of secure tenancy in form 1 of the Common Housing Terms under the 1980 Regulations or the equivalent Scottish form (form 2), depending on the jurisdiction in which they operate.
The steps to take when establishing a lifetime tenancy under the national right to buy provisions are as follows; For the purposes of the secure tenancy, a dwelling-house or house is to be construed as referring to (a) a flat or (b) a part of a building. In Scotland, a "house" is defined as including "any other building or part of a building", which would thus include a tenement flat.
Every local authority, housing association and housing co-operative which grants a lifetime tenancy must immediately give notice in writing in accordance with the 1980 Housing Regulations (in England and Wales) or the Tenant Information Pack Regulations (in Scotland) to every tenant who has been granted a lifetime tenancy to notify him or her of his or her rights under the right to acquire.
It should be noted that any secure tenancy granted by a local authority , housing association or housing co-operative is subject to the leasehold covenants implied by the 1980 Housing Regulations or the 1988 Housing Scotland Act (as appropriate).
It is important to note that the information requirements required for the granting of a lifetime tenancy differ between local authorities and housing associations or housing co-operatives in England and Wales because of the different reasons for which they can designate dwellings as secure tenancies. It is essential that local authorities, housing associations and housing co-operatives and their legal advisers take care to comply with the provisions of the Relevant Regulations which are applicable to them.
Another important point to note is that a contract for sale of the property requires the existence of the local authority, housing association or housing co-operative as a common landlord (i.e. where the property is jointly owned by all three). In this case, the contract for sale must be entered into by the individual common landlord (i.e. by the individual local authority, housing association or housing co-operative in favour of a particular tenant) and the purchase price (which will be a sum of money) divided between the three common landlords into whatever percentages the common landlords see fit.
A complete application is one that contains all the required information. If the application is incomplete, the freeholder is required to acknowledge this or may ask for more information within twenty one days of receipt. The landlord then has another twenty one days to either accept or reject the application. If the landlord does not issue a decision within the prescribed period, they will be bound to accept the application.
Notice must be given to tenants who have received a notice to purchase but who then do not proceed with their application. Individual notices are not required for this. One notice is sufficient.
The purchaser must then notify the landlord in writing of its decisions.
Dealing with Disputes in Lifetime Tenancies
A common issue in lifetime tenancies is when the only surviving tenant dies – what rights does the remaining tenant have, and how will the property pass after death? A lifetime tenant has a right of occupation for their life and no one can bring to an end that right. Whilst the life tenant is alive he has the right to remain in possession of the property, to do whatever she likes with it, and to transfer her right to anyone else. A life tenant can even charge rent on the property during her lifetime (although most do not do so, to avoid incurring a charge to inheritance tax). When the life tenant dies, the house forms part of the estate of that life tenant and the current value of the property may be subject to inheritance tax. If a life tenant dies and surviving tenant continues to live in the property as a sole occupant, a ground rent will accrue. The ground rent typically will be payable to the reversioner in the 21st year after the death of the life tenant or 15 years after it takes effect. Disputes often arise between the surviving tenant and reversioner regarding the level of the ground rent, the requirement to permit access to the property for purposes of inspection or repairs, and the level of repairs to which the surviving tenant is obliged. Ground rent disputes can be resolved through negotiation, but if you are unable to reach an agreement with your reversioner, recourse may be had to the terms of the originating transfer which created your life interest and reversion. This dispute could then be resolved by litigation before the Court.
Frequently Asked Questions Surrounding Lifetime Tenancy Agreements
Q: How does a lifetime tenancy agreement differ from other types of tenancy agreements?
A: A lifetime tenancy agreement is typically not subject to the same level of flexibility as other tenancy agreements. Here, the tenant has a right to occupy the property as long as they abide by its conditions. The better awareness and understanding of this type of agreement, the more likely tenants are to use it without presenting issues for owners.
Q: Can I terminate a lifetime tenancy agreement at any time?
A: A lifetime tenancy agreement cannot be terminated unless the tenant is in breach of one of its conditions or, in some cases, the tenant consents to its termination.
Q: Can I include a special term in a lifetime tenancy agreement?
A: By their nature, lifetime tenancy agreements are usually free of such special terms. It’s wise to include a clause setting out that any amendments to a lifetime tenancy agreement will be mutually agreed by both parties . This element of control enables tenant rights to be retained while limiting the impact on the tenant to specific instances within the agreement. For example, you can get an indication of how long the tenant will occupy the property for without breaching the terms of the agreement.
Q: Can a lifetime tenancy agreement be enforced if it lacks witness signatures?
A: In most cases, yes. Although witness signatures on a lifetime tenancy agreement, like all tenancy agreements, are encouraged. Without signatures, a court or tribunal may find it difficult to enforce the agreement when specific terms are broken.
Q: Do I have to register a lifetime tenancy agreement?
A: While there is no specific legal requirement for registering a lifetime tenancy agreement with the Land Registry, it would be a good idea to do this, as it helps prevent issues arising in the future following the tenant’s death.