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Lord Mackay of Ardbrecknish: Obviously, my earlier remarks have brought two hereditary Peers opposite to their feet and I welcome the points that they make. Before entering the general discussion on the clause, perhaps I may say to the noble Lord, Lord Monkswell, that if the landlord offers a verbal fixed term, that is binding; if it is periodic, then that will be a shorthold. A verbal fixed term is indeed binding.
The clause changes the basis for creating assured shorthold tenancies defined in Section 20 of the 1988 Housing Act. It provides that any new assured tenancy created on or after the day the provision comes into force, will automatically be an assured shorthold tenancy unless it meets the conditions in Schedule 6 to the Bill. Schedule 6 lists those tenancies which cannot be assured shorthold tenancies. Landlords who wish to do so will be able to continue to let property on full assured terms by serving a simple notice to that effect or by including a simple declaration in the tenancy agreement itself. Where the tenant has existing rights of security of tenure, those rights will be preserved.
The noble Lord, Lord Dubs, seeks to give greater security to the private sector tenant. I am sure we would agree in principle that security for the tenant is wholly desirable. It would be nice if tenants could live where they wanted for as long as they wanted to. But, frankly, the great majority of landlords are unlikely to let property on that basis, and it was excessive regulation of the private rented sector by successive governments that led it to decline to an all-time low in 1988 when only 1.7 million households were in that sector.
The introduction of assured shorthold tenancies has been a major factor in the recent revival of private renting. Landlords need the flexibility that is available from the assured shorthold tenancy. For example, anyone with a mortgage on a property is unlikely to get the agreement of a building society or a bank to let the property unless the tenancy is on shorthold terms. That is why more than 70 per cent. of tenancies are on shorthold terms, and the number is increasing. If the noble Lord, Lord Dubs, is keen to see a healthy private sector, I put it to him that his desire to give tenants greater security than is given in the Bill currently before us and in current legislation which is not being amended by the Bill is unrealistic. It would reverse the revival we
We do not propose to remove the existing right of shorthold tenants to a minimum of six months' security of tenure; nor is there any reason why a landlord who intends to continue letting his property should want the existing tenant to leave after six months, provided he pays his rent and complies with the terms of the tenancy agreement. Indeed, the average completed length of residence of a shorthold tenant is well over two years.
When shorthold tenancies were first introduced, tenants were accustomed to regulated tenancies which gave long-term security of tenure. In 1988 we felt it appropriate to require the landlord to give prior notice on a special form that the tenancy was to be on shorthold terms and would not provide long-term security of tenure. However, we need to consider what purpose the notice procedure now serves. Shorthold tenancies have been around for more than seven years. Most private tenants--the figure is now 70 per cent.--expect to be offered a shorthold tenancy and know that it will not give security of tenure. If we were setting up a shorthold system from scratch today, we would not invent a special procedure requiring the landlord to say, "If you agree to a one-year tenancy I will give you a separate form, served in a special way, confirming that we have agreed to a one-year tenancy".
Furthermore, the notice procedure can be a trap for the unwary landlord because through a simple administrative error, such as failing to sign the form or even misspelling the landlord's name, the form can be ruled invalid. As a consequence, landlords can accidentally create a full assured tenancy, giving the tenant long-term security of tenure. That puts people off letting property all together. Instead, they may leave it empty, which is liable to lead to disrepair and means that there is one fewer house on the private rented market. What Clause 89 will do is dispense with the prior notice requirement, making it easy to create a shorthold tenancy. That will give more confidence to the landlord and encourage owners of empty property to let it.
When the Bill is enacted, unless the landlord actually gives specific notice in writing that he is creating with the tenant an assured tenancy, the tenancy will be assumed to be a shorthold tenancy. That reverses the current position. As the years have rolled on since the advent of shorthold tenancies--it is seven years now--we believe that it is now reasonable to reverse the procedure we introduced in 1988 which was designed against the background that this was a new procedure and people did not know about it. Now, as I have already said, 70 per cent. of tenancies are on an assured shorthold basis. We believe now is the time to reverse the position so that landlords, who may be deciding to rent a house as a one-off piece of business, will not be put off by the idea that all they have to do is make one mistake and they will suddenly find themselves landed with a fully assured tenancy. This will prevent that
Lord Stallard: As I listened to the noble Lord, I could not help thinking that he is solely intent on fixing the Bill so that it safeguards the landlord at every stage. We know that shorthold tenancies are being used as an excuse to get rid of a tenant or to say that a landlord will get rid of a tenant at the end of six months unless the rent is increased for the following six months. That is what the Bill says to me. Landlords are determined that they will only have to have the tenant for six months before they can increase the rent. That is what the Bill is about. There is no safeguard for the tenant. Landlords will now be assured, without anything in writing or any legal papers, that at the end of six months they can say to the tenant, "You can carry on for another six months but I shall have to double your rent", or whatever the process is. That is what is happening and that is what I think is wrong with the Bill. It is one-sided.
Lord Mackay of Ardbrecknish: I do not believe it is one-sided. As I said, 70 per cent. of new tenancies are assured shorthold tenancies. The normal position now is for assured shorthold tenancies. We believe that it is the advent of those tenancies which has given rise to the welcome increase in the private rented sector.
Lord Stallard: The noble Lord mentions the figure of 70 per cent. Is that an overall United Kingdom figure, or does it take account of the special circumstances of the inner cities? The position in the inner cities is quite different. I live in an inner city area where tenants are in and out. It is like shelling peanuts. They are in and out, rents go up and landlords seem to be doing what they like. Where does this figure of 70 per cent. overall come from?
Lord Mackay of Ardbrecknish: I think the 70 per cent. will be for England and Wales. It includes inner cities, outer cities, country areas and so on. It is 70 per cent. of new tenancies, just as I said. I think the noble Lord has got the wrong end of the picture. In fact, the 70 per cent. is England only. I included Wales but the statistic is for England, although the legislation applies to England and Wales. However, I do not suppose the figure will be much different for England and Wales.
The noble Lord seems to think that at the end of every six months the landlord will decide to get the tenant out and hike up the rent. I do not believe that getting the tenant out does help to hike up the rent because tenancies are already at market rents. If the landlord tries to double the rent to an amount above the market level he may well find that there is little market for his property.
Baroness Gardner of Parkes: It is unrealistic to think that landlords will try to double the rent. Tenants simply would not accept that. It has become a highly competitive market. My experience is that rents are
Lord Monkswell: What are the Government's wishes for the private rented sector? Do they wish that the private rented sector should provide just temporary accommodation for people, or do they envisage that the private rented sector should provide permanent homes for people? There is a difference. If 70 per cent.--probably that figure will rise--of private rented accommodation is under assured shorthold tenancies, effectively that means it is temporary accommodation. There is no assurance that people can be certain that their home can become their permanent home.
If that is what the Government want the difficulty is that we shall have the private rented sector categorised as being only for temporary accommodation. I am not sure that even the Government would like the private rented sector to be stigmatised in that way. If that is going to be the predominant form of tenancy then that is the reality for people living in that kind of accommodation. They will not have long-term security where they can say, "This place is my home". It will only be temporary accommodation. If that is the way the Government want the private rented sector to be seen, that is fine, but we shall have to say to the people of this country, "If you want a home which you can call your own and which you can live in permanently, don't rent privately". I am not sure that even the Government would like that to be the situation that the people of this country have to face.
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