Qualitative research to explore the implications for private rented sector tenants and landlords of longer term and moresecure tenancy

3 UNDERSTANDING OF THE CURRENT TENANCY REGIME

3.1 This chapter covers the types of tenancies being used and landlords' and tenants' understanding of the current tenancy regime. The second part of the chapter looks at tenancy documents, including the potential for introducing the use of a model or standard set of tenancy documents.

Types of tenancies being used

3.2 Very much in accordance with previous research, including the evidence review discussed in Chapter 1, the vast majority of the landlords who took part in this research routinely use the Short Assured Tenancy (SAT). The very few exceptions were either connected to renting to students using occupancy agreements or to very long-standing tenancies. In these cases, where Regulated or Assured Tenancies were in place for some existing tenants, any new tenancies created were SATs.

3.3 Equally, the majority of tenants who were clear about the type of tenancy being used by their landlord had a SAT, with a small number of student participants having an occupancy agreement. Although a number of tenant participants were unaware what type of tenancy they had, discussion of the key features they understood to apply to the tenancy suggested they too were renting through a SAT.

3.4 This is very much in line with the view expressed by landlords that the SAT is essentially ubiquitous, with its use simply seen as standard industry practice. A number of landlords also noted that all likely sources of advice and information for landlords (see para 2.16), actively promote the use of the SAT. Some participants also pointed out that example tenancies (such as those made available by professional bodies or some local authorities), are always SATs. Some of those with financing arrangements such as buy-to-let mortgages in place noted that the use of a SAT is generally stipulated by lenders.

3.5 No landlords recalled being advised to use, or having actively considered using, an Assured Tenancy since the introduction of SATs in 1989. In fact a small number of landlords were not aware that an alternative to the SAT was available. Those who were aware of the Assured Tenancy option saw no logical reason why a landlord would prefer its use, nor indeed why landlords would consider an option so little used within the industry.

3.6 Tenants also generally saw a SAT as the only option, with only a very few aware that other options existed. Those that were aware of the Assured Tenancy had generally had one at some point in the past. No tenants recalled having been offered any alternative to their current SAT, nor had any raised the possibility with a potential landlord or with an agent. Tenants typically suggested that when looking for a property the focus is very much on finding good-quality accommodation at an affordable price and that the type of tenancy being offered is not really a consideration, or as one tenant put it:

…. if you've found somewhere half decent you're not going to start complicating things…apart from anything else you'd be worried they'd give it to someone else who was happy just to take what was on offer.
(Higher income tenant with children living in small town)

Understanding of the SAT regime

3.7 Although the use of the SAT was consistent, the research found some variations in understanding of the rules and regulations which underpin the SAT regime. Landlords tended to suggest that, at its core, a SAT was an initial 6 month tenancy and that, at the end of the first 6 months, the landlord could bring the tenancy to an end with no grounds if preferred or required. A small number of landlords did note that the initial 6 month period is simply the minimum and that although 6 months is generally used, other timescales are possible. For example, a small number of landlords reported offering a 12 month SAT as standard.

3.8 There was also a widespread understanding of the need to issue an AT5^[3] at the creation of a new tenancy. However, not all landlords agreed about when and how the AT5 should be issued; some suggested it should be in advance of the signing of the tenancy documents, others that it could be signed along with the tenancy documents.

3.9 Another area in which practice and/or understanding differed was with regard to the arrangements in place at the end of the initial tenancy term. Most landlords described a rolling, month-by-month arrangement and were clear that this was stipulated within the tenancy documents they use. However, a small number suggested that if they do not ask a tenant to leave, another SAT of the same period as the first automatically comes into force. Those taking this approach appeared less clear about whether these arrangements were set out within their tenancy documents.

3.10 Tenants tended to be less confident about the basic arrangements that must or should be in place if a landlord has issued them with a SAT. In particular, they often assumed that the arrangements under which they were currently renting were simply the standard and that there was little or no potential to vary them. Some were themselves surprised that they had never really questioned these arrangements, whilst others noted that they tend simply to be presented as 'the way is must be done':

I'm on my fourth let and I don't think anyone has ever suggested anything different…or that there could be anything different….certainly agents don't.
(Lower income, rurally based tenant)

3.11 Overall, however, tenants tended to suggest that a SAT was for 6 months or occasionally for 12 months. The small number who pointed to the potential for a longer tenancy all had direct experience of being offered a 12 month tenancy and were all renting at the 'upper end' of the sector.

3.12 Otherwise, the common understanding was that as a tenant they had both agreed to stay and were entitled to stay in the property until the tenancy expired, assuming they met other tenancy conditions (such as paying the rent on time for example). Only a very few tenants were aware of the role of an AT5 or of having been issued with one. However, none of the participants were clear that they had not been issued with an AT5.

3.13 There was varied understanding and some confusion amongst tenants as to the arrangements in place once the initial period of the SAT had expired. Some assumed that they automatically had another 6 month period unless they were asked to leave, some were clear or suspected that they were on either a monthly or two-monthly rolling notice period, while others simply did not know and were occasionally surprised by their own lack of knowledge:

That's shocking. I should know that shouldn't I. How can I not know that?
(Student with children in receipt of LHA, urban area)

3.14 Some of those with a higher degree of awareness reported having 'learnt the hard way'. For example, confusion about whether a tenant was still required to give notice at the end of the initial tenancy period had led one tenant to lose their deposit. Another reported having assumed they had a guaranteed further 6 months having not been asked to leave, only to be asked to move on 2 months later. In this case the tenancy had set out a month-by-month rolling arrangement but the tenant had not been fully aware of the implications of this.

3.15 The frequent lack of communication between the tenant and either their landlord or their landlord's agent as the tenancy period drew to an end was striking. Many tenants had not attempted to make contact themselves and many had no recollection of anyone making contact with them. Whilst some found this surprising in hindsight, others explained that they had always been led to believe the tenancy would continue beyond the initial period unless they chose to bring it to an end themselves. This meant that a number of tenants experienced little or no anxiety associated with the initial tenancy period coming to an end. However, some did consider this strange when they reflected on it.

Tenancy documents

3.16 One area in which there was a clear consensus amongst research participants was that the documentation associated with setting up a tenancy can be both lengthy and complicated. Many of the larger or more established landlords tended to view this as simply being one of the realities of being a landlord, were confident that they had all the necessary documentation in place, and that the processes they used for setting up a SAT were fully compliant with the legislation and any associated regulations.

3.17 Smaller or medium-sized landlords, and particularly those who had entered the sector relatively recently, were more likely to express anxieties about the tenancy documentation itself. A common area of concern was around the correct practice for issuing an AT5 and the implications of getting this wrong. Those with these concerns sometimes reported having received conflicting information when they had sought clarification. There were also mixed reports about the extent to which use of an agent, factor or solicitor gave comfort, with a small number of landlords having stopped using an agent precisely because one of their tenancies had not been set up correctly. A number of landlords also pointed out that ultimate responsibility lay with them as the landlord and that for this reason they felt they ought to have a clear understanding of the tenancy regime. As one newer landlord put it:

I know the buck stops with me…and it's a business so I really ought to have it all straight in my head…but it's really hard, especially when the people who are supposed to know aren't even all telling you the same thing.
(Landlord with 2 properties, only been renting for 8 months)

3.18 Some landlords also raised concerns about the sheer amount of paperwork that needs to be issued and the impact this can have on a tenant's ability or willingness to really engage with the detail associated with the contract they are taking on. Most landlords reported that they did try to take tenants through key parts of the tenancy document but suspected that few, if any, of their tenants go through all the paperwork. In this respect, the requirement to issue the Tenant Information Pack at the point at which the tenancy document is signed was seen as unhelpful. An alternative suggestion was that it should at least be possible to issue the Tenant Information Pack in advance and that doing so might increase the likelihood of a new tenant reading it. On an associated point, the fact that the Tenant Information Pack cannot be edited to match the terms of the tenancy being issued was raised as unhelpful.

3.19 Landlords' perception that few if any tenants read the tenancy carefully was generally confirmed by tenant participants. Tenants generally felt that, whilst they knew they should have read the document carefully, it is simply human nature not to read the small print. Some reported that they had read those parts which they considered to be most important; these generally seemed to relate to the payment of rent and responsibilities for repairs and maintenance. It was also common for those who had struggled to find accommodation to suggest that reading their tenancy document would have achieved little, since even if they had any concerns they would not have been in a position to turn down a property.

3.20 Although in a minority, a small number of tenants had either read their tenancy document carefully or had tried to do so. Those in the former category included the small number of foreign nationals who took part in the study, along with tenants who had either studied law or worked within the housing profession. Others reported trying but giving up, with their experience perhaps typified by the following:

Its full of herewiths and thereafters….excuse my language but I've got no **** idea what they're talking about. They don't write these things so normal folk can understand them and that's no coincidence
(Longer-term tenant with health problems living in a larger town)

3.21 Finally, there was a small group of tenants who were not in possession of a tenancy document. All were aware of having signed a tenancy when they moved into the property and some reported having asked repeatedly to be sent a copy. All of those without a copy of their tenancy were living in properties at the bottom end of the market and were in receipt of LHA. These tenants tended to see the absence tenancy documents as one of the less-worrying realities that came with having few, if any, choices about where to live. There was a sense in which a tenancy document was seen as meaningless - these tenants believed their landlord would be unlikely to adhere to the tenancy terms and were equally clear that they would not be able to mount any realistic challenge when this happened. It should be noted that all those in this situation believed their landlord to be registered, with a few tenants having checked this was the case.

Potential for a model or standard

3.22 Given the difficulties some respondents reported with understanding tenancy documentation it is perhaps unsurprising that many supported the principle of introducing some type of standard or model tenancy document. Indeed, some participants, principally tenants but also a small number of landlords, expressed surprise that such a thing does not already exist. When exploring this issue further with landlords it appeared that the example tenancy being supplied by either the Scottish Association of Landlords or some local authorities may have been understood as representing some type of industry standard. Tenants who were of this view thought that any tenancy documents they had seen had always appeared to look the same, although did generally concede that they were not really sure whether the content had been the same.

3.23 Most participants (including nearly all tenants and many landlords) supported the principle of a model tenancy. However, other participants took a different view. Those who broadly supported the idea of a model tenancy included most tenants and a number of newer or smaller landlords. These participants made the following points:

• Given that all tenancies need to be compliant with the same legislation and regulations, why is there a need for many possible variations?
• A standard approach could help tenants and some landlords develop knowledge and understanding of their rights and responsibilities. In particular, knowledge gained from one tenancy would be directly transferable to another tenancy.
• There could be a non-adaptable section that contained all the information that cannot be changed on a tenancy-by-tenancy, or property-by-property basis. Anyone reading the tenancy document would know they should focus their attention on those parts that could be adapted.
• The 'ownership' of the document would be important - any landlord using it would need to be confident that it was not open to legal challenge and was being updated as required. The general consensus was that this suggested the Scottish Government should develop and maintain the document.

3.24 However, some landlord participants did have concerns. These landlords tended to be the larger or more established landlords, with the range of issues raised by this group including the following:

• Landlords already have compliant tenancy documents in place and these will have been developed in accordance with the type of properties they own and may have been customised on a property-by-property basis. The resources associated with changing all these documents (even based on newly created tenancies only) would be considerable.
• There would be an absolute need to allow any model to be adapted on a property-by-property basis. The degree of variation required could be so considerable as to render the original premise (of a standardised document) null and void.
• Resources would be better directed at checking that documents currently being used are compliant, rather than introducing 'change for change's sake'.