Three Way Mutual Exchange in Tenancy

Brief : 109285

Title: Answer the following using the scenario below;

Three tenants want to swap homes with one another. In other words, this is a three way mutual exchange. Mrs X is a local authority tenant whose tenancy began on 1 January 1994. She wants to move into the property currently occupied by Mr Y. Mr Y is an RSL tenant whose tenancy began on 1 May 1984. Mr Y wants to move into the property currently occupied by Miss Z who is a tenant of a housing association which was set up after stock transfer (LSVT). Miss Z became a tenant on 3 April 2001. She wants to move into Mrs X’s property.

You have been asked to advice these clients about the legal implications involved in mutual exchanges. You should consider fully the statutory rights and obligations of all three parties and advise them accordingly. You should also refer them to other possible sources of legal support and advice

In order to be able to advise the parties above as to whether they should undergo a mutual exchange it is necessary to look at the rights of each of the tenants in the properties they are at present living in.

In the instance of Mrs X who is a local authority tenant, because of the time that she has held this tenancy she is likely to be a secure tenant. The other parties wishing to exchange with Mrs X would need to establish that this is the case as mutual exchange from local authority housing can only be authorised if the tenant is a secure tenant. If Mrs X has not kept to the terms of her tenancy agreement either by falling behind with her rent, being the subject of an anti-social behaviour order or any other such breach of her agreement the local authority might have applied to the courts for a demoted tenancy which would then mean that her rights to mutual exchange would be effected^[1].

With Mr Y, he is a tenant of a registered social landlord and although some tenants of registered social landlords do have secure tenancies some only have assured tenancies. Secure tenancies apply to all RSL tenants provided that the tenancy began before 15^th January 1989^[2]. We are told that Mr Y began his tenancy on 1 May 1984. For this particular scenario that would mean that he would be classified as a secure tenant in the same way as Mrs X provided that he has not done anything to breach his tenancy agreement that could put him in the position of a demoted tenant.

As for Miss Z who is a tenant of a housing association which was set up under Large Scale Voluntary Transfer^[3], her tenancy did not commence until 3 April 2001. Under the Housing Act 1988 this would mean that she would be subject to an assured tenancy^[4] or an assured shorthold tenancy^[5], as opposed to a secure tenancy. Although she may be able to enter into a mutual exchange, she would need to check her tenancy agreement in case the right to transfer is expressly denied.

The main difference between secured tenancies and assured tenancies is that in secure tenancies the rent is governed by the Rent Act 1977 and is set by the Local Authority and therefore substantial increases in rent are unlikely. In assured tenancies the rent is set by the landlord and can fluctuate considerably and therefore the rent may rise quite substantially^[6]. Secure tenants also have a greater degree of protection from possession orders. It is easier for a landlord to obtain a possession order if the property is under an assured tenancy. Assured shorthold tenancies afford the tenant even lesser protection from eviction^[7].

Other considerations that should be taken into account include the keeping of pets, whether the rights of secure tenancy will remain protected upon transfer and what rights will be gained or lost following transfer.

One of the most important of the above issues is whether the rights of the tenant offering their home for exchange will be protected. In respect of Miss Z as she is under an assured tenancy Mr Y would lose his rights as a secure tenant and come under the new rulings for assured tenancies. The Local Authority property belonging to Mrs X would have protected rights and Miss Z would inherit those protected rights and become a secure tenant. The property rented by Mr Y may or may not have protected rights depending on the Housing Association to which he belongs. If his rights are protected then Mrs X will inherit those protected rights. If however his rights are not protected Mrs X would become an assured tenant.

In advising on mutual exchange my advice to Mrs X would be for her to consider the consequences if her tenancy were to change from a secure tenancy^[8] to an assured tenancy.

Mrs X needs to consider that if the rent fluctuates to a greater extent than she is used to will she be able to afford any increases the landlord may make. She may also lose the right to buy the property as assured tenancies do not always offer the tenant the right to buy, though some do.

Mr Y he should also consider the disadvantages of becoming an assured tenancy holder and decided whether he is prepared to lose his secured tenancy rights.

Miss Z would gain a secure tenancy and would therefore be more likely to benefit from the transfer.

Other considerations that need to be taken into account are the size of the properties occupied by each party. In order for the authorities to allow the tenants to enter into mutual exchanges certain conditions have to be met. Before an exchange can be made the authorities insist that all the tenants have clear rent accounts. The authorities will also make sure that the tenants are proposing moving to a property of the correct size for their current housing needs. They will allow the tenants to move to a property with a maximum of one bedroom more than they need though they do try to discourage this. A mutual exchange is not allowed with tenants in private rented accommodation which would mean that verification of the status of the housing association to which Miss Z belongs as some LSVR transfers come under the remit of private landlords^[9].

If the parties decide to do the mutual exchange they all need to get the written permission of their landlords to do the swap. Tenancies should be swapped by a deed of assignment. Exchanges can be refused by landlords for a variety of reasons.

In conclusion, before agreeing on a mutual exchange all the parties should check the tenancy agreement of the person they are swapping with and ensure they are happy with the new tenancy agreement they will be entering into. They should also ensure their landlords will agree to the mutual exchange and may like to seek advice from the Citizens Advice Bureau as to the complexities involved with the swap. They may also consider using the services of HOMES^[10] the Housing Association Mobility and Exchange Services who provide lists of available properties as well as guiding them through the process of the deed of assignment. There should be no money exchanged in the program as this would render the exchange as unlawful.

Bibliography

Blackstone’s Statutes on Property Law 2000-2001 8^th Ed

Gravell, Land Law, Text and Materials, 2^nd Ed, 1999

Bryn Perrins, Understanding Land Law, 3^rd Ed, 2000

http://www.lawcom.gov.uk

http://www.homes.org.uk

http://www.awics.co.uk

http://www.landlordzone.co.uk

http://www.clsdirect.org.uk

http://www.direct.gov.uk

1

Footnotes

^[1] Housing Act 1985 s 82

^[2] Housing Act 1988 c50

^[3] http://www.awics.co.uk/documents/fenlandita/Briefing/LargeScaleVoluntaryTransfer.doc

^[4] http://www.landlordzone.co.uk/residential_tenancies.htm

^[5] Housing Act 1996.

^[6] Housing Act 1988 s86

^[7]http://www.odpm.gov.uk/pub/919/AssuredandassuredshortholdtenanciesaguidefortenantsPDF402Kb_id1151919.pdf

^[8] http://www.direct.gov.uk/HomeAndCommunity/SocialHousing/CouncilHousing

^[9] Law Commission, Reform of Housing Law, A scoping Paper March 2001 102

^[10] http://www.homes.org.uk