"Landlording" A History

Key Points: The real History of landlording is lost in the lists of time but much of our modern property law - throughout the English speaking world, stems from 1,000 years of British legal history. Modern property law involves two elements: common law or judge-made law and statutory law or Acts of Parliament. Years of case law and numerous acts make the whole area quite complex. Residential Tenancies are governed by the Housing Act 1988 as amended 1996. Business tenancies are covered in the main by the Landlord and Tenant Act 1954 Part II, unless both parties have agreed before the agreement to contract out of the Act.

Quote "The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not." - Fredrich August von Hayek

Full Article:In Brief Property law in England and Wales has its roots in antiquity. Modern property law involves two elements: common law or judge-made law and statutory law or Acts of Parliament. Years of case law and numerous acts make the whole area quite complex. Renting (or letting) is a contractual arrangement whereby a tenant occupies and gains a legal interest in land exclusively for a specified period of time in return for the payment of rent. Before WW1 most people in Britain rented their homes, farms and business property. This situation changed dramatically for housing over the course of the 20th century until only about 7% rented their homes in 1991. Whilst business lettings remained largely unaffected, housing was influenced among other things by social legislation and public sector housing  provision. The poor image of landlords, total security of tenure for tenants, and the consequently low returns, made letting residential property unpopular until just a few years ago. The change was mainly brought about by a rebalancing of the rights between landlord and tenant in the 1988 and 1996 Housing Acts. Investment returns have become economically viable again, which has encouraged home owners, small landlords and investors to enter the lettings market. The legislative changes have coincided with shifts in the modern lifestyle which have begun to favour renting for its flexibility. Low interest rates and a volatile stock market have resulted in a buoyant housing market and more and more people looking to buy-to-let. How "Landlording" Started   Property matters 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), begun under the Roman Empire, became common from around the 5th century onwards in England and much of Europe. Peasants became bound to the land and dependent on their landlords for protection and a basic form of justice. Later, feudalism, which lasted until around the 15th century, became widespread. This was a contractual system of military and political relationships existing among the nobility of Western Europe. It was a system whereby fiefs (land and labour) were granted in return for political and military services. This was based on a form of contractual relationship sealed by oaths and fealty (fidelity). Lords provided knights for their king by dividing their estates into smaller parcels known as "knights' fees" which they allocated to tenants able to serve as knights. These knights in their turn would grant plots of land to their own tenants (villeins) in return for their services. In effect a feudal pyramid developed, akin to the modern landlord-tenant and sub-tenant relationships. Lords had few if any rights from their king, and likewise 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. Land Tenure  Today, ultimately, all land in England and Wales is owned by the state, land being merely "held" on tenure (freehold) reverting back to the state in the absence of rightful heirs. To all intents and purposes a freeholder (fee simple absolute in possession) is the 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 where the freeholder dies without heir) 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 interferes with and distorts 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, and statutory or non-statutory rules and regulations of many kinds are all affecting the letting of property. The whole process is slowly changing and evolving as new legislation comes along and courts set new precedents as they interpret both common law principles and statutes vis-à-vis 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 decision sets a precedent which becomes a guiding principle, until such time as it may be further challenged. A business tenancy is a contractual arrangement between landlord and tenant governed by common law for the period of the lease term. The main landlord tenant legislation comes in when disputes arise at the end of business tenancies regarding security of tenure and grounds for possession. Business tenancies are covered in the main by the Landlord and Tenant Act 1954 Part II, unless both parties have agreed before the agreement to contract out of the Act. In the case of residential tenancies they are governed by statutory (parliament made) rules and regulations from day one of the tenancy.  Whilst the residential lease is still a contractual relationship between two private parties in law, much of the residential tenant/landlord relationship is governed by acts of Parliament. Private Landlords  Up until about 1914 approximately 90 per cent of all housing in Britain was privately rented. This compares to only about 10 to 11 per cent at the end of the century, though from a low point of about 7 per cent in 1991 there has been a steady increase over the last few years. It is now predicted that the privately rented sector will reach 15 per cent of the total housing market by 2002. The trend of decline in private renting throughout most of the 20th century was due largely to social trends and legislation designed to switch the balance of power away from the landlord in favour of the tenant. Examples of notoriously harsh Victorian landlords entered the public psyche through writers such as Dickens and Trollope, and the process was exacerbated in the 1950s by the notoriety and scandals of Peter Rachman et al. "Rachmanism" has entered the language as a term used to describe the activities of ruthless slum landlords and their exploitation of hapless tenants. 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, the result of social legislation inspired by an extremely poor public image caused by rouge landlords. Security of Tenure  Rent controls and total security of tenure (Landlords unable charge market rents or terminate tenancies, which even passed on to successive generations) swung the balance so much the other way that over the century the decline in privately rented residential property was quite dramatic. In effect, letting residential property throughout much of the 20th century became uneconomic for the private landlord. Too many landlords had their "figures burned" 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 or near market rents with a guarantee of getting their properties back. The Shorthold Tenancy  This Shorthold Tenancy started to stimulate supply again but it was, and still is, a slow process particularly as the legislation did not apply retrospectively, i.e., not to Rent Act tenancies created before 15 January 1989. Currently about 70% of UK housing stock is in owner occupation. About 19% is in social (local council and housing association) ownership, the the remaining 10/11% in the hands of private landlords. Owner occupation has risen steadily with increasing affluence and the influence of the Thatcher years policies of selling off council properties. This process has continued to the point where housing associations are becoming the main owners of social housing. The increasing wealth of UK professional and many working families, with inherited family property and increasing investment funds, has encouraged the move into rental property as an investment alternative. This, coupled with the Assured Shorthold Tenancy and the buy-to-let mortgage has resulted in a steady rise in the supply of privately owned rented accommodation. We have a long way to go to reach the levels of the European market, but there is now a definite move in this direction. Demand for Renting  The other side if the coin is the demand for rented housing. Demand has begun to increase encouraging more supply. The rapidly rising property prices in the hot spots, particularly London and the south east, has resulted in first timers being squeezed out of some areas as buyers, but not necessarily as renters. For the tenant, renting has become a convenient alternative to buying and for some it has become the only option: Job mobility, job insecurity and short-term work contracts have meant that many are wary about becoming locked-in to owning a property. Co-habitation prior to marriage, again means that couples are often reluctant to become looked-in to a property and a large mortgage, which may be difficult to unravel if there is a split. Higher divorce rates and an ageing population, with people in general living longer, has increased demand for housing and particularly single accommodation. In some high-priced areas first time buyers have been priced out and renting has become the only option.   The Future of  "Landlording" in the UK   For economic prosperity the country needs a mobile and flexible workforce and the fast-changing modern economy of Britain needs more high quality private rented accommodation. If business and enterprise is to be encouraged, a UK government priority in the 21st Century, then commercial premises also need to be readily available for renting. 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. Legislation now appears to be striking a sensible balance between the rights of tenants and landlords. If this can be sustained it will encourage more enterprising landlords (part-time investors as well as businesses) to offer improving standards of residential accommodation. There is also a role to play for the small private landlord in providing commercial premises for the many small businesses needing accommodation on the high street and beyond. In this way the private landlord can make an increasing contribution to local communities and the quality of life in the UK today. 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