2020-08-13
Legal Articles

Mutual exchange - before and after the Localism Act

Home / Knowledge base / Mutual exchange - before and after the Localism Act

Posted by Mary Rouse on 07 March 2013

Mary Rouse - Property Litigation Lawyer
Mary Rouse Partner

The Localism Act has created a new mechanism for mutual exchange to protect certain ‘life-time tenants’ following the introduction of fixed term tenancies. 

The current position

Mutual exchange is the mechanism by which tenants can swap properties without having to make a separate application to their landlord. In a mutual exchange tenants not only swap properties but also step into each other’s shoes. If Tenant A has a different tenancy agreement from Tenant B, he will be obliged to comply with the differing terms of Tenant B’s agreement and vice versa.

The new regime 

Section 158 of the Localism Act creates a new mechanism for mutual exchanges based on the granting of new tenancies. The section introduces a protection for assured lifetime tenants who were granted their tenancy prior to 1 April 2012. If Tenant A (a lifetime tenant whose tenancy was granted prior to 1 April 2012) wishes to exchange with Tenant B (a fixed term tenant) then a new tenancy is issued to each and Tenant A is granted another assured tenancy. 

The fixed term tenant (B) is granted a new tenancy but there is no particular provision regarding its status which suggests that it will be a matter for the landlord to decide what type of tenancy to offer Tenant B. If the concept of mutual exchange is that each tenant effectively steps into the shoes of the other, there is an argument that Tenant B should be entitled to an assured tenancy which is what Tenant A would have ‘left behind’ had the mutual exchange taken place under the old legislation.

The Transfer of Tenancies and Right to Acquire (Exclusion) Regulations 2012 (SI 2012/696), excludes fixed term tenancies at an affordable rent.

In summary

The following criteria must be met for S158 to apply:

  • One tenancy must be lifetime and the other must be a flexible or assured shorthold tenancy with a fixed term of at least two years.
  • The lifetime tenancy must have been granted before 1 April 2012. The fixed term tenancy must be at a social rent. 
  • The exchange must not fall within the list of grounds on which a landlord may refuse an exchange under section 158. This list is set out in Schedule 14 to the Localism Act 2011, and is closely based on the grounds on which consent may be refused to a mutual exchange between secure tenants. 

The reality is that the new legislation will apply in only a limited number of cases but landlords should ensure that, whatever the legal mechanism for mutual exchange, tenants are aware of the implications, including any change in secure or assured status, any change in rent level between social and affordable rent, and any gain or loss of the right to buy, preserved right to buy, or right to acquire. As tenancies and rent levels become more varied, it will be even more important to ensure that tenants are fully informed.

About the author

Mary Rouse

Partner

Mary is an experienced property litigation lawyer.

Mary Rouse

Mary is an experienced property litigation lawyer.

Recent articles

20 October 2020 Setting up an EMI scheme for your company

Over 12,000 companies across the UK use an EMI scheme (Enterprise Management Incentive) as a way of attracting, retaining and motivating their key employees. Our guide covers all the steps to set up your EMI scheme.

Read article
16 October 2020 Sales and leasebacks and the changes to the planning use classes order

We're covering just two topics very different to each other but both in their own way creatures of this pandemic which is truly dominating our lives. Those topics are sales and lease backs and the recent changes introduced to the planning use classes order

Read article
16 October 2020 Co-habiting couples - How much protection do you have?

It is becoming more and more common for couples to live together and start a family without getting married or entering into a civil partnership. Until the law catches up in this area, cohabiting couples need to be aware of their limited legal rights.

Read article
Contact
How can we help?
01926 732512
CALL BACK