Mutual Exchange - Guidance Notes for Tenants
Getting Permission to Exchange
Once a tenant has found a willing mutual exchange partner, permission must be given by all affected landlords before an exchange date can be agreed. You will need to approach your landlord to request an application form to complete.
Public sector landlords generally have policies which state that they will not unreasonably withhold permission to an application to exchange. For some tenants (for example secure tenants), the reasons why an exchange might be refused are limited, and set out in law, whereas for others the reasons a landlord can give for refusal can be much broader. You can check with your landlord, what reasons for refusal they use. Some of the most common reasons include:
- The property would have too many or too few bedrooms for your housing needs
- Legal action is in progress to obtain possession of the property or to demote the tenancy
- The property has been designed or substantially adapted for a specific purpose. (For example, for a person with a physical disability, or as sheltered accommodation for older people.)
- The property benefits from special services/facilities.
Where a landlord is limited by law in its ability to refuse applications to exchange, it may not be entitled to refuse consent to applicants who lack a "local connection."
This is the case even if a local connection with the area might otherwise be required by a 'planning agreement' on the relevant property. For more information on 'planning agreements, see below.
If a landlord was to refuse consent to an exchange on the basis that the incoming tenant has no local connection and it was not permitted to do so, this reason would be invalid at law, and could be challenged. This applies to both landlords of secure tenants and most landlords of assured non-secure tenants. Your landlord will be able to give you further information on this.
Planning agreements (sometimes referred to as Section 106 Agreements) are legal contracts that, amongst other things, can require particular houses to be allocated with designated procedures - and at times this means only to people with a "local connection". Where tenancy legislation restricts a landlord's reasons for refusing an exchange however, this legislation overrides the procedures set out in a planning agreement.
Legal action may be taken against tenants who swap homes without all of the required landlord permissions, and this could result in eviction. It is important that all tenants involved in an exchange get their landlord's consent before the mutual exchange takes place,
Once a tenant has found a suitable exchange partner, and landlord consents are obtained, the exchange needs to be undertaken in accordance with a legal process.
Mutual exchanges are undertaken in one of two ways:
- Assignment (most mutual exchanges are undertaken in this way)
- Surrender and regrant (this only applies if the exchanging tenants meet certain statutory qualifications set out in the law)
In a mutual exchange by assignment, no new tenancies are created and no new tenancy agreements are issued. Each tenant signs a document called a 'deed of assignment' and this document effectively swaps the tenancies over - so each tenant steps into the other tenant's tenancy. This even happens if the tenants have different types of tenancy, so for example:
Betty has a secure tenancy of property 1 and Tony has an assured tenancy of property 2. Following the mutual exchange by assignment:
- Betty will have an assured tenancy of property 2 (even though she was previously a secure tenant); and
- Tony will have a secure tenancy of property 1 (even though he was previously an assured tenant).
The exception to the rule that the new tenant stands in the shoes of the previous tenant is in respect of succession (where a tenant has either inherited their tenancy or had it legally transferred to them, usually from a family member).
Succession rights and status follow the tenant and do not stay with tenancy. So for example a tenant who is a successor under the original tenancy remains a successor following the mutual exchange under their 'new' tenancy.
Surrender and regrant
The surrender and regrant method is not available for all mutual exchanges. It is only used in very specific circumstances where a mutual exchange application involves at least one social housing tenant with a tenancy that was granted before 1 April 2012, and one tenant whose tenancy was granted on or after 1 April 2012.
It was introduced in order to protect the security of tenure of existing lifetime tenants prior to the introduction of the more common use of fixed term tenancies.
Unlike an assignment, where each party steps into the other's shoes, surrender and regrant requires each tenant to surrender (a legal term meaning 'give up') their original tenancy agreements entirely. The landlords are obliged to issue new tenancy agreements to each of the swapped tenants for their new properties. The type of tenancy granted will differ, depending on the status of the tenant.
Before agreeing to a mutual exchange, tenants should ensure that they are comfortable with the condition and decoration of the home they are looking to move into. Some tenancy breaches might be required by the original tenant as a condition of the permission to exchange. Tenants should check whether this is the case, but the general rule is that the properties are taken as seen.
In such cases the incoming tenant takes over any outstanding breaches and liability for repairs. Some things to look out for include:
- Are there any damage or outstanding repairs that will become the 'new' tenant's responsibility
- Agree on any items that will be taken or left behind - not all fixtures and fittings are provided by the landlord and so the outgoing tenant may take them away
- Check that the council tax and other costs/utilities at the chosen property are affordable
- Find out if the landlord is planning any work to the property and/or local area in the near future.
Tenants should also satisfy themselves that the terms of their 'new' tenancy are acceptable. For secure tenants, in particular note that if you have the right to buy your home:
- By exchanging to another local authority secure property, you could lose your right to buy your home, depending on the property you choose.
- By moving into a property owned by a private registered provider, you will lose your right to buy (although you may qualify for the right to acquire).
Before committing to a mutual exchange, we would recommend that you seek independent legal advice.