On 1 December 2022, the Renting Homes (Wales) Act 2016 (‘RHWA 2016’) came into force which introduced a major reform to landlord and tenant law for rented properties in Wales. As a result, all assured shorthold tenancies and licences in Wales converted into occupation contracts from 1 December 2022.
What is a converted contract?
When searching through the vast amount of new information relating to the RHWA 2016 – this question has caused some confusion.
In summary, a converted contract involves merging the terms of the existing contract (which started as a different type of tenancy, for example an assured shorthold tenancy) with the wording set out in the Welsh Government’s example contract (model written statement) and going through each clause to ensure compatibility.
The converted contract served on the contract holder (previously known as the tenant) must include a written statement that is made up of:
- Key matter – the general information about the tenancy (i.e., names of the parties, rental period, and rent). These must be inserted in every contract.
- Fundamental terms – the essential rights and obligations that the landlord and contract holder must comply with (i.e., repair obligations and right to terminate the contract)
- Supplementary terms – the terms relating to practical matters during the tenancy (i.e., notifying the landlord that the property has been empty for 4 weeks or more).
- Additional terms – the extra terms agreed by the landlord and contract holder (i.e., whether a pet is permitted in the property or garden maintenance). These terms must be fair, as required by the Consumer Rights Act 2015. Additionally, they must not conflict with a key matter, fundamental term, or supplementary term.
Although the converted contract will keep the original commencement date and key terms (i.e. same tenant, rent and rental period), it is vital that an assessment is carried out to ensure existing terms are not incompatible with the fundamental terms of the model written statement.
Compatible terms can stay in the converted contract, but any incompatible terms and references to the assured shorthold tenancy must be deleted to comply with RHWA 2016.
Landlords and agents must then consider all remaining terms against the supplementary term in the model written statement. If an existing term is incompatible with a supplementary term within the model written statement, the supplementary term itself is removed and replaced with the pre-existing term.
Finally, once landlords and agents have considered existing terms against fundamental and supplementary terms the remaining existing terms will form part of the new contract as additional terms. This is a summary of a complex process which landlords and agents should give careful consideration.
It is important to note that landlords are required to serve a valid converted contract containing the written statement to the contract holder before 31st May 2023 – so there isn’t much time left to comply and it’s not a straightforward exercise.
Failure to comply may lead to potential penalties imposed on the landlord by the Welsh Government (i.e. the contract holder may be entitled to 2 months’ compensation) and there could be delays in recovering possession.
Do I have to serve a converted contract, or can a new contract be created?
If the landlord does not want to create a converted contract, merging existing terms with the wording set out in the Welsh Government’s contract, a new substitute contract may be created with new terms. However, like a converted contract, the new substitute contract must include a written statement containing key matter, fundamental terms, supplementary terms and if required additional terms, and it must be served on the contract holder before 31st May 2023.
A new substitute contract may be a more appealing option to landlords where:
- They have a fixed-term contract expiring before 31st May 2023; and/or
- The contract holder agrees to enter a new contract setting out new terms.
Where there was an existing tenancy or license prior to 1 December 2022, a converted contract or a new contract containing the written statement must be served on the contract holder before 31st May 2023 or penalties may be imposed on the landlord. Also, careful consideration is needed in respect of merging the existing terms with the wording set out in the Welsh Government’s contract for a converted contract or penalties may be imposed.
If you need any assistance preparing a converted contract or a new contract, please do not hesitate to contact Woodstock Legal Services.