The Renting Homes Act (Wales) 2016 came into force on 1 December 2022 and is the biggest change to housing law in Wales for decades. The purpose of the legislation is to simplify the housing system and provide greater security.
Tenants will be called ‘contract holders’ and will have an ‘occupation contract’ rather than a tenancy agreement.
There are two types of occupation contract:
– A ‘standard occupation contract’ for use in the private rented sector; and
– A ‘secure occupation contract’ issued by local authority landlords.
Standard contracts can either be periodic from the start or for a fixed term and then become periodic. The Government has released model contracts but the rules regarding adapting the terms in the occupation contracts are strict.
There are 4 types of terms that can feature in the occupation contracts. Key matters, fundamental terms, supplementary terms and additional terms.
Fundamental terms marked (F) cannot be omitted or modified. Those marked F+ can be omitted or modified with the contract-holders agreement. But only if the contract-holder believes that their omission or modification is in their benefit.
Supplemental terms (S) can be omitted or modified by agreement. If any are to be omitted or modified the contract-holder should have the omission or modification brought to their attention. They should also be asked to agree to the change.
Additional terms (A) are those terms specifically agreed upon between the parties.
Changes to fundamental terms (F+), supplemental terms and the addition of additional terms are only permitted if the changes or omissions do not conflict with the fundamental terms.
What action do I need to take?
From 1 December 2022, all tenancies automatically converted to occupation contracts.
For any new occupation contracts from 1 December 2022, landlords will have to issue the contract holder with a written statement within 14 days of moving in. The written statement must contain all the terms of the contract.
For existing tenancy agreements, landlords have a maximum of six months to issue a written statement of the converted occupation contract to their contract holders.
The implications of an incorrect written statement
Any landlord who fails to provide a written statement in the required time or provides an incomplete or incorrect statement faces severe penalties.
The contract holder is entitled to compensation of one day’s rent per day of non-compliance. For up to two months, plus interest. It is undoubtedly known that some contract holders will seek to claim the rent back from their landlords if a written statement or defective contract is provided.
It is therefore very important that landlords take action now to get their contracts/written statements ready.
How to terminate an occupation contract
Section 21 and section 8 Notices will be replaced with new notices.
Unlike England and the plans to abolish section 21 Notices, Wales are keeping a no-fault notice. The notice period will be 6 months rather than 2 months.
A landlord will not be able to give such a notice until 6 months after the contract starts. Notice is 6 months long therefore the earliest the contract can be terminated is 12 months under this particular notice. If a landlord wants to incorporate a break clause in a contract, then the contract must have a fixed term of 2 years or more and the landlord will not be able to exercise a break clause within the first 18 months of occupation.
There will be certain circumstances where 2 months’ notice can still be issued but there will be a deadline for these notices and any notices served after this date will be required to be 6 months’ notice. It is very important that agents/landlords are aware of this when serving notices as an invalid notice could cause serious delays when trying to obtain possession. It is recommended to instruct solicitors to ensure these notices are valid.
Similarly, to section 8 a landlord will be able to serve notice to terminate an agreement on various grounds such as rent arrears, but the notice periods differ.
Take action now!
Agents/landlords will need to review their portfolios to ensure they’re ready for the Renting Homes Act changes for any Welsh properties.
Any new contracts from 1 December 2022 the new contracts will be required.
For existing contracts that convert, agents need to note the deadline of 6 months to provide the written statement.
Landlords/agents should review existing tenancies to see if notice needs to be served while the period is 2 months. Before it changes to 6 months (remember this is for only certain tenancies).
Ensure that any notices served are valid due to the long notice periods. It is recommended to get any notices checked by solicitors.
Frustratingly we still see a large number of invalid notices – perhaps as high as 70-80%. It is crucial that landlords obtain legal advice on drafting and service of notices.
We appreciate the Renting Homes Act changes seem incredibly overwhelming and daunting particularly given the harsh penalties and the long notice periods. Woodstock Legal Services are here to support you and help you navigate through the changes. We can assist to provide you with a renting homes compatible template contracts/written statement, and we can assist to serve possession notices under the new regime. Please do not hesitate to get in touch if you need any help.