From 15 July 2022, new laws are planned to change the way you rent your properties.
Letting Agents and landlords must prepare for a significant change in the rental sector. The Welsh Government has introduced the Renting Homes (Wales) Act 2016, which provides guidance and simplifies how to rent properties. Under the Act, there are two types of landlords:
- Community Landlords (local authorities and registered social landlords ); and
- Private Landlords (all other landlords).
Under the Act, Tenants and Licensees are referred to as “contract-holders”. Contract-holders will have an “occupation contract” which replaces tenancy and licence agreements (including assured shorthold, assured and secure tenancies). occupation contracts will be either:
- A Secure occupation contract; or
- A Standard occupation contract (Fixed Term Standard Contracts and Periodic Standard contracts).
The type of contract will depend on whether the property is owned by a Community Landlord or a Private Landlord. In addition, there will be additional occupation contracts for other types of housing including supported housing and introductory contracts.
What the ‘Written Statement’ of the Occupation Contract may include
- Key Terms
These set out the details of the parties, property, occupation date, rent, rental period and deposit and anything else which is specific to the particular transaction.
- Fundamental Terms
Provisions of the Act which are automatically included as a term of all occupation contracts, or of specified occupation contracts and so forms part of the contract between a contract-holder and a landlord).
At the creation of the contract, the parties can agree that a fundamental term will be included in the contract with changes or whether it will not be included at all - however, parties can only do this if it improves the contract holder's position and there are some fundamental provisions which must be included without changes.
- Supplementary Terms
These are provisions set out in regulations made by the Welsh Ministers, which are automatically included as a term of all occupation contracts, or of specified occupation contracts.
Once a Supplementary Term is included in an occupation contract, it is referred to as a “Supplementary Term” of the contract.
At the creation of the contract, the parties can agree that the Supplementary Term will be included in the contract with modifications or that it will not be included at all. Once the occupation contract has been created, the parties may vary its terms but there are limits to this.
Where a fundamental or supplementary term has been left out or amended it must be identified in the written statement.
- Additional Terms
The parties may include specific issues in the contract for which there are no statutory provisions, for example keeping pets, although this will need to pass the fairness test. Under section 62 of the Consumer Rights Act 2015, an additional term, or any change to a supplementary term, which is unfair within the meaning of that Act, is not binding.
If there is an existing tenancy or licence in force, it will automatically convert to the relevant occupation contract on the date the new rules come into force, which is currently the 15th of July 2022. The existing terms of the contract will continue as long as they do not conflict with the Act and will be incorporated into the occupation contract. You will be required to issue a ‘written statement’ of the occupation contract to all contract-holders which replaces existing tenancy or licence agreement requirements.
Landlords are required to provide contract-holders with a written statement within 14 days of the occupation date, where the Landlord fails to do so, the landlord may be liable to pay the contract-holder compensation, equivalent to a day’s rent, up to a maximum of two months’ rent. Unless the failure was intentional in which case the contract-holder can apply to the court for increased compensation.
The terms of the written statement contain the terms of the agreement alongside explanatory information the landlord is required to give to the contract-holder, which sets out the contract-holders rights and responsibilities and those of the landlord.
The Welsh Government has provided model contracts for three of the six contract types set out in the Act, secure contracts, periodic standard contracts and fixed term standard contracts of less than seven years as these are the main contracts landlords will use. The other contracts set out in the Act include introductory standard contracts, prohibited standard contracts and supported contracts which are variations of the three main contract types.
Curious about automated data extraction from documents?
Ending Occupation Contracts
Where the contract-holder has breached the occupation contract, the landlord must give at least one month’s notice for the contract-holder to vacate the property. In instances where the breach relates to anti-social behaviour or serious rent arrears this notice period can be shorter.
Where a ‘no fault’ notice is issued, the minimum notice period to be given is six months. Currently regaining possession of the property, without having to cite a fault on the part of the tenant, is done by serving a Section 21 notice. You will still be able to issue a ‘no fault’ notice to end a periodic standard contract, now referred to as a ‘Landlord’s Notice’ under Section 173 of the new law. Section 173 enables the landlord to regain possession without having to give a reason for doing so.
The main difference is under the new law, landlords will be required to give the contract-holder six months’ notice rather than two months’ notice as required under Section 21 of the Housing Act 1988. A Section 173 notice can only be served during a periodic standard contract after the first 6 months of occupation and cannot be served during a fixed term standard contract. The six month notice period only applies to occupation contracts which begin on or after 1 December 2022, for all tenancies which began before 1 December 2022 landlords are only required to give two month’s notice as per Section 173.
Fitness for Human Habitation
New requirements are set out in the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022. The aim of the Fitness Regulations is to help landlords maintain dwellings and prevent them becoming unfit for human habitation. A contract-holder is not liable to pay any rent for a period in which the property is deemed unfit and a landlord will not be able to issue a Landlord’s Notice, or exercise a break clause if they are not compliant with the Fitness Regulations.
Changes to Smoke Alarm Requirements
Under Regulation 5 of the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022 the Landlord must ensure that during each period of occupation, on each storey of the dwelling there is a smoke alarm which is in repair and proper working order, connected to the dwellings electrical supply and linked to every other smoke alarm in the dwelling which is connected to the electrical supply.
For tenancies which existed prior to 1 December 2022 Landlord’s will have 12 months to comply with these requirements.
In addition, the landlord must ensure that during each period of occupation, a carbon monoxide alarm which is in repair and proper working order is in each room of the dwelling which contains a gas appliance, an oil fired combustion appliance or a solid fuel burning combustion appliance. These requirements apply to all occupation contracts from 1 December 2022.
Changes to Electrical Safety
The new requirements are set out in the Renting homes (Fitness for Human Habitation) (Wales) Regulations 2022. Regulation 6 requires the landlord to ensure there is a valid electrical condition report, a copy of which needs to be provided to the contract-holder, in respect of the dwelling during each period of occupation.
An electrical condition report is provided following an electrical installation inspection, this report remains valid for 5 years, the period may be reduced if the report indicates there is a need for testing at shorter intervals.
For tenancies which existed prior to 1 December 2022 Landlord’s will have 12 months to comply with these requirements.