Sian Skerratt-Williams explores the new regime for renting in Wales, and what landlords need to know.
The countdown has begun for the introduction of a new regime for renting homes in Wales. The Renting Homes (Wales) Act 2016 finally comes into effect on 15 July 2022. Numerous sets of regulations issued earlier this year put flesh on the bones of the Act, giving a clearer picture of how the regime will operate in practice. What are the implications for new and existing landlords in the private rented sector?
Key features and terminology
The primary purpose of the Act is to create a simplified, transparent and fair system for renting homes in Wales. A fundamental principle is that most tenancies and licences granting to individuals the right to occupy a dwelling as a home must be one of two types of “occupation contract”, with the individual being a “contract holder” in each case. “Secure contracts” are periodic contracts for use by public sector or community landlords for social housing, while “standard contracts” are for use by the private rented sector and can be periodic or fixed-term.
Both types of occupation contract must clearly set out the rights and obligations of each party within a prescribed structure. This comprises:
- “key matters”, such as the property’s address, occupation date and rent;
- “fundamental terms”, which are set out in the Act, some of which cannot be modified and others which may be modified in limited circumstances; and
- “supplementary terms”, which are set out in regulations and are also automatically inserted, although parties can agree to modify or exclude them.
Any additional provisions agreed between the landlord and the individual contract holder may be included, although these must not conflict with the prescribed terms. Landlords may be liable to pay compensation for any incorrect or incomplete contract and any unfair changes or additional terms will not be binding on the contract holder.
Granting a new occupation contract
Section 31 of the Act provides that, on the grant of an occupation contract on or after 15 July 2022, the landlord must give the contract holder a “written statement” of the contract within 14 days of the occupation date.
The Renting Homes (Model Written Statements of Contract) (Wales) Regulations 2022 prescribe model written statements of contract, while another set of regulations prescribes the explanatory information that must be included in each case.
Creating a written statement of occupation contract may sound time-consuming, if not daunting. But thankfully the Welsh government has created templates, available on its website, for the main contracts that will be used – periodic secure contracts, periodic standard contracts and fixed standard contracts – which should make life easier for landlords and their agents. The templates make it clear what can be changed and what is set in stone.
Existing tenancies and licences
These are trickier. The Act is retrospective and on 15 July 2022, with some limited exceptions, including tenancies for a fixed term of more than 21 years, existing tenancy agreements and licences will automatically convert to occupation contracts.
For example, an existing periodic assured shorthold tenancy will convert to a periodic standard tenancy. These are “converted contracts”.
In the case of a converted contract, the landlord is required to provide a written statement of contract to existing tenants and licensees by 15 January 2023. Schedule 12 to the Act sets out the mechanism for the conversion process. Looking at the 15 pages of guidance issued by the Welsh government to assist, conversion is likely to be a complex task. The guidance states: “Conversion strikes a balance between the required terms necessary for the conversion contract to operate under the Act, whilst making provision for some existing terms to be maintained…”
Fitness of homes for human habitation
It is a fundamental term that landlords of all occupation contracts other than those with a fixed term of seven years or more must ensure that the dwelling is fit for human habitation. The obligation must be complied with before the occupation date and subsequently for the duration of the contract.
This requirement is supplemented by the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022, which also come into force on 15 July 2022. These set out 29 matters and circumstances to which regard must be had when determining compliance. The Regulations also impose specific requirements on landlords relating to smoke alarms, carbon monoxide detectors and electrical installations.
Deposits and deposit schemes
With occupation contracts granted after 15 July 2022, the Act has its own requirements in relation to tenants’ deposits and deposit schemes. Again, these are supplemented by regulations.
The occupation contract is in place. What next?
Landlords need to bear in mind that the new regime has a significant and sometimes dramatic impact on the landlord/contract holder relationship throughout the duration of the contract. Just to touch on a few areas:
- there are new provisions relating to joint contract holders and enhanced succession rights;
- the Act has its own regime in relation to landlord’s consent;
- there is a new scheme for sub-lettings, transfers and dealings generally;
- there are extensive termination and repossession provisions, replacing existing law and strengthening the position of contract holders.
These are just the tip of the iceberg.
An optimum solution?
The new regime may justifiably be called revolutionary, but will it achieve its goal of simplifying the system for renting homes? At first glance one might think not – but, given the degree of standardisation, the passage of time will surely increase familiarity, which in turn should lead to greater understanding and transparency.
Sian Skerratt-Williams is a knowledge of counsel solicitor, qualified in England and Wales, at Norton Rose Fulbright
