Sian Skerratt-Williams explains what the increasing number of differences between English and Welsh law mean for property transactions
Legal devolution in Wales is a recent development but the pace of change has been dramatic. The National Assembly for Wales was established by the Government of Wales Act 1998 with limited powers to make secondary legislation. The relatively unsophisticated initial structure of the Assembly was improved, and the scope of its legislative powers extended, under the Government of Wales Act 2006 (“the 2006 Act”). Today the Assembly has separate legislative and executive branches and the power to make primary legislation on an extensive range of matters.
In a relatively short space of time, therefore, the Assembly has reached the point of being able to create its own national policies in a number of key areas, subject to specified exceptions and general restrictions. Several of these areas are highly relevant to property transactions (see “Areas of devolved power” box).
Planning and development control
Town and country planning is one of the areas in which legislative competence has been devolved to the Assembly. This includes “listed building and conservation areas, caravan sites, spatial planning, mineral workings, urban development, new towns and protection of visual amenity”. One notable exception under town and country planning is development consent under the Planning Act 2008 (“the 2008 Act”).
The main pieces of primary legislation relating to planning in Wales, as in England, are the Town and Country Planning Act 1990, the Planning and Compulsory Purchase Act 2004 and the 2008 Act. In December 2013, the Welsh Government published a consultation paper, “Positive Planning: Proposals to reform the planning system in Wales”. The proposals were enacted in the Planning (Wales) Act 2015 (“the 2015 Act”) which became law in Wales on 6 July 2015. The 2015 Act changes the planning system in Wales largely by amending the primary legislation as it applies to Wales. Key changes include:
- Strengthening the plan-led approach by introducing a new legal framework for the Welsh Ministers to prepare a national land use plan, the National Development Framework for Wales. Provision is also made for the production of strategic development plans.
- Providing for planning applications in relation to nationally-significant projects to be made to the Welsh Ministers.
Processes and procedures are also improved and changes are made in relation to applications to register town and village greens.
These changes are the tip of the planning iceberg. As part of its 12th programme of law reform, the Law Commission for the first time included projects devoted entirely to the law in Wales. One relates to planning and development control. A Law Commission consultation on the project is imminent and a report, with recommendations for reform and a draft bill, has been promised for summer 2017. The Law Commission has said: “This project considers the benefits of a simplified and modernised system that reflects the needs of Wales, a smaller country with different types of land use, and where there is a close connection between government bodies. The main focus is the reform of the development control process, and the relationship between this and plan-making. A simplified and modernised planning system for Wales will have the potential to promote economic growth, housing supply and protection of the environment, as well as increasing efficiency and reducing transaction costs.”
The private rented sector
Housing is another area in which legislative competence has been passed to the Assembly.
The Housing (Wales) Act 2014 (“the 2014 Act”) became law in Wales on 17 September 2014. This was the culmination of the first project undertaken jointly by the Law Commission and the Welsh government, entitled “Housing: Encouraging responsible letting”. Among other things, the 2014 Act introduces a compulsory registration and licensing scheme in Wales for private rented sector landlords and letting and management agents.
Then, on 9 February 2015, the Renting Homes (Wales) Bill (“the Bill”) was introduced in the Assembly. The Bill is based on recommendations of the Law Commission which were accepted in Wales but rejected in England.
The Bill is a radical one and very comprehensive, running to 255 clauses. It will reform and restructure the legal basis for renting a home in Wales from a private or community landlord. It will require that the legal relationship for renting a home is based on one of two types of occupation contract: a secure contract or a standard contract, both prescribing the rights and responsibilities of the landlord and “contract-holder”. It will result in the abolition and replacement of most statutory and common law residential tenancies, such as secure tenancies, assured tenancies and assured shorthold tenancies.
The Bill has already reached stage three of the legislative process, which involves a detailed consideration by the Assembly as a whole. If enacted, this will mark a significant divergence between England and Wales in relation to the law on private letting.
Property taxes
The Wales Act 2014 devolves to the Assembly the power to make primary legislation in the area of taxation.
Initially, two taxes are devolved, both related to land and property: a Land Transaction Tax (“LTT”) and a Landfill Disposal Tax (“LDT”). It is anticipated that these will replace the existing UK taxes in these areas – Stamp Duty Land Tax (“SDLT”) and Landfill Tax – in Wales from April 2018. In July 2015, the Tax Collection and Management (Wales) Bill was laid before the Assembly to pave the way for tax devolution.
The exact form that the proposed LTT and LDT will take is not yet known. Earlier this year there were consultations seeking views on the subject. In a written statement on the responses to the consultation on the LTT, the Welsh Minister for Finance and Government Business stated that it was proposed to retain a number of the key elements of the current SDLT structure. However, legislation is not expected to be introduced before the next Assembly elections in May 2016. Decisions on tax rates and bands will also not be known for some time and will be left to the next Welsh government to consider “taking into account the economic factors in play closer to April 2018”.
Practical implications
It is clear that, on a property acquisition, development or other transaction in Wales, a knowledge of the differences between the law in England and in Wales in relevant devolved areas is essential.
Just looking at the above examples – and there are many others – law and regulation in the private rented sector is already different and will become more so when the Renting Homes (Wales) Bill is enacted. Similarly, there is already a divergence between the planning process in England and that in Wales and this will become more significant if the Law Commission project on planning and development control in Wales proceeds and its recommendations are adopted. The flesh on the bones of the new LTT is also awaited with interest – will the rates and bands entice new property investment into Wales, or will the reverse be true?
In terms of due diligence, the acquisition of a portfolio of properties spanning England and Wales will require a new and additional level of scrutiny. The point may well come in the future when specialist Welsh law advice will be needed, as is currently the case with Scottish and Irish law.
The Welsh language may also need to be taken into account. Wales remains part of the single legal jurisdiction of England and Wales. However, the Acts of the Assembly are enacted in both English and Welsh and both versions are treated for all purposes as being of equal standing. The Welsh language may be used in any legal proceedings in Wales and is already used extensively in courts. In practice, this may well be a factor when it comes to the interpretation and enforcement of the increasing body of Welsh law.
Looking to the future
Wales is already developing a distinct legal personality and there is more ahead:
- In a command paper published in February 2015, “Powers for a purpose: Towards a lasting devolution settlement for Wales”, the UK government proposed further devolution, this time on a reserved powers basis, so that law making-power would be transferred to the Assembly in all areas other than those specifically reserved to the UK parliament. A draft Wales Bill was published earlier this month and includes a move to the reserved powers model and the devolution of new powers, including powers relating to energy projects.
- Acknowledging the increasing divergence between the law applicable in Wales and that applicable in England and also the fragmented way in which this is happening, the Law Commission has recently consulted on the form and accessibility of Welsh law. The consultation, which closed on 9 October 2015, asks what can be done to simplify legislation relating to Wales and make it more accessible. One suggestion is a programme of consolidation or codification, which would certainly make Welsh legislation very distinctive.
- The Law Commission now has a Welsh Advisory Committee to advise it on the exercise of its functions in relation to Wales and a protocol was signed in July 2015 between the Law Commission and the Welsh Ministers about the Commission’s work relating to Welsh devolved matters.
In a nutshell, this is an exciting and dynamic time: more legal divergence is on the way and those in the property industry need to be prepared for it.
Areas of devolved power
The National Assembly for Wales has legislative competence in relation to a range of subjects listed under 21 broad headings (set out in Schedule 7 of the Government of Wales Act 2006, as supplemented by the Wales Act 2014). The headings that may be particularly relevant to property transactions include:
- Agriculture, forestry, animals, plants and rural development
- Ancient monuments and historic buildings
- Economic development
- Environment
- Highways and transport
- Housing
- Taxation
- Town and country planning
- Water and flood defence
Sian Skerratt-Williams is a knowledge of counsel solicitor at Norton Rose Fulbright LLP
