The Renting Homes (Wales) Act 2016 (the “Act”) received Royal Assent on 18 January 2016 and will come into force on a date to be appointed by statutory instrument.
The Act tries to simplify the regime in a single piece of legislation and tries to modernise the relationship between landlord and tenant with the use of more modern terms, making the tenancy a “contract” and the tenant a “contract holder”. There are greater pitfalls for landlords if they fail to comply with certain requirements but there is no fundamental change to the no fault possession grounds at the end of a tenancy.
With limited exceptions, the Act will replace all existing tenancies and licences with two types of “occupation contracts”:
Secure Contracts – modelled on the current secure tenancies issued by Local Authorities, this will provide a high degree of security of tenure and likely to be used for social housing.
Standard Contracts - modelled on the current assured shorthold tenancy commonly used in the private sector, these can be periodic contracts (i.e. which will typically run from week to week or month to month) or fixed term contracts (for a minimum term of 6 months) to run for a pre-agreed set period after which they automatically become periodic contracts.
The new occupation contracts (which will be based on free model contracts produced by the Welsh Government) will incorporate:-
- fundamental terms which will set out the primary rights and responsibilities; some fundamental terms can be omitted or changed by agreement but only where, in the contract holder’s opinion the position of the contract holder is improved; this places restrictions on the Landlord’s ability to negotiate the occupation contract; there are certain fundamental terms which cannot be omitted or changed;
- supplementary terms (yet to be announced by the Welsh Ministers) will contain further rights and responsibilities that apply under the occupation contracts e.g. obligations to pay Council Tax and Utility bills; the parties are free to exclude and modify supplementary terms provided that they do not undermine the fundamental terms of the contract;
- key matters i.e. the property address, occupation dates, the rent and other consideration, the rental period; and
- additional terms that may be agreed between the parties in addition to the fundamental and supplementary terms.
For all occupation contracts, the landlord must provide to the contract holder with a written statement of the contract within fourteen days of the occupation date. This must set out the details of the parties, the fundamental terms, the supplemental terms and additional terms. If the landlord fails to supply a written statement within the stipulated time, the contract holder can apply to the Court for determination of the terms of the contract. In addition, the landlord is liable to pay to the contract holder compensation of up to two months’ rent for failing to issue a written statement of the contract. Interest will also be payable in certain circumstances and compensation will also be paid if the written statement is incomplete or incorrect.
Also within fourteen days of the occupation date, the landlord must provide the contract holder with an address where any documents can be sent to the landlord. Failure to comply with this requirement will also entitle the tenant to compensation of up to two months’ rent.
Tenancy Deposit Scheme
The Tenancy Deposit Scheme will continue to apply to occupation contracts under the new regime but unlike the current system, the deposit requirements will also apply to secure contracts granted by social landlords. Not dissimilar to the current scheme, the deposit must be placed in a Tenancy Deposit Scheme within 30 days and the contract holder must be given details of the scheme setting out his/her rights and confirmation that the initial requirements have been complied with. As with the current system, if the landlord fails to comply with these requirements, it cannot issue a Notice Seeking Possession and, on application by a contract holder, the Court can order the deposit to be repaid to the contract holder (or to be paid into a custodial deposit scheme) and for the Landlord to pay three times the amount of the deposit to the applicant.
Unlike the current system which gives the court discretion to order such penalty, it appears that under the new requirements in Wales there will be a mandatory requirement to impose this penalty where a landlord fails to comply.
Certain Provisions to be aware of
- The Act introduces a right of succession for all occupation contracts on the death of the contract holder. Any person is qualified to succeed if they are a priority or reserve successor i.e. essentially family members who occupy the dwelling as their principal home at the time of the contract holder’s death. However this is not a fundamental term so it is possible to exclude this right in the occupation contract.
- There is a strict procedure and timeline for the landlord to give consent under an occupation contract which if not strictly followed will imply deemed consent.
- Where a Landlord accepts payment from a person knowing that they are a trespasser or where they ought to have known that they are a trespasser and does not take any action to evict that person within two months of accepting the first payment, a periodic contract is created between the landlord and that person which entitles the trespasser to occupy the dwelling as their home.
Existing Tenancies and Licences
Existing Tenancies or licences will not terminate on coming into effect of the Act. The existing terms will continue to have effect provided they do not conflict with the fundamental terms; supplementary terms will be incorporated unless they conflict with the existing terms.
The Welsh Government has not (yet) opted for Rent Controls and has retained the ability to terminate contracts under the accelerated procedure.