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Occupation Contracts – The New Form of Tenancy Agreement Under the Renting Homes (Wales) Act 2016

The Renting Homes (Wales) Act 2016 (“the Act”) (passed six years ago) will be coming into force on 15 July 2022. This Act will fundamentally change the current system for letting residential property in Wales.

The change has been introduced to simplify the letting process and make it easier for contract-holders (the new term for tenant) and landlords by having one overarching Act in place which sets out the parties’ rights and obligations, (as opposed to various pieces of legislation).

For the purposes of this post, we will be looking at occupation contracts (which are the new form of tenancy agreement) which will replace most assured shorthold tenancy agreements and licences to occupy in Wales.

Standard vs. Secure

There are two types of occupation contracts: 1) Standard; and 2) Secure.

Secure occupation contracts are intended for use by community landlords. As a result, we will be focusing on standard occupation contracts, which are to be used by private landlords.

Fixed Term vs. Periodic

Standard occupation contracts can either be for a fixed term (an agreed period of either months or years (less than 7 years)) or periodic (week to week or month to month). A fixed term contract will become a periodic contract on expiry of the term if the contract-holder remains in occupation.

Written Statements

Occupation contracts must be in writing and must contain certain terms. Landlords must give their contract-holder a written statement setting out the terms of the occupation contract within 14 days of the date the contract-holder is entitled to begin occupying the property.

Written statements must be used for standard occupation contracts entered into on or after 15 July 2022. In the case of existing tenancies and licences that fall within the definition of an “occupation contract”, these will automatically convert to occupation contracts on 15 July 2022, and landlords will need to provide a written statement to the contract-holder within 6 months (no later than 14 January 2023).

Written statements can be issued in hardcopy or, if agreed by the contract-holder, can be sent electronically.

Terms

These are broken down into four categories:

  • Key matters – information about the property, occupation date, amount of rent or other consideration.
  • Fundamental Terms – these are the essential rights and obligations of landlords and contract-holders.
  • Supplementary Terms – these are practical matters to make the occupation contract work, access for repair
  • Additional Terms – other agreements not dealt with elsewhere (for example the keeping of pets).

Model Written Statements

Model written statements for both periodic and fixed term standard occupation contracts have now been published by the Welsh Government. The model statements incorporate all the fundamental and supplementary provisions to be included (without modification). The model statements can be found here.

When an existing tenancy is converted to a standard occupation contract, the existing terms of the tenancy will apply unless they conflict with the fundamental terms. Supplementary terms will be included unless they conflict with the terms of the existing tenancy.

Joint Contract-Holder

Parties can be added to the contract as joint contract-holders with the consent of the landlord. A contract-holder can leave the contract without the tenancy ending.

Succession

On the death of a sole contract-holder, the contract will terminate unless there is someone who qualifies to succeed the contract-holder.

Termination

A contract-holder cannot be evicted without a court order unless the contract-holder abandons the dwelling.

For no-fault evictions, the minimum notice period is six months. A landlord will not be able to give a possession notice until 6 months after the contract starts. This will give contract-holders a minimum 12-month contract.

A landlord can still terminate early if the contract-holder is in breach of contract. Typical grounds include serious arrears of rent (if the rent is paid monthly, at least two months’ rent unpaid), anti-social behaviour, or failing to take proper care of the property. A court must find it reasonable to evict the contract-holder.

Most grounds require one month’s notice; however, where there are grounds of anti-social behaviour and other prohibited conduct, the landlord can make a possession claim on or after the day on which the possession notice is served. Where there are serious rent arrears, the notice period is 14 days.

Fundamental changes are being made to how the private rented sector will operate in Wales. This blog post is only a high-level summary on occupations contracts. For more information on this and other key changes being introduced please read Renting Homes (Wales) Act 2016. We will be producing more detailed guidance and publishing new templates for Wales over the coming months.

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