Classes of occupation

This area of the site is currently under review and the content will be available shortly.

The rights and obligations of a person occupying a home will depend on that person’s ‘status’, in other words what class of occupation they enjoy. The basic concepts are freehold, long leasehold, commonhold, tenancy and licence. 

Freehold is to all intents and purposes outright ownership. However, there are still restrictions on what a person can do with their home, with certain activities requiring planning permission for example.

Long leasehold is generally recognised as being a lease for 21 years or more. It is different from short-term letting such as fixed term assured shorthold tenancies. Usually, a payment has to be made to the landlord (or the existing leaseholder on assignment) to purchase the lease (often with a mortgage) and the rights enjoyed by the leaseholder are much greater than those of other tenants. Leases can be assigned to other people, equivalent to selling the freehold of a house. The leaseholder will normally pay a small, annual ground rent to the landlord. The Leasehold Reform Act 1967 gives tenants under long leases the right to buy the freehold of their lease, known as enfranchisement. There are some potential restrictions to enfranchisement in relation to publicly held land.

Commonhold is a form of collective freehold applicable to flats and was introduced by the Commonhold and Leasehold Reform Act 2002.  Land which is commonhold is divided into units, e.g flats, whose freehold is owned by unit-holders. The communal areas which are not held by individual unit-holders are held as common parts by the commonhold association, of which every unit-holder is a member. The rights and obligations of the commonhold association and its members are set out in the commonhold community statement.

Residential tenancies are generally for either a fixed term, or are periodic, i.e. from month to month. In general, residential tenancies must include exclusive occupation of residential accommodation, payment (i.e. of rent) and must be for a term, in other words, not indefinite (although a tenancy may be periodic indefinitely, as long as it can be determined, for example by one person giving notice to another). Different types of tenancy afford different local protection.

It does not matter what a tenancy is called, it is the practical effect of the relationship between a landlord and tenant that determines the nature of their relationship, including whether a tenancy has in fact arisen. 

A licence to occupy is different to a tenancy and does not create any estate or interest in the land. In general, there is no statutory protection in relation to licences.

The Renting Homes (Wales) Act 2016 is now partially in force, for the purpose of making regulations and issuing guidance. Once fully enacted, the 2016 Act will create a new system for the rental of homes which are situated in Wales. Most individuals who rent their homes under a tenancy or licence, and their landlords, will make a contract with each other known as an ‘occupation contract’.

In effect, the occupation contract, with all of its rights and obligations will sit on top of a tenancy or licence this will ensure the parties to the tenancy or licence have clarity as to what their rights and obligations are, and what the other party’s rights and obligations are, regardless of the legal basis for the occupation. The 2016 Act will not change the fact that a person in Wales will rent under a tenancy or licence, but that distinction will be less important in practice, because the Act makes virtually no distinction between a tenancy or a licence and instead the Act introduces the concept of a ‘landlord’ and a ‘contract-holder’, who will enter into an occupation contract with one another.

There are two types of occupation contract; a ‘secure contract’ and a ‘standard occupation contract’. To determine the type of contract which is in place between a tenant or licensee (referred to in the 2016 Act as a contract-holder) and a landlord, there are two questions to consider. Firstly, who the landlord is and secondly, what has been agreed between the landlord and the contract-holder.

Most community landlords (this is defined in the Act and includes local authorities, housing associations and Registered Social Landlords) will enter into secure contracts with their tenants. This provides the contract-holder with the strongest security of occupation. The second type of occupation contract is ‘standard contract’. An occupation contract used by a private landlord (a landlord who is not a community landlord) will most often be a ‘standard contract’.

Whilst generally, a secure contract will be used by community landlords and standard contracts will be used by private landlords, there are exceptions to this contained within the 2016 Act (section 11 and schedule 2).

Introductory tenancies and prohibited conduct standard contracts will be ‘a standard contract’.

The Act makes provision as to the terms of occupation contracts and places an obligation on a landlord to set out those terms in a written statement of contract.

Certain provisions apply to all occupation contracts (such as the contract-holders right to occupy the dwelling without interference from the landlord and a prohibition on anti-social behaviour). Similarly, certain ‘key matters’ must be included as ‘key terms’ including the address of the dwelling and the rent payable. The Act then makes provision for the occupation contract to be structured in a particular way, depending on the type of occupation contract. An occupation contract will contain fundamental terms, supplementary terms and any additional terms agreed between the landlord and contract holder.

Model written statements of contracts will be issued by Welsh Ministers and made available to landlords. These written statements will include those fundamental and supplementary provisions relevant to each form of contract without modification.

Fundamental provisions must be incorporated into an occupation contract as fundamental terms, although there are some provisions which the landlord and contract-holder can elect to leave out or to incorporate with modifications, provided that the non-incorporation or modification improves the position of the contract-holder.

The Welsh Ministers can make regulations to establish ‘supplementary provisions’ which must be incorporated as ‘supplementary terms’ to a contract and are automatically included as a term of all occupation contracts, or specified occupation contracts. The parties to a contract can agree that a supplementary provision will be included in a contract with modifications, or not included at all. Also once a contract has been created, the parties can vary its supplementary terms, but there are certain limits to this.

The landlord is required to provide a written statement of the occupation contract to the contract-holder within 14 days of the contract-holder becoming entitled to occupy the dwelling. The occupation contract will not be enforceable until the landlord has provided a written statement to the contract-holder.

In circumstances where section 31 is incorporated into a written statement without modification and the landlord has failed to provide a written statement to the contract-holder, the contract-holder may apply to the court for a declaration of the terms of the contract. The contract-holder may also be entitled to compensation. The contract-holder may also apply to the court if the landlord has provided an incomplete or incorrect statement. If the court finds that the landlord deliberately provided an incomplete statement, the contract-holder may be entitled to compensation.

An occupation contract can be terminated (Part 9, Chapters 2, 3, 4 and 5 of the 2016 Act), although the grounds of termination will, in part, depend on the type of contract.

A landlord can issue a possession claim against the contract holder in respect of all occupation contracts; however, the Act imposes specific requirements and restrictions upon a landlord before the court will use their powers to make a possession order. If the landlord makes a possession claim on the ground of a breach of contract the court may only make a possession order if it considers it reasonable to do so. There are separate procedures for making a possession claim on ‘absolute grounds’ depending on whether the contract is a secure contract or a standard contract.

The 2016 Act makes provision for standard contract-holders to be protected from any landlord seeking to make a ‘retaliatory possession claim’. This means that if the court is satisfied that a landlord has made a possession claim to avoid complying with contractual obligations, the court may refuse to make an order for possession.

A landlord is not required to make an application to the court for possession in the event that a contract-holder has abandoned the dwelling. The procedure in connection with abandonment is set out in Chapter 13 of Part 9 of the Act. The landlord must provide notice in the prescribed form and making enquiries relating to the suspected abandonment of the property during the notice period of 4 weeks, after which a landlord can take possession of the dwelling.

The Rent Homes (Wales) Act 2016 also introduces section 91, a landlord’s obligation to ensure each dwelling is ‘fit for human habitation’.