The Renting Homes (Wales) Act 2016 (the Act) aims to simplify the process of renting a home in Wales and to provide parties with more information about their rights and obligations. The Act is now partially in force, for the purpose of making regulations and issuing guidance. Once fully enacted, the Act will create a completely new system for residential tenancies in Wales. It is intended to entirely replace the secure, assured, assured shorthold and assured agricultural occupancies tenancy regimes which currently operate under the Housing Act 1985 and Housing Act 1988. Tenancies under the Rent Act 1977 and Rent (Agriculture) Act 1976 will remain unaffected.
It is anticipated that the remaining provisions of the Act will be brought into force fully during spring 2022.
Once the Act is implemented, most existing current tenancies and licences will be converted into occupation contracts. The occupation contract will sit on top of a tenancy or licence and will set out the rights and obligations of each party.
The Act introduces the concept of a ‘landlord’ and a ‘contract holder’, who will enter into an occupation contract with one another. Landlords will also be grouped into one of two groups:
- Community landlords (as defined by section 9 of the Act and includes local authorities, housing associations and Registered Social Landlords)
- Private landlords (any landlord in Wales who is not a community landlord)
There are two types of occupation contract: a ‘secure contract’ and a ‘standard contract’. Standard contracts can be fixed term or periodic; secure contracts are always periodic. The type of occupation contract in place will depend on whether the property is owned by a community landlord or a private landlord.
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 Act (section 11 and schedule 2).
Introductory tenancies and prohibited conduct standard contracts will be a ‘standard contract’ issued by a community landlord.
Under section 31 of the Act, all landlords will be obliged to issue contract holders with a written statement of their occupation contract within fourteen days of the contract holder becoming entitled to occupy the dwelling. Under sections 34 and 35 of the Act, if they do not have one, they can ask the landlord for such a statement. If they are not provided with one after a request, or if the details are incomplete, they can apply to the court to set the terms of their contract. The occupation contract will not be enforceable until the landlord has provided a written statement to the contract holder.
If there is a change in the identity of the contract holder, the landlord must give the new contract holder a written statement within fourteen days of the change or (if later) the landlord becoming aware of the change. Within fourteen days, a landlord must also provide the contract holder with an address where any documents for the landlord can be sent.
The landlord is liable to pay the contract-holder compensation of up to two months’ rent for failing to issue the written statement of the contract if details are incorrect of if they fail to provide an address where information can be sent. Interest will be payable in certain circumstances.
Sections 18 to 29 of the Act provide prescribed terms which an occupation contract must or may contain. Under the Act, every term within a contract will fall into one of four categories:
- Key terms - these must be included in all occupation contracts and are unique to the individual contract, such as the address of the property, the occupation date and the amount of rent. Further key matters apply to standard contracts only: whether the contract is periodic or fixed term, if for a fixed term the term for which it is made and any periods during which the contract holder is not entitled to occupy the property as a home.
- Fundamental terms - these set out the fundamental rights and obligations of both the landlord and contract holder and must be incorporated into an occupation contract, for example, terms connected to the payment of deposits. There are some fundamental provisions which can be modified or left out, if the landlord and contract holder agree and provided the non-incorporation or modification improves the position of the contract holder.
- Supplementary terms - these terms are automatically inserted into every contract or specified types of contract and relate to matters such as the maintenance of the property. Parties can agree that a supplementary provision will be included in a contract with modifications or, subject to certain limits, can agree to exclude provisions.
- Additional terms - these can be inserted into the occupation contract if both the landlord and contract holder agree. These terms can be used to cover specific issues, such as keeping pets at the property.
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.
What type of tenancy or licence is an occupation contract?
Section 7 (2) - (3) of the Act sets out the types of tenancies and licences that are occupation contracts. A tenancy or licence is an occupation contract if all the following apply:
- Rent or other consideration (such as providing a service) is payable under it
- It is made between a landlord and an individual (or two more persons, at least one of whom is an individual)
- It confers on the individual(s) the right to occupy a dwelling as a home
Schedule 2 of the Act contains the following exceptions to section 7:
- Part 1 of Schedule 2 of the Act confirms that certain tenancies and licences not within section 7 (2) - (3) can be occupation contracts if notice is given by the landlord to the contract holder to confirm that this is the case. A tenancy or licence in this category would be a tenancy or licence where no rent or other consideration is payable.
- Part 2 of Schedule 2 of the Act confirms that certain tenancies and licences that are within section 7 are still not occupation contracts unless notice is given by the landlord to the contract holder. The types of tenancies or licences in this category include holiday lets.
- Part 3 of Schedule 2 of the Act confirms that certain tenancies and licences that are, on the face of the Act, within section 7, are never occupation contracts. For example, this includes a tenancy or licence granted to those under the age of 18, an agricultural tenancy, a business tenancy, a farm business tenancy, a long tenancy for a fixed term exceeding 21 years, and a secure tenancy that is a housing association tenancy.
- Parts 4 and 5 of Schedule 2 of the Act contain special provisions that apply to contracts relating to homelessness and supported accommodation.
To consider whether a tenancy or licence falls within section 7 of the Act, it is important to remember the distinction between tenancies and licences. A tenancy is the grant of a right to the exclusive possession of land for a determinable period and will involve the payment of rent. In contrast, a licence is simply permission for a licensee to do something on a licensor’s property, it does not grant exclusive possession. (see: licences).
The secure contract is modelled on the current secure tenancy issued by Local Authorities. In general, the landlord can only end the contract for a particular reason.
Most community landlords will enter into secure contracts with their tenants. This provides the contract-holder with the strongest security of occupation.
Community landlords can only enter into a standard contract in limited circumstances.
Standard contracts have rights similar to those enjoyed by assured shorthold tenants, as the tenants have a tenancy which is protected for a limited period. The landlord can end the contract with cause, or without cause, after a set period on notice.
Private landlords will normally enter into standard contracts, but they can elect to enter into a secure contract.
Under section 184 of the Act, at the end of a fixed term standard contract the occupier will automatically be granted a new periodic standard contract if they remain in occupation, on similar terms and conditions to the previous fixed term contract.
Introductory tenancies and prohibited conduct standard contracts will be ‘a standard contract’.
Introductory tenancies are standard periodic contracts for a period of twelve months which allow a community landlord to ascertain whether a contract holder will be able to sustain a secure contract. After twelve months, an introductory tenancy will become a secure contract unless the landlord seeks an extension serving notice in accordance with Schedule 7 of the Act. If the contract holder does not agree with the landlord’s decision to extend the introductory tenancy, they can apply to a court to review the decision.
Prohibited conduct standard contracts broadly correspond with demoted tenancies. A court will be able to impose this contract where a landlord applies for an order under section 116 to end the secure tenancy due to anti-social behaviour. If such an order is made, the contract holder will become subject to a 12-month probation period before the contract reverts to a secure contract. If the landlord has continuing concerns during the probation period, then they can seek an extension of the probationary period up to a maximum of 18 months. If the contract holder does not agree with the landlord’s decision to extend the probation period, they can apply to a court to review the decision.
As with the existing legislation relating to Assured Shorthold Tenancies, sections 45 (1) and (2) of the Act requires that all deposits held under all occupation contracts must be protected with an authorised deposit scheme within 30 days of its receipt. Prescribed information about the scheme protecting the deposit, how the scheme works and their rights must also be given to the contract holder. If a landlord does not comply with these requirements, they will not be permitted to issue a notice for possession or exercise a break notice.
Under section 49 of the Act, individuals can apply to be added as joint contract holders in all contract types with the consent of the landlord. Under section 50 of the Act, the landlord is not permitted to refuse this consent unreasonably.
A joint contract holder will be able to leave a contract without ending it in its entirety. In secure contracts, one or more joint contract holders can withdraw from the contract by giving notice to the landlord and the other joint contract holder(s). Similar provisions exist in relation to a periodic standard contract; however, in a fixed term standard contract, the withdrawal of a joint contract holder is only permitted if the contract itself makes provision for that.
New joint contract holders can also be added without having to end the current contract. Under section 52 of the Act, if a joint contract holder dies, the remaining joint contract holder(s) remain liable under the contract, but they also inherit the rights provided by that contract in full.
Under section 231 of the Act, there is also a restriction on joint contract holders terminating the tenancy in such a way as to deprive other joint holders of that tenancy as the consent of all is required to do so.
Under section 57 (1) of the Act, a contract holder may not “deal” with their occupation contract in any way which is not permitted by the contract itself or by a family property order. “Dealing” includes creating a sub-tenancy or sub-licence, transferring the contract to another or taking out a mortgage on the dwelling.
Under section 57 of the Act, a contract holder dealing outside the terms of the contract, or without the landlord’s consent will be acting in breach of contract and the transaction will not be binding on the landlord.
Under sections 58 and 84 of the Act, if the occupation contract allows dealing subject to the landlord’s consent, the landlord cannot withhold consent unreasonably or make consent subject to unreasonable conditions. Schedule 6 of the Act sets out specific matters that are relevant to considering reasonableness.
There are two main types of dealing:
- Sub-occupation contract: there is no fundamental provision in the Act for a contract holder to have the right to enter into a sub-occupation contract with another person. However, the parties may agree for this right to be added to a contract as an additional term. The main contract would be known as the “head contract”. The contract holder under the sub-occupation contract is the “sub-holder.”
- Transfer: the Act sets out the formalities and processes for the transfer of an occupation contract from a contract holder to another person, or the transfer by a joint contract holder of that person’s rights and obligations under an occupation contract. The former contract holder remains liable for breaches occurring before the transfer takes effect. The transfer of an occupation contract must be signed or executed by each party to the transfer. Section 72 of the Act provides that the transfer does not need to be by deed.
The Act also changes the rules on succession for sole contract holders. Under an occupation contract, if a sole contract-holder dies and there is a person who survives the contract-holder who is qualified to replace or to ‘succeed’ the contract-holder, then that surviving person will succeed to the occupation contract.
There are two types of successors: ‘priority’ successors and ‘reserve’ successors. A priority successor will succeed even if there are reserve successors. If there is more than one priority successor, the successor is determined by section 78 of the Act.
A tenancy will pass to a reserve successor if there is no priority successor. There are two categories of reserve successors: family members and carers. If there is more than one reserve successor, the successor is determined under section 78 of the Act.
If a reserve successor succeeds to the occupation contract, there can be no further succession. When a priority successor dies, and there are persons qualified to succeed as a reserve successor to the contract, one of those persons may succeed to the contract. However, there can be no further succession after that person succeeds to the contract.
If a priority successor succeeds to an occupation contract and elects to terminate that contract within the first six months of the death of the preceding contract-holder, another successor will be entitled to succeed. If there is more than one qualified successor, this will once again be determined under section 78 of the Act
- Landlord’s consent The Act introduces a procedure and timeline for the landlord giving consent under an occupation contract. Under section 84, the landlord will be deemed to have given consent if the procedure is not strictly followed. The procedure applies in relation to any term of an occupation contract that permits something to be done only with the landlord’s consent. The landlord may not unreasonably refuse consent or impose an unreasonable condition. The procedure for landlord’s consent is as follows: The landlord must request any additional information it requires by the date 14 days after the day the request is made. The landlord may not ask for additional information after this period has expired.
- The landlord must either give or refuse consent within one month of the day the request for consent is made, or if additional information is requested, the day that information is received. If the landlord does not respond by the end of this period it is deemed to have given consent.
If the landlord refuses consent or gives consent subject to conditions, the person who requested the consent can ask for reasons for the refusal or conditions. If the landlord does not provide a written statement of its reason for refusal or for conditions within one month of this request, the landlord is deemed to have given consent without conditions.
Repair and condition of the property
The Act creates a new set of standards for property condition intended to ensure that properties are habitable and free from serious defects. They do not apply to fixed term standard contracts that are for more than seven years. However, they will apply where a standard contract for a fixed term has ended and then a periodic contract arises at the end of the fixed term. These standards include:
- A general obligation on all landlords to ensure that the dwelling is fit for human habitation at the start of the contract and throughout the time the contract is operational (section 91 of the Act).
- An obligation on landlords to keep the structure and exterior in repair and keep installations for the supply of water, gas or electricity, for sanitation, for space heating, and hot water in repair and proper working order.
- The landlord must also make good any repair work required by sections 91 and 92 of the Act.
Under section 95 of the Act, landlords are not liable to do any work where they cannot do so at reasonable expense, to make good damage caused by fire, storm, flood or other accident, repair anything that the tenant is entitled to remove from the premises, or anything which does not affect the contract holder's enjoyment of the property. Under section 96 of the Act, landlords are also not required to do any work which has been caused due to the tenant causing damage or not taking proper care of the property or its contents.
Under section 97 of the Act, landlords have a reasonable time to carry our works once they become aware that the works are necessary. Landlords must give 24 hours’ notice to access a property for the purposes of undertaking such repairs..
On any breach of these terms, a contract holder has a right to claim damages, pursue claims for personal injury or loss or damage to the property and a right to seek specific performance (i.e., remedying of the breach).
Termination of occupation contract
Under both a secure contract and a periodic standard contract, the contract holder can terminate the contract early by giving no less than four weeks’ notice to the landlord. Under a fixed term standard contract, the contract holder’s ability to terminate the contract early depends on whether there is a break clause in the contract.
To terminate a secure contract, the landlord must make a possession claim on the grounds stated in Chapter 3 of Part 9 of the Act.
To terminate a standard contract, the landlord must give notice to the contract holder. This is previously known as a Section 21 notice, and has been amended by the Act as follows:
- The minimum notice period that a landlord must give a contract holder under ‘no fault’ grounds will be extended from 2 months to 6 months.
- A landlord will not be able to give such notice until 4 months after the contract starts. If a contract holder has not been provided with a written statement of their contract terms, a landlord cannot serve notice until 6 months from the date of service of the statement.
- A landlord will not be able to give such a notice unless they have compiled with certain obligations, including failing to provide a contract holder a written statement of their contract terms, registration, licensing and deposit protection rules.
- Landlord break clauses will only be able to be incorporated into an occupation contract if the contract has a fixed term of 2 years or more. A landlord will not be able to exercise a break clause within the first 18 months of occupation.
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 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 if 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 make enquiries relating to the suspected abandonment of the property during the notice period of four weeks, after which a landlord can take possession of the dwelling. A contract holder can apply to the court within six months of the date of the landlord notice being served, the basis that notice was not given, that no proper enquiries made, that the property has not been abandoned but the contract holder had good reason for not responding to the notice or that the landlord had not reasonable grounds for believing that the property was abandoned. The court can order the landlord to allow the contract holder back into the property, provide alternative accommodation or any other remedy it sees fit.