Rural Estates Newsletter February 2023 - Flipbook - Page 14
5 – Welsh occupation contracts:
buyers beware!
On 1 December 2022, the Renting Homes (Wales) Act 2016 (the Act)
came into force, applying not only to new rental agreements, but also
converting all relevant existing tenancies and licences into the new
“occupation contracts”.
Alice Groom
View web profile
A new vocabulary has been introduced: tenants and licensees are now “contractholders”, and landlords are required to serve “written statements” setting out the terms
of the occupation contract on “contract-holders”. The written statements must include
prescribed “fundamental terms” which are automatically incorporated in all occupation
contracts, “supplementary terms” (with any agreed amendments made clear within the
contract itself) and any “additional terms” which have been agreed by the parties.
The regime is completely new and there is uncertainty about how some aspects of it
will work in practice. This article provides an overview of the issues created by the new
regime that buyers of properties in Wales subject to residential occupancies should
consider as part of their due diligence.
Consider which residential occupations are affected
Occupation contracts have replaced assured tenancies (governed by the Housing Act
1988 and previously the most common form of residential tenancy granted by private
landlords). Older, Rent Act tenancies (derived from pre-1989 occupations) are excluded,
as are agricultural leases (both FBTs and AHAs) and long leases of over 21 years.
However, the Act also applies to licences and other, less formal arrangements previously
outside of the scope of the Housing Act where rent or other consideration is payable. It
is unclear what will count as “other consideration” as this is not defined, but providing a
service to or undertaking work for the landlord are referred to as examples in guidance.
Importantly, there is no minimum rent threshold, which means that the Act applies to
agreements even where there is only a token rent of £1 per annum (regardless of whether
it is paid).
On this basis, a buyer should flush out information on all of the residential occupations
on the property, including any less formal arrangements, to ensure that they are clear on
which occupations come within the purview of the Act. Buyers should also take care if
they are considering granting holdover licences on completion, as it may be difficult to
ensure that they are not inadvertently caught by the Act.
Check all written statements were served within statutory deadlines
Landlords are required to serve the written statement on contract-holders within 14 days
of the “occupation date” (the date on which the contract-holder is first entitled to reside
in the dwelling) and in the case of “converted contracts” (existing tenancies in place prior
to 1 December 2022 which the Act converted to new occupation contracts on that date)
before 1 June 2023. However, the obligation to provide a written statement can arise
again on other occasions throughout the life of the contract, including within 14 days of a
new periodic tenancy arising at the end of a fixed term contract, if there are any changes
to the identity of the contract-holder and if the contract-holder requests a further
written statement.
14
Rural Estates Newsletter
February 2023