A revolution in Welsh renting?

This article was first published in Estates Gazette on May 16, 2022

The countdown has begun for the introduction of a new regime for renting homes in Wales. The Renting Homes (Wales) Act 2016 finally comes into effect on 15 July 2022. Numerous sets of regulations issued earlier this year put flesh on the bones of the Act, giving a clearer picture of how the regime will operate in practice. What are the implications for new and existing landlords in the private rented sector?

• Key features and terminology
• Granting a new occupation contract
• Existing tenancies and licences

Key features and terminology

The primary purpose of the Act is to create a simplified, transparent and fair system for renting homes in Wales. A fundamental principle is that most tenancies and licences granting to individuals the right to occupy a dwelling as a home must be one of two types of "occupation contract", with the individual being a "contract holder" in each case. "Secure contracts" are periodic contracts for use by public sector or community landlords for social housing, while "standard contracts" are for use by the private rented sector and can be periodic or fixed-term.

Both types of occupation contract must clearly set out the rights and obligations of each party within a prescribed structure. This comprises:

• "key matters", such as the property's address, occupation date and rent;
• "fundamental terms", which are set out in the Act, some of which cannot be modified and others which may be modified in limited circumstances; and
• "supplementary terms", which are set out in regulations and are also automatically inserted, although parties can agree to modify or exclude them.

Any additional provisions agreed between the landlord and the individual contract holder may be included, although these must not conflict with the prescribed terms. Landlords may be liable to pay compensation for any incorrect or incomplete contract and any unfair changes or additional terms will not be binding on the contract holder.

Granting a new occupation contract

Section 31 of the Act provides that, on the grant of an occupation contract on or after 15 July 2022, the landlord must give the contract holder a "written statement" of the contract within 14 days of the occupation date.

The Renting Homes (Model Written Statements of Contract) (Wales) Regulations 2022 prescribe model written statements of contract, while another set of regulations prescribes the explanatory information that must be included in each case.

Creating a written statement of occupation contract may sound time-consuming, if not daunting. But thankfully the Welsh government has created templates, available on its website, for the main contracts that will be used - periodic secure contracts, periodic standard contracts and fixed standard contracts - which should make life easier for landlords and their agents. The templates make it clear what can be changed and what is set in stone.

Existing tenancies and licences

These are trickier. The Act is retrospective and on 15 July 2022, with some limited exceptions, including tenancies for a fixed term of more than 21 years, existing tenancy agreements and licences will automatically convert to occupation contracts.
For example, an existing periodic assured shorthold tenancy will convert to a periodic standard tenancy. These are "converted contracts".

In the case of a converted contract, the landlord is required to provide a written statement of contract to existing tenants and licensees by 15 January 2023. Schedule 12 to the Act sets out the mechanism for the conversion process. Looking at the 15 pages of guidance issued by the Welsh government to assist, conversion is likely to be a complex task. The guidance states: "Conversion strikes a balance between the required terms necessary for the conversion contract to operate under the Act, whilst making provision for some existing terms to be maintained…"