Your help, please!
The Welsh Government have now published new regulations, which are due to come into force on 1 June 2023.
However, I have been unable to find explanatory guidance on the Welsh website.
There are also a number of other pertinent questions regarding the new laws and the private rented sector to which I have been unable to find a definitive answer.
I list them below:
Question 1
I had assumed when the new laws first came into force last December that landlords would be able to sign tenants / contract holders up to a new occupation contract as an alternative to creating and serving a ‘converted occupation contract’. Which is not an easy task for landlords to do, bearing in mind the length of the new contracts.
However, the new regulations provide that these ‘substitute contracts’ will commence (or the occupation date will be) on 1 June 2023.
So, I assume that now, all landlords will have to serve the conversion document, no matter what, to inform contract holders of the rules relating to their contract between 1 December 2022 and 31 May 2023. Is this correct?
Questions 2
If this is the case, what are landlords who have lost their tenancy agreement supposed to do?
Just serving the model contract terms should not be an answer, as these are prejudicial to landlords (no deposit clauses, rent payable in advance, no pets clause, etc) and will not reflect the original tenancy.
(Getting contract holders to sign a new contract would have been an ideal solution to this problem, but question 1 indicates that this may no longer be an option).
Question 3
What penalties apply to landlords who fail to serve a converted contract?
I understand that contract holders will be able to apply to court for a fine of up to 2 months rent. Will the landlord also be debarred from serving a no-fault notice? If so, will this still be the case if the contract holder has signed a substitute contract?
Question 4
What is the situation regarding guarantees? Normally if the terms of a tenancy change substantially (e.g. new parties, changed rent etc.), this will invalidate the guarantee as the tenancy/ contract is no longer the one they agreed to guarantee.
Will the new legislation have this effect, and should all landlords get guarantors to sign new guarantees?
Question 5
A new post-publication of this post question which has occurred to me:
Are Judges likely to cut landlords any slack when dealing with claims based on the transition regulations due to the extreme difficulty, even for qualified lawyers, in working out precisely what they mean and what they are requiring landlords to do?
Those are the questions I have at the moment.
Do you have any thoughts, suggestions? Or, ideally, answers? If so, please put them in the comments below.
If you have any other relevant questions, put them in the comments below, and I will add them to the list.
Note that if you are looking to create a converted contract, we have help for this on Landlord Law.
Some answers
1. Yes a new contract is not the answer because these are conversion tenancies and so should have a conversion document.
2. I don’t see that signing anything is necessary, although this is an area in which the Welsh legislation is very unclear as it implies a contractual relationship but imposes it. But a standard contract will not work as it will contain provisions which are incorrect in respect of converted tenancies
3. There is a rent repayment provision and the no fault notice is not allowed until corrected contracts are served plus a further wait of six months
4. Well this is another issue that the Welsh government has not considered. It would depend on the wording of the guarantee agreement. But yes there is a risk that some of them will fall away
As to the reply to point 1. This is logical for a fixed term Short hold Tenancy that was still current when the law changed on the 1st December 22, so it needs converting.
If we are talking about a situation where a short hold tenancy had expired before the 1st December 22 so the Tenants are merely holding over as Statutory periodic tenants then surely an Agreement can be reached to grant a new Periodic Substituted Contract under the Renting Homes Act as in fact there isn’t anything that needs converting.
Under the old Law a new contract could be granted at any time in the holding over period by Agreement of the Landlord and tenant.
Thanks David. I have just thought of a new question which I have added to the post.
Q5 – it’s going to be a Natt v Osman (as followed in Elim Court, Cheerupmate etc) scenario isn’t it? Does the legislation specify a penalty for non-compliance? If so, then no scope for judge to save you. But if no penalty specified then can it fairly be said that the legislature intended fatality or can the error be waived if there is no prejudice?
Renting Homes Wales processes for agencies and landlords to cope with the Transitional Information Period
After first becoming aware of the Renting Homes Wales Act when presenting training for the Rent Smart Wales licensing I have followed the twists, turns and delays closely and can now see the light at the end of the tunnel. I think its recommended we view the Welsh changes to the agency process as a series of ‘events’ evidenced in writing by use of a ‘written statement.’
The situation has gone back and forth with the Welsh government since Dec and no doubt will continue to do so in the future although we believe that after a few court judgements some common sense will gradually be applied in the same way as over the years Deposit protection laws, the deregulation act, etc have softened to acknowledge late service of documents and non duplication of requirements.
The first event that we encounter is Dec 1st 2022 when the new Act was released. Obviously, the tenants were governed by the Housing Act 1988 until then and overnight became Contract Holders under the Renting Homes Wales Act 2016. This is a big change and hence a Written Statement of Conversion had to be provided to explain it to the tenants/Contract Holders by the end of the transition period at the end of May 2023.
The next event we encounter is if a renewal Occupation Contract (a substitute contract) is agreed within the transition period and this will have to be evidenced by the use of a Written Statement as per normal by writing and signing a contract by June 14th 2023.
Another event we may encounter is that a converted ast which was fixed term comes to the end of that fixed term and automatically becomes periodic. Unfortunately, in Wales that too will give rise to a Substitute Contract and will need to be evidenced by a written statement! Again, by the 14th June 2023.
With all of these, at present, an RHW2 form is required to be served at some point, we have always said that it is advisable to attach the RHW2 to the written statement as the government would not create a form unless they wanted it used. If this has been omitted then you still have time to send by the end of May 2023 and this can be by email as the written statement already served will have gained permission for this.
After the transition period it will become apparent that many events will be referred to as needing Written Statements for example, rent increases, change of occupiers even changes in legislation that Contract Holders have to be made aware of.
The latest changes 2 weeks ago will have finally given some clarity on a much debated question and will have some bearing on the agency process too regarding the events above –
It has been decided that all converted asts will need a written statement telling the tenants about the conversion. If a substitute contract is also arranged within the transition period, even though the Contract Holders have signed and agreed the new contract, a Written Statement will still have to be served on them to cover the period from Dec 1st 2022 until the start date of the substitute contract. Ie they are 2 separate events which both need written statements and this applies also to fixed terms becoming periodic.
By the way, it is likely that we will have to issue a written statement of variation to all Contract Holders to inform them of the ‘event’ of a an amendment to the legislation too. Guidance will be coming soon regarding this from the Welsh Government.
We have become event managers and paper pushers! But as we progress homeward through the haze of the transition period I hope things will become more transparent.
Q1 Since April last year we have been advising agents to serve statements on the converted contract, even if a renewal was done, as it was not then clear if it was needed or not. We agree it is now more clear as the substitute contract is now clearly defined separately from the agreement that converted. The fact that the the law changes on the 1 June (assuming it passes) also means you have to complete the conversion statement before this law is even in force. At the end of the day only a court can interpret the law, but no cases will go to court till after 1 June, by which time it will be too later to respond, and so giving the statement is a bit of an insurance policy.
We are saying that we need to be very careful with the language. The law does not require a new contract, it requires a statement of the contract that already existed. One fundamental difference is that a new contract would require the usual offer and acceptance, the statement does not. If served electronically it needs to be signed by or on behalf of the landlord, and you might ask the contract-holder to sign to confirm receipt, but you are not asking them to agree to contractual terms.
Q2. This is only a problem for some systems of producing statements. It may not just be lost, it may be that it was never in existence in written form. The same principle applies, the statement has to reflect the original contract. Some things will be easy, like you will have a history of rent payment to evidence agreement. Other point will be difficult, and possibly open to disagreement, though there is no clear route to appeal we have seen. The statement will need all the statutory parts and whatever you can work out for the rest.
Q3. As David Smith says, the legislation is clear that not only can you not serve notice till you have served the statement, you cannot serve notice for 6 months after you have given the statement, if your statement is later. This will give a massive incentive for those trying to delay possession to claim a statement is not valid and effectively delay possession for 12 months (6 month delay and 6 month notice). Breach of contract notices remain accessible.
Q4. We have been talking about this for the last year and the whole scheme is a threat to guarantors. If fact, we would recommend any agreement with a guarantor is renegotiated and the guarantor signed up again. This is because if you have a periodic agreement with three sharers and one sharer gives a withdrawal notice (which they have the legal right to do), the other two contract-holders are liable for 100% of the rent each, or a 50% increase over what they were paying. It is not clear how the courts will view this change in the law and the only way to avoid it being you arguing in court will be to sign a new guarantor agreement where the risks to the guarantor are clarified. This could include a new contract or not, though watch any consideration issues.
Q5. The way judges will view these changes and a short term tolerance to mistakes remains to be seen. However, it is fairly likely that some advisors will be looking to make the most of these changes resulting in cases having to go to court to resolve unresolved issues.
Another issue we are waiting and watching is the question of if referencing will raise the standard as if the two remaining joint contract-holders might suffer a 50% rent increase, will referencing and rent guarantee want a larger affordability margin to cover this, making property more difficult to secure for those less well off?