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A warning for Welsh landlords looking to use fixed-term occupation contracts

This post is more than 2 years old

November 28, 2022 by Tessa Shepperson

WalesWhen the new Welsh legislation comes into force on 1 December 2022, there will be two types of contract (for private Welsh landlords)

  • Fixed term, and
  • Periodic

Most landlords are used to using fixed-term contracts. The ‘renewal’ gives them an opportunity to set a new rent, and the fixed term gives both landlords and tenants a period of security.

Letting agents also like fixed-term contracts.  As dealing with the ‘renewal’ contract is normally a trigger for them to charge a renewal fee.

But what happens (after 1 December 2022) to a Welsh occupation contract if no renewal document is signed before the end of the fixed term?

If no renewal contract document is signed

As in England now with assured shorthold tenancies, if the contract holder remains in the property after the fixed term ends, a new statutory periodic contract will take its place. Assuming there is no new fixed-term contract already signed up

The rules are set out in section 184 of the Renting Homes (Wales) Act 2016 and are as follows:

(3) The new contract—
(a) has an occupation date falling immediately after the end of the fixed term, and
(b) has rental periods that are the same as those for which rent was last payable under the fixed term contract.
(4) The fundamental and supplementary provisions applicable to periodic standard contracts are incorporated as terms of the new contract without modification.
(5) Subject to subsections (3) and (4), the new contract has the same terms as the fixed-term contract immediately before it ended.

So this seems similar to the situation in England. However, there are some differences.

Amended fundamental and supplementary terms

One big difference is that the fundamental and supplementary terms will be incorporated ‘without modification’. So, where does that leave you if you have modified these terms in your fixed-term contract?

Remember that it is possible to modify fundamental terms marked (F+) and Supplementary terms (S) in the model contracts.  So long as you do this properly. But according to s184, these changes will not carry over to a statutory periodic.

Your carefully amended terms will be replaced by all of the fundamental and supplementary terms which apply to periodic contracts.

Service of written statement

You also need to remember that Welsh landlords must serve a written statement of the occupation contract on their contract holders. Which must be served within 14 days of the ‘occupation date’ under s31(1).

I suspect that some of you may assume that, as the contract holders will have been living there for some months or years, the occupation date will be the date when they first moved in.  So a new written statement is not necessary.

However, looking at s185, it seems this is wrong. The ‘occupation date’ means the occupation date for THAT contact. Not the preceding one.

Because, section 185(1) says that, effectively, you can say in your fixed-term written statement, what the terms of any subsequent contact (which the legislation calls the ‘potential contract’) will be.

AND if you do this, then (s185(2)(b)) says you will be treated as having complied with s31(1).  Meaning you won’t have to serve a new written statement of contract.  So presumably, if you don’t do this, you WILL have to serve the written statement.

There are a few conclusions to draw from all this:

If you want to amend your fundamental or supplementary terms – you should

  • either use a periodic contract (where these problems will not arise as the contract will just run on indefinitely) or
  • Include all the terms of any future statutory periodic occupation contract in your fixed term contract.  Or you can just set out the terms which have changed. This will make your statement even longer, but it means you won’t have to serve a new written contract at the start of the new statutory periodic.   Plus any amended fundamental and supplementary terms will carry over, or
  • Make sure you get a new fixed-term contract signed up before the end of your fixed term

Remember,

  • if a statutory periodic arises which you have not provided for in your preceding fixed term agreement, and
  • if you do not serve a new written statement on your contract holders within 14 days of this happening –
  • you will be in breach of the rules and your contract holders will be able to claim the penalty.

Which is up to 2 months’ worth of rent, depending on how late you eventually serve the written statement, which they can offset against their rent.

And finally

Remember also that you cannot force contract holders to sign a new contract.  They will be perfectly within their rights to refuse.

Indeed, they may well decide that it is against their interests to sign a new contract.  Bearing in mind that if they refuse, the terms of their contract will change.  Probably in a way which is more favourable to them!

In view of these issues, landlords may want to consider using periodic contracts from the start, as this will avoid these problems.  Or use a form of fixed term contract which includes all the terms of the ‘potential’ periodic contract.

Otherwise, I suspect there will be a few angry landlords and happy contract holders if no written contract is provided and the penalty becomes payable.

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Filed Under: New Welsh Laws Tagged With: Wales, Welsh Housing

Notes:

Please check the date of the post - remember, if it is an old post, the law may have changed since it was written.

You should always get independent legal advice before taking any action.
Please read our terms of use and comments policy. Comments close after three months

Primary Sidebar

Welsh Law has changed – are YOU up to date?

Changes effective from 1 December 2022

New Terminology

  • Occupation contracts – tenancies and/or licenses
  • Dwelling – the property being let
  • Written statements – tenancy or license agreements
  • Contract holders – tenants or licensees
  • Terms – the clauses in the written agreements

Posts

  • Introducing the new Welsh Laws due to come into force on 15 July 2022
  • The new Welsh Occupation Contracts and Deposits
  • The New Welsh Tenancy Agreements – numbering issues
  • The New Welsh Tenancy Agreements – or occupation contracts as we must call them now
  • Additional occupiers, lodgers and the new Welsh Occupation Contracts
  • Landlord liability for contract changes introduced by the Welsh Government
  • Do Welsh contract holders need to sign their contracts before they move in?
  • A warning for Welsh landlords looking to use fixed-term occupation contracts
  • New Welsh Occupation Contract available from Landlord Law
  • What are the transition arrangements under the new Welsh legislation?
  • Can Welsh landlords issue a new contract instead of serving a written statement of converted contract?
  • 17 Reasons NOT to use the Welsh Government’s Model Contract
  • Welsh landlords and a BIG problem with electrical condition reports

» Check our the content for Welsh Landlords on Landlord Law.

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