Renting Homes (Wales) Act: What landlords, lenders and receivers need to know

4th April 2022

The Renting Homes (Wales) Act 2016 (RH(W)A) received Royal Assent back in January 2016 and will finally come into force on 15 July 2022. The intention behind the new legislation is to simplify the existing law and letting process in Wales into one clear legal framework. RH(W)A makes sweeping changes to housing law and practice in Wales [1]. It will apply with immediate effect – not only to future tenancies, but also to the vast majority of existing residential tenancies/licences.

Renting Homes (Wales) Act 2016: General information

Key points to note include:

• RH(W)A introduces the concept of an ‘occupation contract’ (as opposed to a lease or a licence) and creates:
  • A ‘standard occupation contract’ which is based on the current assured shorthold tenancy used mainly in the private rented sector; and
  • A ‘secure occupation contract’ which is modelled on the current secure tenancy currently issued by local authority landlords.
  • There are also variations for specific types of housing or circumstances, such as for supported housing (sometimes referred to as ‘supported living’).

• Standard contracts may be periodic from the start, or may be fixed term contracts initially, and then become periodic.

• There is no transition period. That means, as of 15 July 2022, all existing tenancies and licences (bar specified exceptions) will become converted occupation contracts. Existing terms will continue as long as they do not conflict with RH(W)A. Any supplemental terms applying to occupation contracts will be incorporated.

• RH(W)A places new obligations on landlords to issue, within 14 days of the occupation date, a written statement of the occupation contract. The written statement must contain specified information and will set out the rights and responsibilities of the landlord and contract-holders. (In respect of converted occupation contracts, the written statement must be issued within six months of the coming into force date – that is, by no later than 14 January 2023).

• RH(W)A requires landlords to ensure that the property is fit for human habitation at the time of occupation and throughout. It places higher levels of responsibility on landlords in that regard, and in relation to repairing obligations, than has previously been the case in Wales – and higher even than is the case in England post- the Homes (Fitness for Human Habitation) Act 2018. New regulations concerning fitness for human habitation were enacted in January 2022 and will come into force on 15 July 2022 alongside the RH(W)A.  (Where the occupation contract is a converted contract, there is a 12 month transition period for compliance with the fitness for human habitation requirements.)

• RH(W)A seeks to protect contract-holders from ‘retaliatory evictions’ where occupiers are at risk of eviction for complaining about the condition of a property. It therefore allows the court to refuse to make an order for possession where it is satisfied that the landlord is seeking to avoid complying with its repair/human habitation obligations. In addition, where the court refuses possession on this basis, the landlord will be unable to give a further ‘no grounds’ notice to terminate or a notice to terminate under any landlord’s break option for at least a further six months after the date of the court’s refusal.

• Special provisions apply in respect of community landlords and charities which provide supported accommodation. Those provisions are outside the scope of this note and affected landlords are encouraged to obtain specialist legal advice.

• Other aspects of the RH(W)A include:
  • Enabling landlords to repossess abandoned properties without a court order;
  • Introducing anti-social behaviour and other prohibited conduct clauses;
  • Allowing perpetrators of domestic abuse to be targeted for eviction;
  • Introducing a temporary exclusion power for some supported contracts;
  • Allowing the occupation contract to continue for a remaining occupier when a joint tenant leaves;
  • Simplifying succession arrangements; and
  • Creating succession rights for carers.

• RH(W)A is supplemented by the Renting Homes (Fees etc) Act 2019 which bans the majority of landlord’s or letting agent’s fees being charged to residential occupiers and contains detailed provisions regarding tenancy deposits.

Termination of occupation contracts under Renting Homes (Wales) Act 2016

RH(W)A contains detailed restrictions on termination and a landlord’s ability to recover possession, whether or not the contract-holder is in breach of the occupation contract.  Some key points to note on termination include:

• Where the contract-holder is in breach, the landlord must give a possession notice specifying the ground of possession.

• If the breach relates to anti-social behaviour or other prohibited conduct, the landlord can make a possession claim on or after the date of giving the possession notice.

• If the breach is of any other term, the landlord can make a possession claim after the period of one month from giving the possession notice and before the end of the period of six months starting with the date of giving the possession notice.

• The power of the court to order possession for a breach of the contract is discretionary and the court will only do so if it is reasonable [2].

• Where the landlord wishes to terminate on estate management grounds it must give a possession notice specifying the grounds and cannot issue possession proceedings for the period of one month or after the period of six months starting with the date of giving notice.  The power of the court to order possession on an estate management ground is discretionary.

• The contract-holder may terminate a periodic standard contract by giving not less than four weeks’ notice to the landlord.  If it does not then vacate, the landlord can issue possession proceedings.  Before doing so, the landlord must give a possession notice within two months of the date the contract-holder should have left. The landlord can then issue proceedings, but not more than six months after it gives the notice.

• The landlord may terminate a periodic standard contract by giving not less than two months’ notice [3].  The notice cannot be given in the first four months of the contract.  If the landlord has not given the contract-holder a written statement of the contract within 14 days of the date of occupation, it cannot serve the notice for six months from giving the written statement is given.  If the landlord has not given the contract holder written information as required, it cannot serve a notice.  (There are also detailed restrictions on the landlord’s serving of notice relating to the tenancy deposit, but they are outside the scope of this note.)

• The landlord may issue possession proceedings on the ground it has served a notice to terminate and the contract-holder has failed to vacate. The proceedings cannot be issued before the date specified for possession in the landlord’s notice, and must be issued within two months of that date.  This is an absolute ground for possession, so if the landlord has followed the correct procedure, the court must order possession.

• The landlord may also terminate a periodic standard contract for serious rent arrears [4]. This is an absolute ground for possession.

• RH(W)A also provides for termination of a fixed term standard contract. A fixed term standard contract will terminate at the end of the fixed term unless contract-holder stays in possession, in which case a new periodic standard contract will arise.  The landlord may, before or on the last day of the fixed term, give the contract-holder a notice to end the occupation contract. The date specified for possession in the landlord’s notice cannot be earlier than six months after the occupation date of the contract or any time less than two months after the day on which the notice was given.

• If the landlord did not give the contract-holder a written statement of the contract within 14 days of the date of occupation, the landlord must give the written statement and wait a further six months before serving the termination notice. If the landlord did not give the contract-holder written information about the landlord as required, it cannot serve a termination notice until it has done so.  (There are also detailed restrictions on the landlord’s serving of notice relating to the tenancy deposit, but they are outside the scope of this note.)

• Possession proceedings cannot be issued before the end of the fixed term standard contract; and this is an absolute ground for possession.

• RH(W)A also allows the landlord to terminate a fixed term standard contract if the contract-holder is in serious rent arrears [5]. Before issuing possession proceedings due to serious rent arrears of a fixed term standard contract, the landlord must give the contract-holder a possession notice specifying that ground.  Proceedings cannot be issued before the period of 14 days from the date of giving the possession notice, or after the period of six months from the date of giving the possession notice.  This is an absolute ground for possession.

• There are also rules concerning the ability and procedure for contract-holders and landlords who wish to terminate fixed term occupation contracts pursuant to a break clause. The details are outside the scope of this note but, interestingly, RH(W)A reverses the common law principle that a break notice cannot be withdrawn even if the parties are in agreement.

• Certain grounds for possession have not been included in the RH(W)A regime. Notably, Housing Act 1988 ground 2 (lender’s right to repossess where landlord defaults on mortgage payments), which is often used by receivers, has not been carried over or replicated.

Practical advice

Landlords, lenders, receivers, managing agents and advisers should now:

• Become familiar with the terms and detail of the RH(W)A and, in particular, the options for recovering possession.

• Consider how the RH(W)A will affect existing processes and whether any consequential changes will be required.

• Review against existing documents and processes the occupation contract model forms which the Welsh Government has now published.

• Review and update mortgage conditions, terms of appointment and any other documentation connected with the mortgage, possession and receivership processes to reflect new terminology and terms under the review.

• Implement a training programme to ensure that all staff are made aware of the legal and practical changes brought about by the RH(W)A.

• From a commercial perspective, monitor and evaluate residential property portfolios in Wales on an ongoing basis to assess any additional work, cost or risk associated with the letting and possession processes.

How we can help

Walker Morris’ Housing Management & Litigation specialists are experienced and expert in all-things housing- and possession- related.  We have long-standing, successful client relationships with landlords (including local authorities, charities and other providers of supported housing), lenders, receivers and managing agents dealing with property portfolios in England and in Wales.  We can assist with the education and review processes that are now essential for all those operating within the rented housing sector in Wales.

If you have any queries or concerns, or if you would like to speak to us in relation to the provision of tailored advice or any training requirements, please do not hesitate to contact Karl, Justin or Deborah.

[1] the legislation does not apply in England

[2] The matters the court will take into account (amongst others) when considering reasonableness are set out in Schedule 10 RH(W)A

[3] This right is not available if the occupation contract is a converted contract that was an assured tenancy on the day before the RH(W)A 2016 came into force

[4] Section 181(2) RH(W)A defines ‘serious rent arrears’ in this context. It provides that the contract-holder is seriously in arrears: (a) where the rental period is a week, a fortnight or four weeks, if at least eight weeks’ rent is unpaid; (b) where the rental period is a month, if at least two months’ rent is unpaid; (c) where the rental period is a quarter, if at least one quarter’s rent is more than three months in arrears; and (d) where the rental period is a year, if at least 25% of the rent is more than three months in arrears.

[5] Section 187(2) RH(W)A defines ‘serious rent arrears’ in this context. It provides that the contract-holder is seriously in arrears: (a) where the rental period is a week, a fortnight or four weeks, if at least eight weeks’ rent is unpaid; (b) where the rental period is a month, if at least two months’ rent is unpaid; (c) where the rental period is a quarter, if at least one quarter’s rent is more than three months in arrears; and (d) where the rental period is a year, if at least 25% of the rent is more than three months in arrears.