Our grateful thanks as ever to Mike Norman of Harrow Law Centre for Part 2 of his updates on the implementation of Renting Homes (Wales) Act. Part 1 is here.

Wales – Renting Homes updates: The Good, the Bad and the Converted – part 2

Introduced by the Renting Homes regime, the Welsh statement of contract initially appears similar to her (now England-only) predecessor, the tenancy agreement. This post addresses some of basic requirements of the statement, the significant consequences of breaches of those requirements, and the importance of last month’s updates for ‘converted contracts’.

Obligations

The statement of contract has obligations of both form (i.e. provision of statement) and of substance (what those statements have to actually contain).

Starting with those contracts commencing on or after the ‘appointed day’, landlords must serve a complete and correct statement within 14 days of the ‘occupation date.’ In a world where some occupiers might otherwise face challenges as simple as evidencing their rental liability (for a benefit claim to the DWP) as well as everything upwards, this is of no small significance.

Contract terms fall into four broad ‘types’– ‘key matters’, ‘fundamental’ provisions (F and F+ ) , ‘supplemental’ provisions (S) and ‘additional’ terms. The terms have their own hierarchy, and there is even some consumer-rights style protection. Fundamental provisions set out a level of minimum rights since ‘F’ terms cannot be altered at all and ‘F+’ terms can only change, by agreement, if they benefit contract-holders. That is however the limit, as supplemental terms do not have this protection and so are far easier for landlords to negotiate out.

The Welsh government has drafted model statements of contract for post-appointed day contracts. It should be said that the model contacts are not short – even the shortest, for fixed-term standard contracts, has 56 terms.

Sanctions?

Failure to serve the statement within the set timescale (subject to any defence) allows occupiers to apply for a ‘declaration’ of contract terms, claim compensation, and for standard contract-holders, even engage schedule 9A* defences to Landlord Notices (as identified in part 1, those notices which are not ‘grounds-based’).

At risk of having to deploy the rarely spotted (and grammatically questionable) triple-negative, the effect of schedule 9A is that not only can notices not be served prior to the provision of the statement if the deadline is missed, but also not for 6 months after that. Added to the fact, as observed in part 1, that notices in converted contracts generally have to last six months now, failure to provide statement within the timescale effectively adds a year’s security to a contract.

Compensation isn’t token either, starting with the rent equivalent for each unserved day up to 2 month’s maximum and thereafter at a specified interest rate. ‘Deliberate’ failure to provide can lead to compensation being doubled at court’s discretion, which would have the effect of reversing the rent charge. Serious indeed.

Slightly different considerations apply where a served statement is incomplete or incorrect (no schedule 9A defence,  sadly).

Failure to provide an address also carries a sanction meaning the landlord cannot serve ‘Landlord Notice’ whilst the breach is ongoing – but without the 6-month penalty period following service (compensation can also be claimed, without the ability to increase above the level of applicable rent due).

Converted contracts?

Landlord of converted contracts face additional challenges migrating tenancy agreements over to the statement, requiring a very careful drafting exercise. ‘F and F+’ contract terms override existing tenancy terms by default, but existing tenancy terms override default S terms.

The suggested model contracts drafted by the Welsh government cannot therefore address converted contracts as each one can be different, meaning this quickly becomes an unenviable task especially in bulk.

The ‘information provision period’ (IPP) identified in part 1 gave such landlords an extended compliance period –  six months past the ‘appointed day’ of 1^st December 2022. This makes 1^st June 2023 the key date when sanctions will start, in respect of failure to serve statement for ‘converted contracts.’

Better (almost) late than never?

The Welsh Government considered clarity was required for converted contracts where there had been ‘dealing’ within and after the IPP including:

• Contract-holder changes (contract remains converted e.g. successor)
• Substitute-contract changes (e.g. new fixed-term/contract goes from ‘fixed term’ to ‘periodic’, contract remains converted)

The regulations were only finalised on 18^th May, and guidance published on 24th May (i.e. only 7 days before coming into effect!). At risk of over-simplifying, for those changes occurring before 1^st June 2023, the IPP broadly continues to apply, with a final (bonus?) sanction-free period of 14 days from 1^st June 2023. Any changes after 1^stJune 2023 starts the 14 days for provision of contract statement from the date of the change.

The ‘occupation date’ is also treated as 1^st June 2023, in respect of a substitute contract arising within the IPP where an incomplete/incorrect statements of contract has been served (i.e. it is the 15^th June when the sanctions apply from.)

Since the purpose of the IPP was itself to give time to ensure an orderly transition, it seems likely Some Frustration will occur for last-minute introduction of this, especially as it is treated as a ‘new term’…

Human habitation

Last, but not least: whilst human habitation requirements apply straightaway to contracts starting after 1^st December 2022, for converted contracts, a moratorium is in place until 1^st December 2023 for mains-fitted smoke-alarms or EICR provision. A year until full implementation follows the precedent of England’s Fitness for Human Habitation Act. Carbon Monoxide alarms however can be battery operated and are not covered by the r moratorium.

Summary

In respect of service of statements for converted contracts, where there has been no change in the contract holder or contract, sanctions against landlords  apply from 1^st June 2023. Where there is a new contract-holder or a ‘substitute’ contract, there was an effectively extended deadline, with sanctions applying now from the later date of 15^th June 2023. There will now be significant additional security for those occupiers where landlords still haven’t provided statements of contract.

In respect of human habitation requirements, there is just under 5 months therefore until full parity for converted contract-holders is finally achieved.

*Schedule 9A is my favourite schedule in the Renting Homes Act. Everyone should have one.