New Transition rules for Welsh Occupation Contracts

This post is being written on 8 May 2023. On 1 December 2022 the new Renting Homes (Wales) Act 2016 came into force. 

The Act provided for existing contracts at that time to be converted into ‘occupation contracts’ which were a combination of the new Welsh prescribed terms and the tenancy original terms prior to 1 December (where these did not conflict with the Welsh prescribed terms).

Landlords were told that they had to create a ‘conversion document’ telling contract holders/tenants what the terms of their contract were post 1 December 2022 and that this had to be done by 1 June 2023.

This is easier said than done.  The new Welsh prescribed terms are very long (very long indeed), and most landlords, unfamiliar with drafting legal documents, will struggle to create the conversion document unaided.

New substituted contracts – the easy option

It would be much easier if landlords could just get tenants to sign a new contract.  Indeed I understood from webinars attended by Welsh government lawyers last year that this would be a good solution.

A new contract signed after 1 December 2022 is described in the legislation as a ‘substitute contract’. This term also applies to any periodic contract which may arise after the fixed term ends.

So we initially thought that serving a new contract would be the way to go.  Altough the legislation wording was confusing and unclear on this.

The situation now

However, since then, unhelpfully, the Welsh government have retreated from this position.

Regulations published recently and which are due to come into force 1 June 2023 provide:

• A new ‘substitute’ contract signed by the landlord and contract holders/tenants before 1 June 2023 will be deemed to have an occupation date of (ie to have started on) 1 June 2023.
• So, this means landlords need to provide a conversion document anyway to contract holders to tell them what the terms of their contract were, between 1 December 2022 and 1 June 2023.

Note also that the following will apply to all substitute contracts

• You will no longer have a two-month notice period for no-fault evictions, as it will go up to six months
• You won’t be able to serve notice for a no-fault eviction during the fixed term
• You will still have until 30 November 2023 to comply with the electrical and smoke and Co alarms rules
• Landlords who increased the rent by the notice procedure (under s13 of the Housing Act 1988) cannot propose a new rent under the new Welsh procedure within 12 months of their s13 notice.

So if you are considering evicting the contract holders, it will be best not to get them to sign a new contract but to serve a conversion document and then move to serve the no-fault notice in due course.

What are the penalties for not providing a conversion statement?

Some landlords may fail to do this because they are unaware of the new rules.  For others, for example, where the tenancy agreement has been lost, it may prove impossible to create.

If you fail to comply by providing either a conversion document or a new contract, your tenant will be able to apply to the court for an order that you pay up to two months’ worth of rent (it will be less than two months if you are able to rectify the situation before 1 August).

You will also be unable to serve a no-fault eviction notice until six months after a conversion contract is served.

Creating a written conversion document – the Landlord Law guide

Landlords faced with creating a conversion document may struggle.  It is impossible to provide a ‘template’ for this as although we know what the Welsh prescribed terms are, we don’t know what the terms of YOUR tenancy agreement were!

However, in order to make things easier for you, I have created a special page with detailed guidance on what you need to do.

Your document will need to be in four parts:

• The introduction
• The ‘key matters’
• The terms and conditions, and
• The annex or annexes

We provide draft wording for you to use for all four sections.  For the terms and conditions section (which will be the most difficult part for you to create) we give you the wording of the Welsh prescribed terms, colour coded to help you comply with the different rules for the different types of term.

This will make it much easier for you to combine these terms with your own tenancy agreement terms.  We also provide guidance on how to deal with each of the four sections.

We have already had feedback from our Welsh members telling us how helpful this page has been for them.  If you are a Welsh landlord, hopefully, it will also be helpful for you.

Members will find the page here.

If there is something about your situation which makes it impossible for you to draft the conversion document yourself, you should consult specialist Welsh landlord and tenant solicitors.

And finally

It looks as if landlords may have to serve a ‘variation’ statement on contract holders due to changes in the Welsh terms.  If this is necessary, it will need to be done by 14 June 2023.

We will be providing further information on this nearer the time.

I have to say that the way the transition rules have been set up and then varied by the Welsh government is (to put it mildly) unhelpful. 

For example, at the time of writing, there is no guidance on these new regulations on the Welsh government site that I can see, despite the fact that they are due to come into force in a couple of weeks.

I sincerely hope that any legal changes in England brought in under the forthcoming Renters Reform Bill will be less chaotic.