The biggest shake-up of housing law in Wales is imminent

Occupation contracts will contain some specific provisions, these include:

1. Key matters – these will be the key, factual and headline items contained within the contract, such as the amount of rent and start date.
2. Fundamental terms – as the name suggests, these are the most important elements of the contract, including the possession procedures and obligations regarding repairs. Some fundamental terms set out in legislation must be included without any changes being made to them. Other fundamental terms can be removed or modified but only where this improves the contract holder’s position.
3. Supplementary terms – these are set out in legislation (by way of regulations). Parties can agree to remove or modify these terms by agreement, although any amendment which is incompatible with a fundamental term will be deemed void.
4. Additional terms – these are other terms that don’t fall into one of the categories outlined above, for example the contract holder’s ability to keep a pet at the property.

For any new occupation contract granted from 1 December, a written statement must be issued to the contract holder within 14 days of taking up occupation.

Where an existing tenancy or licence has converted into an occupation contract (which will happen automatically on the implementation date), landlords will have six months – until 1 June next year – to issue a written statement.

While there is no obligation for the parties to sign a written statement, the Welsh government has encouraged this as a matter of good practice.

In the event that a landlord fails to provide a written statement, or a statement is incomplete, the contract holder may apply to the court to determine the terms of the contract and the landlord may be ordered to pay compensation.

Compensation may also be payable where the landlord fails to provide a written statement for a converted contract within the specified time period.

The act also places an obligation on landlords to ensure properties are fit for human habitation.

These obligations are set out in the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022, which set out 29 matters and circumstances to which regard must be had when determining whether a property is fit for human habitation.

These regulations also set out other more specific requirements in relation to fitness, for example the provision for smoke alarms.

Landlords must be also aware of potential ramifications for secured funding arrangements.

It is market practice for bank and private placement lenders to place restrictions on the disposal of properties forming part of their security portfolio.

“While the government has helpfully published model written statements for some occupation contracts, it is important to highlight that those statements will need to be reviewed and additional terms inserted”

Sometimes these restrictions relate not only to charged properties, but also to any other substantial part of a borrower’s assets.

Legally, the granting of a tenancy is a type of disposal and is therefore caught by a disposals prohibition. As occupation contracts will act and feel like tenancy (and a disposal of property), any occupation contract entered into may be subject to a contractual disposal prohibition.

Under a typical restriction on disposals, the occupation contract could require lender approval because, in comparison with current tenancy agreements, the new occupation contract could confer fewer material rights and/or impose additional material obligations on the borrower as landlord.

The consequence, for any secured funding arrangements that are subject to a typical restriction on disposals of existing charged or other properties, is that lender consent to the new form of occupation contract may be required prior to 1 December.

The changes have created a heavy administrative burden for landlords. Written statements of contracts need to be drafted, a conversion process must be carried out in order to issue written statements for converted contracts, lending agreements and policies must be reviewed, and further new policies created.

It is likely that landlords are well underway with this process ahead of implementation.

While the government has helpfully published model written statements for some occupation contracts, it is important to highlight that those statements will need to be reviewed and additional terms inserted.

Vicky Smith, solicitor, Devonshires