A warning for Welsh landlords trying to make use of fixed-term occupation contracts » The Landlord Legislation Weblog

WalesWhen the brand new Welsh laws comes into power on 1 December 2022, there will probably be two sorts of contract (for personal Welsh landlords)

Most landlords are used to utilizing fixed-term contracts. The ‘renewal’ offers them a chance to set a brand new hire, and the fastened time period offers each landlords and tenants a interval of safety.

Letting brokers additionally like fixed-term contracts.  As coping with the ‘renewal’ contract is generally a set off for them to cost a renewal price.

However what occurs (after 1 December 2022) to a Welsh occupation contract if no renewal doc is signed earlier than the top of the fastened time period?

If no renewal contract doc is signed

As in England now with assured shorthold tenancies, if the contract holder stays within the property after the fastened time period ends, a brand new statutory periodic contract will take its place. Assuming there isn’t any new fixed-term contract already signed up

The principles are set out in part 184 of the Renting Properties (Wales) Act 2016 and are as follows:

(3) The brand new contract—
(a) has an occupation date falling instantly after the top of the fastened time period, and
(b) has rental intervals which can be the identical as these for which hire was final payable below the fastened time period contract.
(4) The elemental and supplementary provisions relevant to periodic normal contracts are included as phrases of the brand new contract with out modification.
(5) Topic to subsections (3) and (4), the brand new contract has the identical phrases because the fixed-term contract instantly earlier than it ended.

So this appears much like the state of affairs in England. Nonetheless, there are some variations.

Amended elementary and supplementary phrases

One large distinction is that the basic and supplementary phrases will probably be included ‘with out modification’. So, the place does that depart you when you have modified these phrases in your fixed-term contract?

Do not forget that it’s potential to change elementary phrases marked (F+) and Supplementary phrases (S) within the mannequin contracts.  As long as you do that correctly. However in keeping with s184, these adjustments won’t carry over to a statutory periodic.

Your fastidiously amended phrases will probably be changed by all the elementary and supplementary phrases which apply to periodic contracts.

Service of written assertion

You additionally must keep in mind that Welsh landlords should serve a written assertion of the occupation contract on their contract holders. Which should be served inside 14 days of the ‘occupation date’ below s31(1).

I believe that a few of you could assume that, because the contract holders can have been dwelling there for some months or years, the occupation date would be the date after they first moved in.  So a brand new written assertion is just not mandatory.

Nonetheless, s185, it appears that is flawed. The ‘occupation date’ means the occupation date for THAT contact. Not the previous one.

As a result of, part 185(1) says that, successfully, you possibly can say in your fixed-term written assertion, what the phrases of any subsequent contact (which the laws calls the ‘potential contract’) will probably be.

AND in the event you do that, then (s185(2)(b)) says you can be handled as having complied with s31(1).  Which means you gained’t must serve a brand new written assertion of contract.  So presumably, in the event you don’t do that, you WILL must serve the written assertion.

There are a couple of conclusions to attract from all this:

If you wish to amend your elementary or supplementary phrases – it is best to

  • both use a periodic contract (the place these issues won’t come up because the contract will simply run on indefinitely) or
  • Embody all of the phrases of any future statutory periodic occupation contract in your fastened time period contract.  Or you possibly can simply set out the phrases which have modified. This can make your assertion even longer, however it means you gained’t must serve a brand new written contract firstly of the brand new statutory periodic.   Plus any amended elementary and supplementary phrases will carry over, or
  • Be sure to get a brand new fixed-term contract signed up earlier than the top of your fastened time period

Keep in mind,

  • if a statutory periodic arises which you haven’t supplied for in your previous fastened time period settlement, and
  • if you don’t serve a brand new written assertion in your contract holders inside 14 days of this occurring –
  • you can be in breach of the principles and your contract holders will be capable to declare the penalty.

Which is as much as 2 months’ value of hire, relying on how late you finally serve the written assertion, which they will offset towards their hire.

And at last

Keep in mind additionally that you just can not power contract holders to signal a brand new contract.  They are going to be completely inside their rights to refuse.

Certainly, they could properly resolve that it’s towards their pursuits to signal a brand new contract.  Allowing for that in the event that they refuse, the phrases of their contract will change.  In all probability in a means which is extra beneficial to them!

In view of those points, landlords could wish to think about using periodic contracts from the beginning, as it will keep away from these issues.  Or use a type of fastened time period contract which incorporates all of the phrases of the ‘potential’ periodic contract.

In any other case, I believe there will probably be a couple of offended landlords and comfortable contract holders if no written contract is supplied and the penalty turns into payable.

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