Standard occupation contract

Overview of occupation contracts

The Renting Homes (Wales) Act 2016 (the 'Act') comes into effect on 1 December 2022, replacing assured shorthold tenancy agreements and residential licences to occupy with a new type of agreement called an occupation contract.

Landlords need to comply with the new law on or after this date if they:

• rent residential property in Wales under a new contract; or
• renew an existing contract.

Definitions from the Renting Homes (Wales) Act 2016

New terminology replaces common terms used in England and Scotland.

A standard occupation contract is a contract between a private landlord and an individual (or more than one) to rent a residential property. It is what used to be known as a tenancy agreement or licence to occupy. The term of the tenancy can be fixed to a set amount of time, or periodic, continuing from one rental period to the next until cancelled.

A secure occupation contract is a contract between a community landlord and an individual (or more than one) based on the local authority secure tenancy scheme currently in place. A secure contract can only be periodic.

A sole contract holder means the individual who rents their home from a landlord under the occupation contract. They are what would commonly be called a tenant or a licensee. If there is more than one contract holder, they are termed joint contract holders.

The occupation date means the date on which the contract holder moves into the property subject to the occupation contract.

A written statement means the document that contains the terms of the occupation contract, which must be recorded in writing.

The rental period means a period in respect of which a payment for rent falls to be made.

Qualifying conditions for use of an occupation contract

A standard occupation contract is for use by by private landlords renting any type of residential property in Wales. It cannot be used for properties located in any other country.

The basic qualifying conditions to use this document are:

• the occupation term must be at least 6 months to a maximum of 6 years
• the contract holder must be a private individual and not a company
• the property should be used for residential purposes only (not business or agriculture)
• the contract holder will have the exclusive occupation of the property

An occupation contract or written statement must be given to the contract holder within 14 days of the contract holder is moving in (start date), or sooner.

Contents of this occupation contract

The terms of this occupation contract include the following.

Key matters

These are the names of the parties, the address of the property, the occupation date, the amount of rent or any other consideration for letting the property and the rental period.

Fundamental terms

These are provisions of the Act that automatically become part of the contract.

Some fundamental terms can be changed or altered.

Fundamental terms cover the obligations of the landlord and contract holder to each other, and matters such as the requirement to use a deposit scheme and termination of the contract.

Supplementary terms

These are provisions of the Act that are by default included in the contract, but which, if the parties agree, can be altered or left out.

For example, they include the contract holder’s responsibility to inform the landlord of damage to the property, whether the contract holder can make changes to the property, such as redecorating it, and subletting.

Additional terms

These are terms that are not fundamental or supplementary.

They include, for example, if the contract holder is allowed to keep pets in the property or whether they can grow specific plants in the garden.

We include the following clauses in our template:

• Guarantor: essential if contract holder is not in full employment
• Provision for you to use an agent (perhaps you are the agent)
• Rent deposit provisions and explanation for the contract holder
• Landlord's access: to view or show prospective lenders or buyers
• Menu of over 40 contract holder's covenants (promises) setting out what the contract holder can and cannot do

Advantages of using a Net Lawman occupation contract

You can find model occupation contract templates elsewhere on the Internet for free download (the Welsh government, for example, provides model written statements). However, there are significant differences with our version.

Strong legal protection for landlords

By default, the law favours the contract holder rather than the landlord. It has been written to give greater protection to the contract holder.

As a landlord, the key to letting safely is to have a document that protects your rights as strongly as possible within the framework of the law.

This document makes sure your legal rights are protected fully.

Comprehensive menu of options to suit any situation

No letting arrangement is quite the same - each situation requires different terms.

This document goes further than most others. We give you a large choice of over 40 contract holder’s promises and restrictions so that you can customise your document exactly how you want it.

Of course, you can also choose to keep in or take out terms that you would expect to be in such a template but might not need (such as a provision to use a separate managing agent).

Easy to edit and understand

Because of the structure of the document, deleting what you don’t want is simple. Our extensive drafting notes explain more technical points.

Our use of plain English language means that your contract holder can never say it was not clear.

No need for a separate guarantor agreement

Many tenancy agreements and leting agreements require you to buy a separate contract to bring in a guarantor. We include provisions for a guarantor within the document making a separate one unnecessary.

Other documents included with this occupation contract

To make property management easier, we have included additional commonly used forms and letters:

• Draft inventory form (provided in the document, with explanatory notes on how to use)
• Cold weather letter to remind contract holders to ventilate and heat the property
• Smoke and carbon monoxide detector release letter and form
• Form RHW16- notice to evict the contract holder by giving 6 months notice
• Late rent letter if the contract holder has not paid rent
• Letter claiming rent arrears to use if the contract holder fails to rent over time
• Pet consent letter in case the landlord allows the contract holder to keep a pet
• Tenancy deposit protection scheme notice

The law relating to this document

This document complies with:

• the Renting Homes (Wales) Act 2016
• the Renting Homes (Deposit Schemes) (Required Information) (Wales) Regulations 2022
• the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022

The implementation of the Renting Homes (Wales) Act was delayed by just under six months. It was due to come into force on 15 July 2022, but now will become law from 1 December 2022.

Among the changes to housing law are the following.

Fitness for Human Habitation (FFHH)

Landlords must ensure properties are fit for human habitation.

In practice this means that a landlord must carry out electrical safety testing and provide working smoke alarms and carbon monoxide detectors.

In theory, rent would not be payable for any period during which the property is not fit for human habitation, but enforcing this would require a court to decide on the circumstances.

Protection against retaliatory eviction

A landlord cannot issue a contract holder with a no fault notice because they have made one or more complaints that the property is in a poor state of repair.

However, in practice, whether or not a landlord has made a retaliatory eviction can only be decided by a court.

Joint contracts

In law, usually the parties to a contract cannot be changed without terminating the contract and putting a new one in place.

However, with an occupation contract, contract holders can be added or removed.

The aim is to make it easier to manage joint contracts in situations where contract holders change often (such as with student housing) and to make it easier to separate people who experience domestic abuse from their abusers.

Succession rights

A succession right is the right to become the new contract holder (a 'successor') once the current contract holder ends their contract.

There can be both a ‘priority’ and a ‘reserve’ person to succeed. For example, if a husband is the sole contract holder, his wife might be a 'priority' successor and their adult child, who also lives with them might be the reserve successor. In addition, there is a new succession right for carers.

Abandonment

A landlord can repossess an abandoned property without needing a court order. They only need to serve a four-week warning notice, having carried out investigations to make sure that the property is abandoned.

Frequently asked questions

How will the existing Welsh tenancy agreements work?

If a tenant rents their home before 1 December 2022 under an assured shorthold tenancy agreement, then that tenancy agreement will automatically turn into an occupation contract when the new law comes in on 1 December.

The landlord will have up to 6 months to give the contract holder a written statement, i.e. a new occupation contract in place of the previous tenancy agreement.

Other types of tenancy that will automatically convert to occupation contracts include:

• where the dwelling consists of licensed premises
• where the property has a high rateable value or a low rent
• where the rent is over £100,000 per annum

Will licences also convert to occupation contracts?

If a tenant lives in their home under a residential licence to occupy such as a lodger agreement, then their contract may change to an occupation contract. However, it does not do so automatically.

How will the security deposit be protected under the Renting Homes (Wales) Act 2016?

Tenancy deposits will continue to be protected under the existing tenancy deposit schemes.

Can a section 21 notice be used to seek possession after 1 December 2022?

Form 6A (a section 21 notice) can no longer be used to give notice to vacate.

A section 173 notice enables the landlord to obtain possession of the property without giving a reason (known as a no-fault eviction notice). Landlords who were letting under tenancy agreemets signed before 1 December (which will convert to standard occupation contracts) will be able to give a two-month notice period after 1 December.

When can the landlord serve a section 173 notice to the contract holder?

The landlord can only serve the no-fault eviction notice after 6 months of occupation have passed. The Section 173 notice also has a minimum notice period of 6 months.

So a contract holder can live in the property for at least a year after signing the occupation contract.

What is the notice period if the contract holder wants to end an occupation contract?

Under a fixed term standard contract, the contract holder cannot end the contract before the end of the fixed term unless a break clause is included. The point of the contract being for a fixed term is that it gives certainty to both the landlord and the contract holder that the property will be rented for a certain period of time.

On the expiry of the term of a fixed term contract the arrangement becomes a periodic contract if the contract holder remains in occupation.

The contract holder must give a minimum of 4 weeks’ notice under a periodic occupation contract.