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What sort of residential lets fall within Renting Homes?

Q Do Gypsy, Roma and Traveller (GRT) sites fall within the Act?

> Generally, no. For the Act to apply, the property which is let must be a dwelling. Sites which are provided for GRT populations will generally be for a piece of land with some amenities, and so not let “as a dwelling”.

Q Are Almshouses covered?

> Almshouses are not specifically excluded from the Act and so there is no definitive answer to this question. One analysis on the basis of a previous legal case suggests that they might be exempt but even that analysis makes it clear that it will depend on the terms and conditions in each case. Any landlord or agent managing almshouses would be well advised to take specific advice.

Q What about shared ownership?

> These are expressly excluded so the Act will not apply.

Q Are agricultural properties within the Act?

> Any agricultural tenancies and occupancies which relate to farmland which is used primarily for the purposes of an agricultural business (even if it includes a farmhouse or a cottage) are excluded. Some residential occupancies may (if they are old enough) also be excluded.
Specifically, the Act excludes the following:

  • Protected occupancies under the Rent (Agriculture) Act 1976 – this would cover an agricultural worker who is housed by their employer occupying a separate dwelling as part of their employment. It has not been possible to create one of these types of occupancy since 1st January 1989 (and local authorities were never able to).
  • A tenancy of an agricultural holding under the Agricultural Holdings Act 1986 – this is land used for agriculture for the purposes of a business (it has not been possible to create a new agricultural holding since 1st September 1995).
  • Farm business tenancies under the Agricultural tenancies Act 1995 – again this relates to agricultural land used for the purposes of a business.

Where care needs to be taken is where houses (farms and estate cottages) without agricultural land attached are occupied by workers who are employed in the course of the agricultural business. They will not be either farm business tenants or tenants of an agricultural holding. Before 1st January 1989 they would have come within the 1976 Act and are so excluded (for the same sort of reasons as Rent Act tenants). However, since then they may have become assured agricultural occupancies under the Housing Act 1988.

What we are waiting for is further information about how those assured agricultural occupancies are translating into Renting Homes.

Q How should we deal with decants? What status does the decant agreement have?

> Ideally, you should leave the main standard or secure contract in place (i.e. the agreement which relates to the home which you are carrying out work to), and have a new and separate licence of the temporary property. Provided that licence does not require the contract-holder to pay a rent or any other consideration for the temporary property, it should not itself be an occupation contract.

The obligation to pay rent in relation to the main home remains. Of course, a tenant may seek to argue that it is unfit for human habitation and so the rent is not payable; we would hope that the court would agree that if you have put them in a “fit” property (i.e. the decant) the rent is payable but it is a grey area.

There is no ideal solution because the exemption for temporary accommodation during works (paragraph 14 of schedule 3) does not apply where the decant is provided by the same landlord (i.e. the decant landlord and the landlord of the main property are one and the same) or where the contract is secure, so will rarely apply to decants – meaning that if the decant agreement is an occupation contract and the landlord is a community landlord, the contract will be a secure one.

One option would be to amend the supplementary term which provides the rent is not payable to specifically provide that it does not apply where a decant is provided (although that might not be possible on conversion, it could be applied to new contracts).

What sort of contracts to use

Q We are a community landlord but we operate an intermediate lets scheme. They are allocated via the same waiting list as our social lets.

> Generally, it is expected that community landlords can use standard contracts for intermediate lets (provided of course a s13 notice is served (RHW1)). That is because they ought to be considered “Non social lets” under paragraph 15 of schedule 3. However, some care must be taken here as for that exemption to apply, it must be the case that “the allocation rules” (i.e. the landlord’s rules for determining priority between applicants) did not apply to the granting of the contract. Hence where the social waiting list is used that may be a grey area.

Q Do we need to serve a s13 notice on a Rent2Own scheme tenancy?

> Rent2Own is likely to fall within the “non social lets” exemption so can be a standard contract (see answer to question above) but yes it will be essential for a community landlord to serve a s13 notice (RHW1) otherwise by default it will be secure.

Community landlords need to be aware that the RHW1 is essential in ALL cases where they wish to use a standard contract, apart from where the contract arises under s238 (implied contracts where payments are taken from a trespasser), where the contract arises at the end of a fixed term, or where it arises because the court has “demoted” the secure contract to a prohibited conduct standard one.

Standard contracts

Q Does a Section 13 notice always last for 12 months in any accommodation setting?

> The section 13 notice does not have any “lifespan”. It is served before or at the commencement of an occupation contract to inform the contract holder that the contract is a standard and not secure even though the landlord is a community landlord. If it is properly served the contract will be a standard one until it ends whenever that may be.

Private lettings in the social and private rented sector

Private Landlords and Social landlords with “Non social” lettings business

Private landlords will grant standard contracts by default although the landlord can opt to make the contract a secure one. (If a private landlord becomes landlord of an existing secure contract, it will continue as secure.)

Community landlords’ contract holders will be secure by default, although as we have detailed elsewhere there are a list of circumstances where community landlords may use standard contract – and mostly to do so a s13 notice is required as discussed here.

One of the circumstances where a community landlord may use a standard contract is where they are operating “non social” lettings, which is defined as an occupation contract granted where “the allocation rules did not apply to the making of the contract, or the dwelling is made available to the contract holder because he or she is a key worker”.

“The allocation rules” in turn are described as “the landlords rules for determining priority as between applicants in the allocation of housing accommodation, and include any rule of practice whereby the landlord provides accommodation to persons nominated by a local housing authority”.

Community landlords will therefore be able to use standard contracts for projects such as intermediate lettings, rent to own lettings and other non social lettings business although any “qualification” criteria or other policies which are applied to the allocation of these properties do need to be checked with care.

What provisions in the Act apply and do not apply to private (and non social) lettings

Many of the areas dealt with in the Act apply equally to secure and standard lettings. They are set out below. (Please note that introductory, prohibited conduct and supported standard contracts may be slightly different – we will cover those separately):

  • The requirement to serve written statements (and make sure they are complete and accurate, and contain the prescribed information).
  • The requirement to provide notice of the landlord’s address for service within 14 days of occupation (form RHW2) and to provide further notice if the landlord changes, or if the landlord’s address changes (forms RHW3 and 4).
  • The structure of the contract – that it is made up of fundamental, supplementary additional and key terms (although the terms vary).
  • Repair and condition obligations apply equally to all secure, periodic standard lettings and fixed term standard contracts which are for less than 7 years. Read more about repairs and maintenance.
  • If a deposit is taken, it must be dealt with in accordance with the Act (although in practice it is rare for a community landlord to take a deposit). Read more in our dedicated deposits section below.
  • Rent increases are dealt with in the same way although under slightly different provisions in the Act. The notice is the same. Read more about rent increases on our housing management page.
  • Death of a sole contract holder will end the contract unless there is a successor, and the succession rights are the same. Read more on our death and succession page.
  • Minors cannot hold standard contracts either. Read more in our 17 March bulletin.
  • A private landlord is just at risk from an “implied” contract if payments are taken from trespassers. Read more in our dedicated trespassers and implied conduct section below.
  • The contract holder may not engage in behaviour which is “prohibited” by s55 – which prevents behaviour capable of causing a nuisance of annoyance.
  • The contract holder may not “deal” with the contract unless the contract permits it. “Dealing” includes granting sub occupancies (as a consequence sub-contracts will not be allowed unless the contract expressly provides for it).
  • All contract holders can permit persons who are not lodgers or sub holders to live in the dwelling (this is a supplementary term which can be amended by agreement).
  • Transferring the contract to a new contract-holder is only permitted if the contract allows it (although secure contracts will allow two specific rights to transfer – see below).
  • A joint contract holder can “withdraw” from the contract by serving one month’s notice on the Landlord and on other joint contract holders.
  • A sole contract holder can apply to add another person as a joint contract holder with the landlord’s consent (and the landlord must deal with the request for consent within a month and cannot unreasonably refuse or impose conditions).
  • A sole joint contract holder acting alone cannot end the contract.
  • The contract holder cannot be evicted without a court order unless they abandon the dwelling, and the Landlord must follow the procedures and processes in the Act carefully to terminate it. Read more about abandonment on our ending the contract page.
  • The contract holder can terminate the contract by giving one month’s notice, or the parties can agree to end it.
  • The Landlord can seek possession on the basis of the contract holder’s breach of contract (or false statement), or on the grounds of estate management, provided in both cases it is reasonable to do so (and if an estate management ground is used, suitable alternative accommodation is available and the landlord pays removal costs).

What is different?

Lodgers

It is a fundamental term that a secure contract holder is entitled to a lodger (ie someone who shares accommodation with the landlord; the lodger should have a licence which is not an occupation contract under the Act); a standard contract holder may have a lodger with the landlord’s consent to have a lodger although the parties can agree to remove this right.

Rights to transfer

It is a fundamental term of a secure contract that a contract holder can apply for consent to transfer it to another secure contract holder of a community landlord. In addition, another fundamental term is that a secure contract holder can apply for consent to transfer it to someone who would have been entitled to succeed if the contract holder died. These rights do not apply to a standard contract holder.

Termination

There are three additional routes for a landlord to end a standard contract:

  • a “no fault” notice
  • a “landlord break clause”
  • “serious rent arrears”

Checklist for new standard contracts

Where a standard contract is granted the Landlord needs to ensure the following are provided/checked:

Converting contract New contract after 15 July
Written statement of terms (complete and including prescribed information) By 15th January 2023 Within 14 Days
Inventory – see more below By 29th July 2022 if serving Within 14 days if serving
RHW2 (notice of address for service) By 15th January 2023 Within 14 days
Deposit requirements – see more below Sensible to serve prescribed information Within 30 days
EPC ASAP ASAP
Gas safety certificate Within 28 days of check Before occupation
Current EICR (and written confirmation as to work done) Within 7 days of 15th July 2023 Within 7 days of occupation

 

Deposits

The Act permits a landlord to take a money deposit or a guarantee as security for the contract holder’s performance of their obligations. Any other type of security is prohibited.

Where a deposit is taken, it must be dealt with as the Act provides – the requirements are very similar to the existing law. The landlord must protect the deposit by complying with the initial requirements of an authorised deposit scheme, and then must provide “prescribed information” about that scheme to the contract holder within 30 days.

The prescribed information is now set out in new regulations. It is virtually identical to the previous prescribed information, save that references to “fax numbers” have been removed, and of course the information refers to the rights and procedures under the Renting Homes (Wales) Act 2016 and not the Housing Act 2004. So there are differences, albeit minor.

The Act makes it clear that once the deposit is protected, there is no need to “re-protect” it if the contract ends and is replaced with a new one.

The Act is silent on what happens to deposits which are held already in relation to formerly assured shorthold tenancies. The obligations arise from when the deposit was paid, so we would hope that would mean there is no requirement to “re-protect” although it would be a sensible precaution for landlords to serve the new prescribed information advising the contract holder that the deposit remains protected, and is now governed by the new legislation.

The requirement for an inventory

One of the supplementary terms which applies to standard contracts contains an obligation for a landlord to supply an inventory within 14 days of the occupation date. The term requires an inventory noting the condition of fixtures and fittings and any contents. Fixtures and fittings is not defined. If the contract holder doesn’t challenge the inventory it is deemed to be correct.

The term applies to all standard contracts including supported contracts but not introductory or prohibited conduct ones. As it is a supplementary term, it can be removed or amended by agreement (although there is obviously some sense in having an inventory particularly for private lets).

Hence landlords will need to decide whether to do this (many will already), or whether to exclude the term by agreement.

The more tricky question is whether the term will apply on transition for existing tenancies where there is currently no provision for an inventory. The landlord cannot remove any term by agreement on transition if it is imposed by the supplementary terms regulations unless it is incompatible with the existing terms. It is not clear whether a tenancy which is silent on the question of an inventory is “incompatible”.

Hence landlords will need to look at their existing tenancies carefully and consider whether to provide an inventory once the Act is in force.

Termination of Standard contract – Additional “no fault” grounds, landlord’s break clause and serious rent arrears grounds

Much like assured shorthold tenancies, the Act provides for a “no fault” route to eviction for standard contracts. It involves service of a “landlord’s notice” which does not require any ground for service, and provided it is served correctly will give a landlord a right to a mandatory possession claim (subject only to two potential defences – one that the claim is a “retaliatory one”, i.e. pursued by the Landlord to try and avoid the repair/condition obligations; the other is that a possession order would interfere with the occupier’s convention rights (i.e. human rights)).

Two other additional routes to termination for standard contracts are a landlord break clause and serious rent arrears.

The notices are far from straightforward in terms of timing. There are also a significant number of hurdles to cross to ensure the notice is valid.

No fault grounds – form of notice and validity of notice

The prescribed forms must be used, and there are three – RHW16, 17 and 18. Which to use depends on the period of the notice and circumstances it is used in. By and large it will be RHW16 which applies to private and non social lets but be aware that the notice may be different if the contract falls within one of the lists in the schedules.

Once the notice has expired there will be a limited period for possession proceedings to be started – within 2 months of the date in the notice. This is a new departure and one which landlords will need to take care with. If the notice expires a new one will be needed.

No fault grounds – timing

Fixed term standard contracts – within fixed term.

If the fixed term ends and the contract holder is still in occupation, a new periodic contract will arise (so see below for method of termination).

Whilst there is a right for a landlord to serve notice within the fixed term to end the contract at the end of the fixed term, this only applies to certain types of contract, which are listed in schedule 9B. That schedule is due to be amended before the Act comes into force. As it stands, it would not cover general private sector lettings although some types of temporary accommodation would be covered, and service occupancies can be ended at the end of the fixed term too.

The new periodic contract is likely to be not capable of being ended within a year (see below), hence the net effect of that as it stands is that a contract granted for a fixed term is effectively often granted for that term plus one year save in one of the limited circumstances where schedule 9B applies or where a landlord break clause is permitted (see further below).

Where the contract can be ended at the end of the fixed term, notice must be in form RHW22 and served at least two months before the expiry of the fixed term. The restrictions on service listed below apply to it. The possession claim must be started within 2 months of the notice expiring.

As for fixed term contracts on transition the rules are a little more flexible – provided notice is served within the fixed term (and is not served within 6 months of the occupancy date) the contract does not have to fall within schedule 9B. A full 2 months notice not expiring before the end of the fixed term must be given.

Periodic standard contracts

A contract which is either a periodic standard contract from the outset or one arising at the end of a fixed term can be ended by notice served under s173. The general rule is that the notice must be for a period of six months, and cannot be served within the first six months. In other words, all periodic contract (including those arising after a fixed term) will run for a minimum of 12 months.

There are a limited number of cases where two months’ notice is permitted – listed in Schedule 8A and a similar limited number of cases where notice can be served within 6 months. Again, amendments to schedule 8A and 9 are awaited but the exceptions are limited (service occupancies are one).

So by and large the 6+6 rule will apply.

Periodic contracts which are converting can be ended on 2 months notice not to be served within 4 months of occupation (that four months runs from the original tenancy, not the date the act comes into force). Hence again there is a little more flexibility.

No fault grounds – restrictions on service of notice

For all of the above, there is a significant list of issues which could make the notice ineffective, which are:

  • A previous notice has been served and withdrawn – no further notice can be served within six months
  • The court has refused a previous possession order on the basis it considered the claim was a retaliatory one – no further notice can be served within 6 months

The following additional restrictions are listed in schedule 9A:

  • The landlord has failed to supply a written statement of the terms of the contract as required by the Act (no notice can be served within 6 months of putting that right (although there is more flexibility for converting contracts until January 2023)
  • The landlord has failed to comply with the requirement to serve form RHW2 (or RHW3/4 if the landlord has changed or its address has changed)
  • The landlord has breached the deposit requirements
  • The landlord has received a payment which is prohibited by the Renting Homes (Fees etc) (Wales) Act 2019 and not repaid it
  • The landlord has failed to provide an EPC
  • The landlord has failed to comply with the requirements to ensure a working smoke alarm and carbon monoxide alarm is fitted or to comply with the electrical safety requirements in the fitness for habitation regulations
  • The landlord has failed to provide a gas safety certificate

Landlord break clause

A fixed term standard contract may only contain a landlord break clause if it is granted for a term of two years or more, of if it is within one of the categories of contract listed in schedule 9C. The list looks very similar to the list of contracts which may be ended within the fixed term above – again by and large general private lets are not included, although service occupancies and some types of temporary accommodation are.

If the contract is permitted to include a landlord break clause, there are further constraints:

The notice must be for a period of six months unless the contract is one in schedule 8A (in which case it may be for two)

It cannot be served until after the first 18 months of occupation (unless the contract is one listed in schedule 9)

All of the restrictions listed in schedule 9A and the restriction on serving notice following a retaliatory claim also apply.

The notice is form RHW24 or 25 (depending on whether the notice period is six or two months.) Again, the notice is valid for the purposes of seeking a possession order for a period of two months only.

Serious rent arrears

Both periodic and fixed term contracts can be brought to an end if there are serious rent arrears. The arrears have to subsist both at the date of the notice and the hearing.

To be “serious” the arrears must amount to 8 weeks’ (in the case of weekly) or 2 months’ (for monthly) rent. If the rent is payable quarterly it must be three months in arrears and if annually 25% must be at least three months late.

The notice is RHW20, and 14 days’ notice is required of the landlord’s intention to claim. (One month if the contract is introductory or a prohibited conduct one and the form is RHW21). The claim must be issued within 6 months. The ground is a mandatory one, subject to convention rights defences.

The same list of “hurdles” to a “no fault” notice does not apply.

Given the possibility of contract holders reducing the arrears to below the serious rent arrears threshold before the hearing and so avoiding a claim altogether, landlords should consider whether to serve the serious rent arrears notice together with a breach of contract notice (RHW23) although that may mean leaving it longer before issuing the claim, it increases the chance of at least a suspended order if the arrears are reduced but not cleared.

Almshouses

Q Almshouses – are they within the Act?

> This is a difficult question to answer. They are not expressly excluded. There is a very technical legal argument about the nature of the licence which an almshouse resident has which indicates that it may be personal right only – and if so there is another technical legal argument about whether that means the Act does not apply. However, that is based on court decisions in two cases (decided under the old law) which depended on the precise terms of the licence and the almshouse charity’s own founding documents too. Hence there is scope for an argument on it.

As such, there can be no clear answer either way although we understand (but have not been told directly) that policy makers for the Welsh Government have expressed the view they are not within the Act but without an express exclusion it is a grey area.

Those who manage almshouses will need to decide whether to take the risk free approach of treating the Act as applying (when they may well not need to). This has significant implications. Alternatively they can treat the Act as not applying and take the risk of a challenge. Hopefully the indication from the Welsh Government would mean it would be difficult to criticise an organisation who treated the Act as not applying but of course all of the consequences in the Act would apply if a court decided otherwise.

It might be sensible to consider a sector wide application to the court to clarify.

Introductory and prohibited conduct standard contracts

One of the circumstances where a community landlord may use a standard contract is where it is an introductory contract. A s13 notice is required, and the notice must set out the reason the contract is a standard one and explain that the contract holder can apply to the court for a review of the decision to serve it.

The Introductory contract operates as a periodic standard contract for the “introductory period”. At the end of it, it ends and a new secure contract arises. It is no longer an Introductory Contract at that point.

The introductory period can be extended to up to 18 months by serving a prescribed notice (RHW34) not less than 8 weeks before it is due to expire, although the decision to do that is subject to a review and challenge to the court.

If the landlord has served a possession notice, or the RHW18 and that notice is still “live”, or has commenced proceedings before the introductory period has expired then the Introductory Contract does not end and no secure contract arises.

During the introductory period, in addition to the other methods of termination, the contract can be ended via a landlord’s notice (normally called “no fault” notices which are served on standard contract holders, but in the case of introductory contracts it is only likely to be used where there is some “fault”.) It can also be ended on the “serious rent arrears” ground (if 8 weeks/2 months’ arrears are owed at the point the notice is served and at the point of the hearing). The only additional consideration for an Introductory Contract Holder is that the Landlord must offer a review of the decision to serve notice. Other than that, the timescales and hurdles are the same as for any other standard contract. As discussed in the termination of standard contracts section above.

Wherever the landlord serves notice under either ground, the notice must inform the contract holder of the right to ask the landlord to review the decision and of the time by which the application must be made. The notice is in a prescribed form (RHW18).

Many landlords are currently considering whether to use (or carry on using) introductory tenancies/contracts. Over the years they have been a useful tool in combatting anti-social behaviour and other breaches early on in the tenancy and before it became a full assured or secure tenancy agreement. However their effectiveness has been watered down in recent times due to extended notice periods during Covid. Renting Homes will re-introduce those lengthy period.

What will remain under Renting Homes is the fact that a landlord has a mandatory ground for possession by service of the RHW18 notice. So provided the correct notice has been validly served (and all of the conditions for service are met) then subject to any review, the court must grant a possession order. However, as a result of the notice period combined with the lengthy period before which notice can be served, court possession proceedings cannot commence during the first year of the occupancy.

As well as being able to serve an RHW18, the landlord will also have the ability to serve a mandatory ground notice for serious rent arrears (RHW21). This applies where there are arrears of more than 8 weeks (for weekly tenancies) and 2 months (for monthly tenancies). The notice period is one month and proceedings have to be issued within 6 months. Notice can be served at any time after the occupation date as soon as the necessary arrears have arisen. Hence where very serious arrears arise quickly this is one added advantage/incentive for the contract holder to pay

Pros

  • Mandatory ground for possession
  • Can extend the introductory period to up to 18 months with service of a notice 8 weeks before the end of the initial introductory period (right to a review)
  • If a possession notice or RHW18 notice has been served (and time has not yet expired to issue, which in the case of an RHW18 is two months) or if possession claim has been issued the introductory period will continue until conclusion of possession claim, withdrawal of the notice or the expiry of the notice (where no possession claim issued)
  • Serious rent arrears ground available (not available for secure contracts)
  • Serious rent arrears notice period is 1 month
  • Converted starter tenancies can be ended with 2 month notice but not within the first 4 months after the tenancy began
  • Breach of tenancy grounds remain available and for ASB possession proceedings can be issued immediately after the “NSP” has been served

Cons

  • s.173 notice (RHW18) – 6 month notice which cannot be served in the first 6 months
  • Right to request a review of decision to:
  • Serve s.173 notice (RHW18)
  • Extend the introductory period (RHW34)
  • Serve s.181 notice (serious rent arrears/RHW21)
  • (So landlord will need to have a policy/procedure in place and be ready to conduct reviews)
  • Tenant has right to apply to the county court for a review of the landlord’s decision to give the notice of extension
  • (NB there is no right to apply to the county court to review the decision to serve notice to end the tenancy but of course the landlord needs to apply to the court for possession)
  • It’s not clear if the service of a serious rent arrears notice (RHW21) will stop the introductory contract converting to a secure one (although likely that it will) but a possession claim issued following it will.
  • Notice expires after 6 months

Prohibited Conduct Standard Contracts

Another time when standard contracts may be used by community landlords is the new “demotion”, or “Prohibited Conduct Standard Contract”, or PCSC for short.

Like a demoted tenancy, this is something a Landlord can apply to the court to do. The landlord must first serve notice (RHW35) and can commence proceedings straight away.

The Court can make an order imposing a PCSC where it is satisfied the secure contract holder has breached the s55 behaviour clause. The order ends the existing secure contract and creates a periodic standard contract in its place. A new written statement is needed. No s13 notice is required.

The court must be satisfied that it would have made a possession order on the basis of the breach, and so it must be reasonable to make the order. The Court must also be satisfied that the Landlord will provide a programme of social support for the contract holder.

Once the order is made, the contract operates very like the Introductory Period of an Introductory contract, save that the notice period for the RHW18 (or s173) notice is reduced to 2 months, and the prohibition on serving it within the first six months is disapplied. The landlord must still offer a review of a decision to serve the notice.

The serious rent arrears ground applies in the same way as for an Introductory Contract (RHW21)

The Landlord may also extend the Probationary Period by up to six months by serving notice 8 weeks before – this time and RHW37, and the contract holder can seek a review of the decision (and apply to the county court if still unhappy following the review).

At the end of the probationary period, the standard contract ends and a new secure contract arises.

Lodgers, Sub Holders and Permitted Occupiers

Lodgers

All secure contract holders will be entitled to allow a lodger to live in the dwelling, and there is no requirement for the landlord’s consent to be sought (s113). That is a fundamental term which can be modified but only if the contract-holder’s position is improved. A lodger is someone who meets the criteria in the “shared accommodation exception” set out in schedule 2 – i.e. the lodger’s “landlord” must use the dwelling as his or her only or principal home and must share some of the accommodation provided by the dwelling with the lodger (the accommodation shared must be more than corridors and passageways).

The same entitlement to a lodger does not apply to standard contract holders. However, a supplementary term (which can be modified) provides a more limited right – that a standard contract holder may not allow someone to live in the dwelling as a lodger without landlord consent (consent of course may not be unreasonably refused or given subject to unreasonable conditions so effectively this is a qualified right to have a lodger).

The supplementary term does not apply to Introductory or Prohibited Conduct Standard Contracts – those contract holders will not have the right to a lodger (with or without consent) unless an additional term is agreed.

Other permitted occupiers

A “permitted occupier” is anyone living at the property with the authority of the contract holder – whether as a lodger or sub-contract holder, or someone else they have allowed to live there.
The supplementary terms allow the contract holder (of any type of contract apart from a supported standard contract) to allow a person who is not a lodger or sub contract holder to live in the home. That supplementary term can be modified. Hence generally it will be allowed, unless a different provision is agreed.

Sub-occupation contracts

A sub-occupation contract is an occupation contract granted by a landlord who is also a contract holder under a “head” contract.

All occupation contracts contain a fundamental term which provides that the contract holder may not “deal” with the contract, except in a way permitted by the contract (s57). That fundamental term is also one which can be modified but only to the benefit of the contract holder. To grant a sub-occupation contract is to “deal” with the contract, so only permitted if the (head) contract allows it.

There are no fundamental or supplementary terms which permit a contract holder to create a sub-contract. As such, unless the contract modifies the fundamental term, or an additional term is agreed the default position will be that the contract holder may not create a sub-contract of the whole or of any part of the dwelling.

That rule will apply to all secure and standard contracts.

Any sub-contract which is created in breach of a contract will not be binding on the head landlord.
Landlords therefore only need to concern themselves about sub occupation contracts if they have chosen to permit a contract holder to create one (with or without consent), or if they become aware that a contract holder has created one in breach of the contract. Whilst a sub-contract created in breach is not binding, the landlord will need to take care not to waive the right to take action and the landlord also needs to beware of the potential of s238 to apply (see below).

There are detailed provisions in the Act about the status of a sub-occupation contract if it is permitted – it will survive beyond the end of the head contract, and the landlord needs to be aware of the need to serve notice or notices (in prescribed form) on the sub-holder if the landlord intends to seek possession. The landlord can also seek what is known as an “extended possession order” against both the contract holder and the sub contract holder.

Overcrowding and permitted occupiers

Overcrowding is of course one of the 29 “matters” which will be taken into account when considering whether a property is unfit for human habitation.

In order to try and minimise the prospect of a property becoming overcrowded by the tenant inviting people to live with him or her, it is often (but not always the case) that a social housing tenancy will set out how many occupiers can live in a dwelling, and provide that it would be a breach of the tenancy for the tenant to allow more than the number of permitted occupiers to live there.

If so that term may carry over into converted contracts.

If not, there is no fundamental or supplementary term to that effect, so it would now have to be added as an additional term to an occupation contract, and the supplementary term which allows a contract holder to have people living in the property can be modified to provide that the right applies only if doing so would not make the property overcrowded. Likewise the supplementary term which gives a qualified right to a lodger for standard contract holders. (Although of course this cannot be done on conversion if there are no terms to that effect in the existing tenancy).

Without that modification, there is no obvious limit to the contract holder’s right to allow permitted occupiers to move in.

The secure contract holder’s right to have a lodger is a fundamental term which cannot be modified. As such any additional term cannot, it would appear, prevent the contract holder allowing a lodger to live with them even if it would mean that the property would become overcrowded.

S96 of the Act provides that the landlord is not liable if the dwelling is unfit wholly or mainly because of an act or omission of the contract holder or a permitted occupier. It is possible that a court might regard it as a contract holder’s fault if the property is overcrowded because the contract holder has allowed a lodger to move in, but at the same time moving a lodger in is something they are allowed to do as a fundamental term. We think that could be argued both ways.

Your questions answered on Lodgers, Sub Holders and Permitted Occupiers

Q If notice is given under Schedule 2 para 3 a lodger has an occupation contract. Does this notice give security of tenure? Would they continue to have a lodger licence (under an occupation contract) or become a standard contract or something else?

> If the contract holder grants a tenancy or licence to a lodger but then gives notice that the tenancy or licence is an occupation contract, it will be a standard occupation contract. That is likely to breach most social housing secure contracts, which will not permit sub-occupation. If so, that sub-contract is not binding on the landlord and the contract holder is in breach.

Q A lodger agreement at the moment would automatically end with the death of the tenant (i.e. the licensor). Does it also end with the death of the Contract Holder or if the Contract Holder gives notice to end the contract?

>Provided the lodger agreement is not an occupation contract (see question above), the situation remains the same. It will be a licence – a licence is just a permission to be at the property. It does not survive the end of the contract, nor does it survive the occupation contract changing hands. So the lodger’s right will come to an end on the death of the contract holder or otherwise at the end of the contract. If however it is a standard contract which was not granted in breach, it will remain a standard contract if the head contract ends and the head-landlord will become the immediate landlord of the sub-occupier.

Q If one of our tenants has a lodger, what sort of agreement will they have after July?

> If the lodger shares accommodation with your tenant (or contract holder), the agreement between the contract holder and their lodger is not an occupation contract. It is important that your contract holder occupies the property which the lodger resides in as their only or principal home, and that they share some part of the property (which is more than the means of access) for this to apply. Your contract holder can opt to make it an occupation contract, in which case it will be a standard one without any need for them to serve a s13 notice.

Q A lodger agreement at the moment would automatically end with the death of the tenant (i.e. the licensor). Does it also end with the death of the Contract Holder or if the Contract Holder gives notice to end the contract?

> Provided the lodger agreement is not an occupation contract (see question above), the situation remains the same. It will be a licence – a licence is just a permission to be at the property. It does not survive the end of the contract, nor does it survive the occupation contract changing hands. So the lodger’s right will come to an end on the death of the contract holder or otherwise at the end of the contract. If however it is a standard contract, it will remain a standard contract if the head contract ends and the head-landlord will become the immediate landlord of the sub-occupier.

Q What is a sub-occupation contract?

> It is a contract which is granted by an intermediate tenant/landlord to an occupier. There may be a sub-occupation contract of part or the whole of a dwelling which is let on an occupation contract. The Act makes specific provision for the status of a sub-occupier and there are provisions about when sub-occupation will and will not be allowed. As it is your tenant who is the landlord of a sub-occupation contract, the contract will be standard. (If the shared accommodation exception applies it will not be an occupation contract at all). We will look at sub-occupation alongside abandonment, transfer and social housing fraud in our next bulletin.

Trespassers and Implied Contracts

Where a dwelling is not subject to an occupation contract, and it is occupied by someone who is a trespasser (i.e. there is no licence or tenancy permitting their occupation), if a landlord accepts payments from that trespasser, knowing that they are a trespasser (or if the landlord ought to know they are a trespasser), then after two months from the first payment, an occupation contract will be implied.

To prevent that contract arising, the landlord must issue proceedings to evict the occupier as a trespasser within the two month period.

Any contract arising will be a standard one by default, but the obligation to supply a written statement of terms will apply.

This will be a concern to landlords wherever a contract holder has gone, particularly where the contract holder has died and there is no successor. The contract in that case will automatically end. This is particularly a concern where there is a dispute about the succession right – sometimes such cases can take months to resolve whilst the landlord tries to find the occupier an alternative property. It will be essential that the landlord takes quick and decisive action rather than allow the situation to drift as it will be unable to take payments from the occupier (or if it does, it will need to accept that a standard contract will arise).

Where the contract holder has departed without ending the contract, no implied contract can arise. However, landlords will need to be mindful of this provision in the context of any cases where the contract may have ended either by the contract holder serving notice or otherwise.

Times when the identity of a contract holder will change

Transfers of the Contract

The identity of the contract holder can change in a number of ways after it is granted and we have already covered some of those ways in previous bulletins:

In this bulletin we will look at:

  • The ability for a contract holder to “add” a joint tenant.
  • The ability for a joint contract holder to “withdraw” from the contract without ending it.
  • The ways in which a contract holder can be excluded (including abandonment and for prohibited conduct).
  • The right to transfer to someone who would have been entitled to succeed if the contract holder had died.

Preliminary points

Landlords need to be mindful of the information requirements in the Act, i.e. that when the identity of the contract holder changes, the obligation to supply a written statement of terms arises again (14 days from the change). It would be wise at the same time to serve any new contract holders with other documentation which ought to be supplied at the outset of any contract – e.g. electrical and gas safety documentation, the EPC, the inventory (if required) and the prescribed information which relates to any deposit (again if applicable).

Joint contract holders are fully liable for all obligations under the contract – that means that each joint holder is liable for 100% of the rent and any other sum due. They will not be liable for any period before they became a contract holder or after they ceased to be one. So:

  • if an arrear arose before a joint contract holder was added, that arrear is the responsibility of the original contract holder(s) only and not the new one.
  • if it arose before a joint contract holder withdrew (or was excluded), then both joint holders are fully liable for the whole sum so it can be pursued against either or both of them in full (obviously the landlord is not entitled to payment twice though!). The remaining contract holder must pay it in full if the departed one does not to avoid potential possession proceedings.
  • the same principle applies to any other obligations of the contract, and it applies in both directions. Hence if a departed joint tenant had a valid claim against the landlord before he withdrew he can pursue it after withdrawing although his claim cannot relate to the period after the withdrawal.

Adding a joint contract holder

A contract holder of any type of contract (secure or any type of standard) can add a contract holder, with the consent of the landlord. The landlord’s consent cannot be refused unreasonably. Conditions can be added, but only if it is reasonable to do so. We will look at the issue of consent (particularly the process) in more detail in our next bulletin.

Specific issues which the landlord must consider when dealing with a request for consent to add a joint contract holder include whether the proposed joint contract holder is a suitable contract holder (which can include looking at the likelihood of breach of the contract and whether other contracts have been breached), and whether they are a member of the family.

The landlord can also look at whether the addition is a “sham” arrangement – i.e. if the existing contract holder is likely to withdraw leaving the new contract holder as the sole contract holder after the addition, the landlord can consider it would be able to refuse a transfer to them and whether, if the proposed new contract holder applied for housing they would be granted the contract.

The effect on future successions can be taken into account and if the effect of the addition will be that it will lengthen the period during which the contract is in force (because this transaction will not count as a “succession” so could in theory be used to create additional rights), the landlord can add a condition that the joint contract holder is treated as a successor (priority or reserve).

If consent is granted, then the addition must be done by a written document signed or executed by all the parties including the landlord. (If the landlord is deemed to have consented because it has failed to respond to the request for consent or has refused unreasonably it can be done without the landlord’s endorsement).

Withdrawal of a joint contract holder

This is a very simple process – a joint contract holder can withdraw by giving written notice to the landlord and a warning notice at the same time to the remaining joint contract holder. The minimum period is one month.

No prescribed form has been prepared – presumably because of the risk of a contract holder getting it wrong and so being tied into a contract they do not any longer want to be a party to. Landlords may wish to prepare their own for ease of use, although provided the notice is in writing, and gives the requisite time it will be valid.

Excluding a joint contract holder – by the landlord

The landlord can end the rights of one (or more) joint contract holders leaving it intact for others as follows:

  • Where a joint contract holder has abandoned – i.e. they no longer occupy and they do not intend to occupy the dwelling. The process is very similar to the abandonment process available if the dwelling is wholly abandoned (read more on our ending the contract page).
  • Where the joint contract holder has engaged in prohibited conduct (we will cover this in more detail next time).

Excluding a joint contract holder – by the “Remaining” contract holder

A contract holder can end the rights of the other joint contract holder(s) without ending their own rights if the joint contract holder has abandoned – by serving notice and seeking an order of the court.

The fact a court order is required may mean that in practical terms it is more attractive/effective for landlords to step in use the procedure available to them, provided of course there is sufficient evidence that the departed contract holder has no intention to occupy the dwelling.

Transfer to a successor

A secure contract holder is entitled to transfer the contract to a person who would be qualified to succeed if they died, or if there is more than one to all of them. The landlord’s consent is necessary (but again, consent must be dealt with in accordance with the Act).

When considering consent, the landlord must look at the effect on persons who may be qualified to succeed in the future and the period during which the contract will continue if consent is given – and if the effect will be to lengthen the period during with the contract will last substantially, then it is reasonable to make it a condition of consent that the transferee is treated as a priority or reserve successor. In other words, the right cannot be used to increase the number of effective “successions” to the property.

Documentation on transfer

Q Will a mutual exchange simply mean an amendment to a contract, or will it require a new contract which will prompt a gas, electrical, asbestos check, etc.

> Where a contract is being transferred (i.e. the old style mutual exchange) no new contract is being created, the same contract is ongoing with a change in contract holder. No new checks are required (provided the existing checks are up to date), but we would recommend you send the relevant paperwork to the new contract holder (i.e. the gas safety record and the current EICR) along with the contract itself.

Issuing contracts electronically

Q We were hoping to issue as many contracts as possible via email but am aware we need to get our residents’ permission to receive their documentation this way.

I am hoping to draft a special edition of our residents’ newsletter shortly which will provide some information on the RHAW and allow residents to specify their preferred method of receiving the contract, which will either be by email or post?

Can you confirm that I am ok to do this please?

> Yes – although you will need each resident to “sign up” to receive emails.

The documents may be served by electronic means provided the tenant has indicated a willingness to receive them that way. Hence provided there is an appropriate mechanism for tenants to “sign up” to email notifications, and that you are able to record and evidence each tenant’s agreement that should work.

They may need to make sure that they can receive large documents that way too as it seems likely that the contracts will be sizeable.

Failure to provide contracts

Q What are the repercussions if managing agencies we work with failed to comply with providing the new contracts from 1st December 2022 onwards?

> Contracts must be provided within 6 months for existing (converting) occupiers, and within 14 days for all new. Don’t forget as well as the contracts, there are other documents which need to be provided too.

The two major implications are:

  1. Potential claims in court for compensation/orders as to the contract terms, and
  2. Difficulties ending the contract (particularly if what should be a standard contract becomes a secure one through error).

Whether you would have a claim against your agent for failing to take the proper steps depends on the agreement you have with them, but probably not something you want to consider. It seems sensible to consider bringing tenancy management in house and/or reviewing those arrangements to minimise issues.

Minors

Most landlords will be well aware by now that a contract with a minor (someone under the age of 18) will not be an occupation contract within the Act. However, it is still essential that landlords consider their position and what agreements to use carefully, in order to ensure that when the minor turns 18 things run smoothly.

The options and points to be aware of are:

Jointly grant a contract to a minor and an adult

If a tenancy or licence is granted jointly to a person over 18 and someone under 18, it will be an occupation contract in the normal way from the outset (the “adult” will hold the tenancy both in their own right and as trustee for the minor until the minor turns 18).

No additional steps or considerations are needed.

Grant a licence (carefully drafted)

It will still be possible to grant a minor a licence as is often done now (it must be carefully drafted to make sure it is properly a licence and not a tenancy). When the minor turns 18, all of the usual rules will apply to assessing both whether or not it is an occupation contract, and if so whether standard or secure (so if it is homelessness accommodation, or supported accommodation it may not convert, or if it does, it may be a case where a standard contract can be used).

If it does become an occupation contract, then on or within 14 days of the 18th birthday landlords will need to ensure that a written statement of terms is supplied. Furthermore, if it is to be a standard contract, a s13 notice must be served before it becomes a contract (i.e. before the birthday).

As to the written statement which needs to be served, it is the terms the minor is holding on at midnight on the day they turn 18, which will define the terms of their contract so landlords will need to take that into account when drafting and serving the written statement.

As such, the licence needs to be ready to convert to an Occupation Contract and the written statement later served needs to “fit” the licence terms.

Grant the contract on trust

Many landlords are familiar with the idea that one solution at the moment is to grant a tenancy on trust for the benefit of a minor. A family member, social worker or another appropriate adult can hold the legal interest in the tenancy until the minor turns 18.

The 2016 Act specifically provides that a landlord can opt to ensure that a tenancy granted on trust is an occupation contract by serving notice. Paragraph 1 of schedule 2 deals with a “contract for another’s benefit”, which this is.

The advantage of this option is that it is an occupation contract from the outset, and it puts the minor in the same position as any adult who is given a new home.

A short trust deed is sensible, which makes it clear that the trust falls away on the 18th birthday. The obligation to serve a written statement in circumstances where the identity of the contract holder changes (in s31) probably applies, so a fresh copy of the written statement should be sent to the minor within 14 days of their 18th birthday.

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