Occupation Contacts

Cathrine Grubb provides guidance on which agreements will be occupation contracts under the Renting Homes (Wales) Act 2016 and which will not.

The Renting Homes (Wales) Act 2016 (‘RH(W)A 2016’) implements a number of changes. The most significant of which is the abolition of many of the old forms of tenancy replacing these with statutorily regulated occupation contracts.

General Rule

From 15^th July 2022, most tenancies and licences under which people rent their homes will be occupation contracts. Unless certain exceptions apply, the tenancy or license will be an occupation contract if:

1. it is made between and landlord and at least one individual over the age of 18;
2. the contract gives at least one of the individuals who are party to the contract the right to occupy a dwelling as a home; and
3. someone is paying rent or other consideration in exchange for the individual’s right to live in the dwelling.

This general rule set out in section 7 of the Act, is subject to certain exceptions/ modifications.

• Some agreements not meeting all of the criteria above can still be occupation contracts provided the landlord chooses to make it an occupation contract by giving notice [Exception 1].
• Some agreements meeting all of the criteria above are automatically excluded from being occupation contracts, unless the landlord gives notice. [Exception 2];
• Some agreements meeting all of the criteria above can never be occupation contracts [Exception 3].
• Some agreements meeting all of the criteria can be occupation contracts, but special rules apply [Exception 4].

In all cases, the landlord’s notice that the agreement is to be an occupation contract needs to be given on or before the contract is made.

Exception 1: Agreements not meeting the requirements of 7(1) – (3) that can still be Occupation contracts if notice is given:

Contracts where no rent/consideration is payable or where the contract gives rights to occupy the dwelling on an individual (‘beneficiary’) other than the person with whom the contract is made, will not automatically be an occupation contract. Such agreements will only be occupation contracts where the landlord chooses to give notice that they shall take effect as such: para 1(2) Sched 2. This landlord’s notice stating the agreement is to be an occupation contract has to be given to the contract holder on or before the agreement is made to be effective: para 1(3) Sched 2.

Notice will not be sufficient to make an agreement an occupation contract which both confers rights on a beneficiary and there is no rent/consideration payable in exchange for the right to occupy: para 1(2) Sched 2.  

Where an occupation contract involves a beneficiary, fundamental provisions can generally only be modified or not incorporated if the beneficiary also agrees and the change is to their benefit: para 2(4) Sched 2. The notice specifying the agreement to be an occupation contract can also ensure that certain provisions should apply as if references to the contract-holder were references to the beneficiary by stating that in the notice.

Exception 2: Contracts meeting the requirements of Section 7 that will not be occupation contacts unless notice is given:

Paragraph 3(2) of Schedule 2 RH(W)A 2016 sets out the tenancies and licences which, are not occupation contracts unless notice is given by the landlord, notwithstanding that it otherwise meets the requirement of s. 7:

• Occupation for the purpose of a holiday.
• Accommodation in a care institution
• A tenancy or licence made as a ‘temporary expedient’: which is made with a person who was a trespasser when they entered the dwelling.
• Accommodation that is shared with the landlord – for example, where the landlord takes on a lodger.

The landlord’s notice stating the agreement is to be an occupation contract has to be given to the contract holder on or before the agreement is made to be effective.

Exception 3: tenancies and licences that can never be occupation contracts

The following can never be occupation contacts:

• Long leases, including:
  • A tenancy that was agreed at the outset to be for more than 21 years.
  • Where there is an obligation /covenant to perpetually renew the lease.
  • A tenancy made under the right to buy under Part 5 of the Housing Act 1985 or right to acquire under s. 17(2) of the Housing Act 1996.
  • Unless it is a tenancy that can be terminated by notice after death.
  • Shared ownership tenancies: where a dwelling is owned by a registered social landlord and the tenant has purchased a percentage of the property on a leasehold basis and pays rent on the un-owned share. Further shares of the un-owned part can be purchased until potentially the tenant owns the entirety of the interest.

• Where premises are occupied in part for the purpose of carrying on a business in the premises: a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies.

• Agricultural Occupancies are a specialised and particularly complex area, with a unique political history. A particular feature of the system is the inter-relationship between the tenure scheme and regulations of agricultural wages, which makes their inclusion as occupation contract inappropriate. The following are excluded from being occupation contracts:
• A tenancy of an agricultural holding defined by the Agricultural Holdings Act 1986.
• A farm business tenancy within the meaning of the Agricultural Tenancies Act 1995, land must be farmed throughout the life of the tenancy to qualify.
• A protected occupancy or a statutory tenancy within the meaning of the Rent (Agriculture) Act 1976.

• Tenancies under the Rent Act 1977 (protected tenancy, statutory tenancy or secure housing association tenancy). Logically there is little reason why these tenancies should not also be included in the reform. With rare exceptions, no new Rent Act protected tenancy has been able to be created since the Housing Act 1988 came into force (15th January 1989). With the population of these tenants ageing, those representation these tenants were very vocal in their concerns that tenants may become confused about their rights and landlords may take advantage. The decision to exclude these forms of tenancy was largely a political one. 
• Armed forces accommodation: accommodation provided to a member of the armed forces, to a family member of a member of the armed forces or to a civilian subject to service discipline for the purposes of any of the armed forces.
• Direct access accommodation: accommodation provided by a community landlord or a charity registered with the Charity Commission, which is provided for 24 hours or less to people who satisfy criteria set by the landlord. This will commonly require the person to have an immediate need for accommodation.

Exception 4: Homelessness and Supported Accommodation

Homelessness

Interim accommodation provided by a local housing authority in accordance with duties to house homeless persons under s. 66 of the Housing (Wales) Act 2014 cannot be an occupation contract: para 11 Sched 2 RH(W)A 2016. This interim duty under s. 66 arises while the local authority carries out an assessment under s. 62 Housing (Wales) Act 2014 to consider whether the applicant is actually owed a full duty to be provided with accommodation under s. 73.

Once the authority is under a full duty to secure accommodation on a long term basis this will be by way of occupation contract: para 11 Sched 2. The contract holder will continue to occupy the premises under an application contract where the s. 73 duty comes to an end where s. 75(1) applies: para 11 Sched 2.

Paragraph 12 Sched 2 sets out the rules that apply where a local housing authority enters into arrangements with another landlord in discharging its homelessness functions.

Supported Accommodation

This is accommodation provided either by a community landlord, registered charity or accommodation in a care institution and connected to support services received by that person: s.143. Usually the occupation will be intended to last for no more than 6 months. Supported services include support in controlling or overcoming addiction, finding employment or alternative accommodation and supporting someone who finds it difficult to live independently.

If the landlord intends the accommodation to not be provided under an occupation contract, it will not be an occupation contract: para 13(1) Sched 2. It is worth noting that, unlike the rules in the other exceptions, paragraph 13 does not set out a notice requirement. Landlords may nonetheless consider that giving notice would insulate against any legal risk.  

Supported accommodation will automatically become an occupation contract six months after the tenant is first entitled to occupy the dwelling, unless the landlord chooses to extend the initial 6 month period under para 15 Schedule 2.

Civitas Law is running seminars for Community Landlords on 5^th and 6^thApril 2022. To book your place please contact clerks@civitaslaw.com

Cathrine Grubb is on the Lexis Nexis panel of experts for Wales. Her Practice note on secure contracts will be published on Lexis PSL in the next few months.