What is an occupation contract?
From 1 December 2022, most people renting residential property in Wales (previously known as ‘tenants’, now known as ‘contract holders’) will do so under an occupation contract.
An occupation contract is a new type of residential letting agreement which governs the relationship between a residential landlord and contract holder. As previosut letting agreements (eg assured shorthold tenancies), occupation contracts set out the rights and obligations of landlords and contract holders. For more information, read Tenant's and owner's obligations.
Some important aspects of occupation contracts are:
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all occupation contracts have certain standard terms, which include:
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key matters (eg the names of the parties and address of the dwelling)
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fundamental terms (ie terms covering the most important aspects of the contract, like possession procedures and repair obligations)
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supplementary terms (ie the practical, day-to-day matters of the contract, like the requirement to let the landlord know if the dwelling will be unoccupied for more than four weeks)
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additional terms (ie terms addressing any other specifically agreed matters, like terms relating to pets)
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terms explaining the meaning and importance of the contract
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landlords must provide contract holders with a written statement of the standard terms within 14 days of the moving-in date (ie the date from which the contract holder is entitled to occupy the dwelling, known as the ‘occupation date’)
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landlords must provide contract holders with an Inventory (setting out all fixtures and fittings in the dwelling and their condition) within 14 days of the occupation date
What is the written statement of standard terms?
The written statement of standard terms is a document confirming the key terms of the contract. Landlords must provide contract holders with the written statement within 14 days of the occupation date.
If a landlord fails to provide a written statement, they will have to pay compensation to the contract holder. This compensation is one day’s rent per day the written statement is late, up to a maximum of 2 months’ rent. If the landlord’s failure to provide a written statement was intentional, contract holders can apply to the court to increase the amount of compensation.
Rocket Lawyer's occupation contract templates are written statements for the purposes of the Act and contain the terms that occupation contracts must include.
When should an occupation contract be used?
The Act sets out the types of letting arrangements that are occupation contracts. A tenancy or licence is an occupation contract if:
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rent or other considerations (eg the provision of a service) are payable under the contract
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the contract is entered into between a landlord and at least one individual (who is over the age of 18), and
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the contract grants the individual the right to occupy the dwelling as a home
Exceptions
The Act there sets out certain exceptions to the above. These exceptions include:
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certain tenancies and licences that do not comply with the above can be occupation contracts if the landlord gives notice to the contract holder that this is the case (eg a tenancy where no rent is payable)
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certain tenancies and licences that comply with the above won’t be occupation contracts unless the landlord gives notice to the contract holder that the contract is an occupation contract (eg holiday lets and lodger agreements)
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certain tenancies and licences will never be occupation contracts, even if they comply with the above (eg business lets, lets to those under the age of 18, agricultural tenancies and long tenancies for a fixed term of more than 21 years)
The Act also contains further provisions on contracts relating to homelessness and supported accommodation.
Ask a lawyer if you have any questions.
Types of occupation contracts
The type of letting document a landlord needs depends on the type of landlord they are. Under the Act, there are two types of landlords:
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community landlords (council and housing associations) who typically use secure occupation contracts (or ‘secured contracts’)
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private landlords (any landlord who is not a community landlord) who typically use standard occupation contracts (or ‘standard contracts’)
Standard occupation contracts
These are the standard contracts used for private rented accommodation and will be either for a fixed term or periodic.
Fixed-term standard contracts are those with an agreed-upon minimum term (typically the first 6 months of occupation). At the end of the fixed term:
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the contract holder and landlord can agree on a new fixed term (with the contract holder and landlord signing a new standard contract)
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the contract holder can remain in the dwelling on a periodic standard contract (ie without a new standard contract)
Depending on your situation, you can use Rocket Lawyer's:
- Occupation contract for a house - to rent out a house on a fixed-term basis
- Occupation contract for a flat - to rent out a flat on a fixed-term basis
- Occupation contract for a room - to rent a room in a shared dwelling on a fixed-term basis
If the landlord wishes to end the standard contract, they will need to follow the correct eviction procedure. If a contract holder wants to end the standard contract early, they will need to agree with the landlord or rely on a break clause. For more information, read Ending your tenancy early.
Periodic standard contracts are those which run from rental period to rental period (eg from week to week or month to month). As occupation contracts have no requirement for a fixed term, a contract holder can rent a dwelling on a periodic standard contract from the start.
For more information, see the Welsh Government’s guidance.
Secure occupation contracts
These contracts are used by community landlords and may either be fixed-term or periodic.
While secured contracts may be similar to standard contracts there are different types of secure contracts community landlords may provide to contract holders. These include:
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introductory standard contracts - a 12-month standard period contract designed to allow a community landlord to determine whether a contract holder will be able to sustain a secure contract. After the initial 12 months, the introductory standard contract becomes a secure contract unless the introductory standard contract is extended or brought to an end
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prohibited conduct standard contract - a 12-month contract imposed by the courts after a landlord has applied to end a secure contract due to the contract holder’s anti-social behaviour. The 12 months are seen as a probation period during which the landlord can extend the prohibited conduct standard contract if they remain concerned about the contract holder’s behaviour. After the prohibited conduct standard contract’s term, it typically reverts back to a secure contract
For more information, see the Welsh Government’s guidance.
What about contracts entered into before 1 December 2022?
On 1 December 2022, all existing ASTs and licences (that complied with the requirements for occupation contracts) automatically converted to occupation contracts. For example, fixed-term ASTs automatically converted into fixed-term standard occupation contracts, while periodic ASTs converted into periodic standard occupation contracts. Both letting documents will have the same term. However, contract holders will benefit from the enhanced rights granted by the occupation contract. Existing contracts converted to occupation contracts are known as ‘converted contracts’.
While occupation contracts typically require a written statement to be provided to the contract holders by the landlord within 14 days of the occupation date, this is different for converted contracts. For converted contracts, landlords need to provide the written statement by 1 June 2023 (assuming that, before conversion, tenants had received all documents they must be given under the old law).
For more information on creating a converted contract, see the Welsh Government’s guidance.
If you have any questions or concerns, do not hesitate to Ask a lawyer.
