Updated converted contracts guidance for landlords in Wales
For the last couple of months, the NRLA has advised members to wait before renewing converted contracts or issuing the written statement of the original contract. This was because we expected further legislation amending the converted contract rules to come into force before May 31st.
The Welsh Government has now published this draft legislation which makes a number of important clarifications to clear up the grey areas around Schedule 12. These clarifications do mean more work for landlords though. NRLA Policy Manager James Wood explains what landlords in Wales need to know.
Which contracts are affected by the changes?
If your contract-holders moved in before 1st December 2022 you must comply with these regulations.
If your contract-holders moved in on or after 1st December these changes have no impact on you. Similarly, if your contract-holders left before May 31st 2023 you should not need to issue the converted written statement to them.
What does the legislation mean?
If you have done nothing yet - Issue the written statement for the original converted contract by May 31st. From June 1st you may need to issue a statement of variation explaining the changes to one of the fundamental terms.
If you have issued the written statement for the original converted contract and it is still ongoing – You won’t need to do anything yet but between June 1st and June 14th, you may need to issue a statement of variation explaining the changes and provide the statement to any replacement contract-holders.
If your original converted contract has been replaced by a new contract – You should issue the written statement of the original converted contract by May 31st. You will then have until June 14th to provide the written statement of your replacement contract.
What happens if I don't issue the written statement in time?
If you provide the statement late, you can lose access to the Section 173 notice for up to six months after service. In addition, the contract-holders can potentially receive financial compensation from you.
There are also financial penalties for providing an incomplete or incorrect written statement but these penalties require the landlord to have intentionally provided the wrong terms. As a result, it is far safer to try and provide a written statement, even if you get it wrong, than it is to not provide one at all.
How do I prepare a converted contract written statement?
To help assist our members with preparing their converted contracts, we have produced a number of conversion documents and updated our conversion guidance with step by step instructions on converting your old tenancy agreement and downloadable templates.
For NRLA members who used the 2021 AST, we have released conversion documents that have already been converted. You will just have to insert the details from your old contract into the document before emailing it to your contract-holders. This document is editable so landlords with addendums can also use this document. Though you will have to check your additional terms by following the conversion guidance.
For members who did not use the 2021 AST we have produced a template for the fixed term and the periodic contract that includes the necessary changes to the fundamental and supplementary terms for converted contracts. You will still need to check it against your own tenancy agreement and add or remove certain clauses by following the guidance.
What should I do if I am unhappy with the terms of the converted contract?
After going through the conversion process you are likely to find that the contract terms are unsuitable for you, particularly if the contract was in the fixed term on December 1st 2022. Many of the fundamental or supplementary terms inserted by conversion leave landlords exposed to more risk than is necessary.
Similarly, there are risks that the terms of the converted contract may be considered incomplete or incorrect. The conversion process is not straight forward and it is not always clear which terms are retained.
As a result, you may wish to move off that contract and replace it with a renewal on agreed terms from 1 June.
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Take a look at more Renting Homes (Wales) Act resources here, and be sure to register for our free webinar on Monday 22 May at 6pm.