Occupation contracts in Wales

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 (ie tenancy agreement) which governs the relationship between a residential landlord and contract holder. As previously with letting agreements (eg assured shorthold tenancies), occupation contracts set out the rights and obligations of landlords and contract holders. For more information, read Tenants’ and owners’ obligations.

All occupation contracts have certain standard terms within them, which include:

• key matters (eg the names of the parties and the address of the dwelling)

• fundamental terms (ie terms covering the most important aspects of the contract, such as possession procedures and repair obligations)

• supplementary terms (ie the practical, day-to-day matters of the contract, such as the requirement to let the landlord know if the dwelling will be unoccupied for more than four weeks)

• additional terms (ie terms addressing any other specifically agreed matters, such as terms relating to pets)

• terms explaining the meaning and importance of the contract

Landlords must also 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 the written statement to contract holders 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’).

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 two months. 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:

• rent or other consideration (eg the provision of a service) is payable under the contract

• the contract is entered into between a landlord and at least one individual (who is over 18), and

• the contract grants the individual the right to occupy the dwelling as a home

Exceptions

The Act sets out certain exceptions to the above. These exceptions include:

• 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 for a tenancy where no rent is payable)

• 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)

• 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 sort of occupation contract that a landlord needs depends on the type of landlord they are. Under the Act, there are two types of landlords:

• private landlords (ie any landlord who is not a community landlord) who typically use standard occupation contracts (or ‘standard contracts’)

• community landlords (eg councils and housing associations) who typically use secure occupation contracts (or ‘secured contracts’)

Standard occupation contracts

These are the standard contracts used for private rented accommodation. They will be either for a fixed term or a periodic tenancy.

Fixed-term standard contracts are those with an agreed-upon minimum term (eg the first 12 months of occupation). At the end of the fixed term: 

• the contract holder and landlord can agree on a new fixed term (with the contract holder and landlord signing a new standard contract)

• 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 a standard contract, they will need to follow the correct eviction procedure. If a contract holder wants to end a 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 that 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.

Certain more niche types of standard occupation contracts also exist, including:  

• introductory standard contracts - a 12-month standard periodic contract designed to allow a community landlord to determine whether a contract holder will be able to sustain a secured 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

• prohibited conduct standard contract - a 12-month contract imposed by the courts after a landlord has applied to end a secured 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 ends, it typically reverts back to a secure contract

For more information, see the Welsh government’s guidance on standard occupation contracts.

Secure occupation contracts

These contracts are generally used by community landlords for a periodic tenancy. They are similar to standard contracts, but grant the contract holder stronger protections against eviction. 

For more information, see the Welsh government’s guidance on secure occupation contracts.

What about contracts entered into before 1 December 2022?

On 1 December 2022, all existing assured shorthold tenancies (ASTs) and licences (that complied with the requirements for occupation contracts) automatically converted into occupation contracts. These are referred to as ‘converted 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 contain essentially the same terms. However, contract holders will benefit from the enhanced rights granted by the occupation contract. For more information, see the Welsh government’s guidance on creating converted contracts.

If you have any questions or concerns, do not hesitate to Ask a lawyer.