The Renting Homes (Wales) Act 2016 made radical alterations to the renting of residential property in Wales. Many of those changes are still not fully understood and are only starting to become clear as more Renting Homes Occupation Contracts progress through their lifespans. I have written extensively on Renting Homes (including the only book on the subject!) but have recently become aware of an entirely new problem.

The Welsh government was obliged by s29 of the Act to produce model written statements of contract for various types of occupation under the Act. This was because the Act requires very specific and detailed wording as to the form of occupation contracts. The Welsh government duly did as the Act required. While nobody was obliged to use these model statements a great many landlords did so as it was freely available and few others were providing alternatives. Even agents have tended to use it and those produced by others have often used the model contracts as a template or lifted chunks of wording wholesale. This is not entirely due to laziness but rather on the assumption that the Welsh government will have the wording correct and it would be difficult for a court to say that a landlord who had used the model contract provided had not complied with the law.

The Housing Act 2004 was also replaced and re-enacted in parts in the Renting Homes (Wales) Act. In particular, the tenancy deposit protection provisions were replaced, although actually they were much the same. Deposit protection schemes have continued to exist in Wales and they are the same schemes as in England operating in largely the same way. That is to say that in the event of a dispute between landlord and tenant (or contract holder in Wales) the scheme takes charge and adjudicates that dispute by way of a review of the terms of the contract and the evidence that supports the deductions being made. What is key here, in both England and Wales, is that the underlying basis of the deposit deductions being made and adjudicated on are contractual, there is not statutory right to make a deduction on the part of a landlord, and Renting Homes did nothing to change that.

And this is what creates the problem. The Welsh government’s model agreement specifies obligations on the part of contract holders and it specifies that a deposit can be taken. But nothing in the model contract permits for that deposit to be deducted from to meet losses incurred by a landlord due to a contract holder’s breaches. There would be a civil claim in court for those losses but no clear wording exists that permits the money to be deducted. For some this is irrelevant as they will be using their own custom versions of an occupation contract which will have such provisions in. But a great many landlords will simply be using the freely-available model agreement and will be shocked to find that they have no basis to make any deductions at all.

Some deposit schemes are aware of this issue and are starting to refuse deposit claims where no appropriate wording exists. Landlords may feel that the schemes should take a more relaxed approach but their hands are tied. They cannot make deductions from deposits other than on the basis of a clear right to do so otherwise they would be acting unlawfully themselves. This is a problem which will only get worse as more contracts end and landlords seek to make deductions.

The only true solution is in the hands of the Welsh government. They firstly need to fix the model contract so that it deals correctly with deposit deductions. However, that cannot fix the contracts already in use and to deal with this the only option would be to make an urgent amendment to the Renting Homes (Wales) Act itself to permit deposit deductions to be made irrespective of wording in the contract or to imply such a term into a contract regardless of its existence. The Welsh government might of course do nothing and simply say that it the model agreement was there for people to use but they never made any specific warranty as to its suitability or effectiveness. The lack of such a clause does not breach the Act and the Welsh government can legitimately say that the model agreements they provided accord with the law. However, that will provide little comfort to landlords.