Landlords unable to make deposit deductions if using WG’s model Written Statement of Occupation Contract
The Welsh Government was obliged by the Renting Homes (Wales) Act (RHWA) to produce model written statements of contract for the 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. While nobody is obliged to use these model statements, a great many landlords do as it’s freely available and very few others provide alternatives. Even agents have tended to use it, on the assumption that Welsh Government will have the wording correct.
The Housing Act 2004 was also replaced and re-enacted in parts in the RHWA. In particular, its tenancy deposit protection provisions were replaced, although in reality they were recreated nearly word-for-word in the RHWA. As such, 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 contract-holder, 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 a statutory right to make a deduction on the part of a landlord, and RHWA 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 deductions to be made from that deposit 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. Therefore, those using the freely-available model contract 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 can only authorise deductions to be made from a deposit where there is 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 more 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. 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 contract 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 they provided the model contract in accordance with the law. However, that will provide little comfort to landlords.
This is yet another reason why landlords and agents should not be using Welsh Government’s model contract unaltered (read another 10). CPS Homes’ Written Statement of Occupation Contract does, of course, enable landlords to make deductions from the deposit.
Original source: David Smith of JMW Solicitors
At CPS Homes, we've become the go-to agent for landlords looking for ironclad contracts and complete legal protection. Many property owners have come to us after their current contracts fell short, and we've been able to help. If you have any questions or require assistance with reviewing your contracts, please don't hesitate to contact our team on 02920 668585.
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
