Do Welsh contract holders need to sign their contracts before they move in?

I recently attended a webinar on the new Welsh housing laws run by the National Association of Residential Landlords. And there was a piece of advice given at that webinar (not by the NRLA staff, I hasten to add) which shocked me.

It was that landlords do not need to get contract holders to sign their contracts.

It is enough, the gentleman from the Welsh government said, to give it to them, within 14 days of the start of their ‘occupation contract’.

Which, now I come to think of it is what is set out in the legislation in regulation 31. If landlords don’t do this, the tenant is entitled to compensation of up to two months’ worth of rent, depending on how long the landlord delays in giving them their contract.

Regulation 32 sets out what needs to be included, ie.

• The names of the parties
• The key matters
• The fundamental terms
• The supplementary terms, and
• Any additional terms.

All well and good. The legislation makes it mandatory for landlords to provide written contracts to their contract holders.  Something that people have been asking for, for a long time.

So if landlords give contract holders written statements (which do not need to be signed by contract holders) within 14 days of moving in, they will avoid the penalty.

But what about the enforceability of those written statements?

The Law of Contract

As every law student knows, there are three elements to a contract:

• Offer
• Acceptance, and
• What lawyers call ‘consideration’

‘Consideration’, by the way, is nothing to do with being considerate; it means something of value which needs to be exchanged. So with an occupation contract, the consideration from the contract holder is the rent, and the consideration from the landlord is the right to occupy their property.

A contract is concluded once the offer has been accepted, so long as there is consideration passing between the parties.

However, it is also an important rule in contract law that parties are told all the terms of that contract at the time it is made. You can’t make a contract with someone and then tell them what the terms are afterwards.

This is set out in a case with Lord Denning from 1971, Thornton v. Shoe Lane Parking.

In this case, a ticket given to the driver at the barrier said “This ticket is issued subject to the conditions of issue as displayed on the premises”. The terms and conditions were then set out on a notice inside the car park.

Lord Denning held that by then it was too late. The contract had been concluded at the barrier, before the driver had had an opportunity to read the terms and conditions.  Parties, he said at the end of his judgment, must be given

a fair opportunity, before the contracts are made, of discovering the conditions by which they are to be bound.

So those terms and conditions were not incorporated into the contract.

So how does all this apply to the terms of occupation contracts?

It is clear from Part 2 of the act that fundamental and supplementary terms, which are set out in either the main legislation, subsequent regulations or (presumably) model contracts prescribed under regulations, will apply to all contracts.

So as far as those are concerned, it does not matter when the contract holder is told about them. They will be bound no matter what.

But what about the additional terms?

The Welsh government can do a lot, but it can’t change the law of contract.

It can say that landlords can serve ‘written statements’ of contract on contract holders after they have moved in, but they can’t make any of those terms enforceable – unless they are fundamental or supplementary terms as per the regs.

So any additional terms will need to be agreed by contract holders at or before the contract is made, i.e. before they move into the property.

Or they will not be enforceable or indeed part of the contract.

So, what sort of additional terms are we talking about?

Is this something landlords should worry about? Yes, it is!

For example, in my view, the following additional terms are essential.

• A term providing for the rent to be paid in advance (under common law rent is payable in arrears)
• A term setting out the circumstances under which the deposit can be retained by the landlord (I discuss this in this post)
• A term providing for the contract holder to occupy the property as their only or principal home – as otherwise, landlords cannot use the abandonment procedure set out in the Act, and
• A term prohibiting pets. Or, if pets are allowed, terms relating to this (such as requiring the contract holder to look after it properly and ensure it does not cause a nuisance to neighbours)

These are just a few examples of the additional terms which landlords MUST have in their contracts.

But if a landlord hands a written statement to their contract holders after they have moved in containing any of these, they will not be enforceable. As the contract holder will not have had an opportunity to see or agree to them.

And even if they have seen and agreed to them – how is the landlord going to prove this unless he has a signed written agreement, signed before the contract takes effect?

I have to say that I am concerned that the Welsh Government seems to be encouraging landlords to give written statements to their contract holders, without getting them to sign them first, and saying it is all right for them to be given after the contract holders have moved in.

Because if landlords do this, it could be very much to their detriment.

There is something else that bothers me.

Do contract holders need to apply to the Court?

Regulation 37 of the Act provides for contract holders to be able to apply to the Court for a declaration if the written statement contains terms which are not a term of the contract.

However, I would question whether this is actually necessary.  Particularly as court proceedings, particularly for this sort of thing, can be long drawn out and expensive.

If a term is not a term of the contract, then it’s not a term. The court declaration is just setting out something which is already the case. It does not actually affect the agreement.

So if a landlord hands a written statement to their contract holders 13 days after they have moved in, which includes a clause saying that they can’t keep any pets, then this clause will not be effective or enforceable.

Unless maybe the landlord can show an exchange of emails where it is clear that this term was made clear and agreed to by the contract holder.

Agreement by the contract holder is essential. Which is why signature of the contract is so important.

And finally

If you are a landlord

Ignore anything you are told about being able to hand the written statements to contract holders after they have moved in. ALWAYS insist on your written contract being signed before they are given the keys.

If you are a contract holder

If your landlord gives you a contract after you have moved in, you can probably ignore all the additional terms (unless they are in your favour), as if you did not know about them or agree to them, you cannot be bound by them.