Legal divergence to continue in Wales in 2021

Now that the new year is upon us, Sian Skerratt-Williams considers a selection of likely legal developments in Wales in two areas: the residential rented sector and property-related taxation. For the residential rented sector, the Renting Homes (Wales) Act 2016 is ground-breaking. It creates a new compulsory framework for renting homes in Wales, requiring tenancies granting individuals the right to occupy a dwelling to take the form of one of two types of prescribed “occupation contract”. The “standard contract” is generally for use by private landlords and the “secure contract” for use by public sector landlords for social housing. Unusually, given the time that has elapsed since royal assent, the 2016 Act is not yet in force, but there is hope for 2021. The Welsh minister for housing and local government stated in August 2020 that the 2016 Act would not be brought into force before autumn 2021 to give the sector plenty of lead-in time to prepare for the new arrangements. However, a subsequent report published in October 2020 by the Equality, Local Government and Communities Committee of Senedd Cymru (the Welsh parliament) includes the statement: “We now expect that all efforts are taken to ensure that the Act is commenced in autumn 2021.” Even if further delayed, it is a question of “when”, not “if”. Time spent by stakeholders over the coming months getting up to speed with the new regime would therefore be time well spent. The legislation is already in the process of being amended. A bill was introduced in February 2020 to increase the security of tenure afforded by the 2016 Act. At the time of writing, the bill is undergoing detailed scrutiny by Senedd Cymru and is expected to receive royal assent in March 2021. Increasing Welsh caselaw? Where legislation diverges, new caselaw inevitably follows. The Housing (Wales) Act 2014 introduced a new system of registration and licensing for landlords and agents involved in letting and managing private residential premises in Wales. Registration and licensing are achieved through Rent Smart Wales. In Jarvis v Evans and another [2020] EWCA Civ 854; [2020] PLSCS 134, the Court of Appeal was asked to consider the scope of that licensing requirement and the consequences of failing to comply with it. In particular, must a landlord have a licence in order to serve a valid notice on its tenants under section 8 of the Housing Act 1988 to recover possession on the ground of rent arrears? The court held that the fact that the landlord was not licensed when he served the notice rendered it invalid. More cases in a similar vein are surely inevitable over the months to come, particularly once the 2016 Act is implemented. Property-related taxation Fully devolved taxes The Wales Act 2014 devolved to Senedd Cymru the power to replace stamp duty land tax and landfill tax in Wales. A land transaction tax and landfill disposals tax came into effect in Wales in April 2018, both collected and managed by the Welsh Revenue Authority established by the Tax Collection and Management (Wales) Act 2016. LTT rates and bands are set by the Welsh ministers and those for 2021-22 were announced in a draft budget on 21 December. Changes include: ν an increase of 1% in the higher rates of LTT applicable on purchases of additional residential property; and    ν increases in the thresholds at which tax is payable on non-residential property. “The changes mean that Wales will have the highest thresholds at which tax starts to be payable on non-residential property transactions in the UK.” It has also been confirmed that the temporary increase to the nil rate band of LTT for residential property transactions in Wales, introduced in July 2020, will end on March 31 2021. Non-domestic rates Non-domestic rates are also devolved and the Welsh finance minister announced on 15 December 2020 that they will not increase in Wales in 2021-22. However, the Welsh government has recently consulted on regulations to reduce the abuse of empty property rates relief in Wales. These were originally expected to take effect on 1 April 2021 but a cabinet statement on 14 January 2021 announced that, in the light of current economic circumstances, their commencement will be deferred until April 2022. Future aspirations The Welsh government wants to be more agile when it comes to devolved tax legislation. A recent consultation, Tax Devolution – enabling changes to the Welsh Tax Acts, sought views on  a proposal to confer regulation-making powers on Welsh ministers to make changes to Welsh tax Acts at short notice in specified circumstances, for example in response to tax policy changes made by the UK government to predecessor taxes such as SDLT. On 21 December 2020 the Welsh finance minister published a summary of the consultation responses in which she welcomed the overall positive response to the principles of the proposal and stated that “…over the coming months, my officials will continue to engage with stakeholders on refining the legislative proposal.” The Welsh government is also keen to explore further tax devolution. The Wales Act 2014 includes a mechanism to enable the creation of new devolved taxes. These could be existing UK taxes which the UK government devolves to Wales or taxes newly created by the Welsh government in areas of devolved responsibility.  In March 2020, a formal request was submitted to the UK government for devolution of legislative competence in relation to a vacant land tax, the first request made under the statutory mechanism. We await the final outcome.  Promise ahead 2021, already a very challenging year for the Welsh government in current circumstances, promises to be busy and potentially trailblazing in these areas. Sian Skerratt-Williams is a knowledge of counsel solicitor, qualified in England and Wales, at Norton Rose Fulbright LLP Photo by REX/Shutterstock