Can Tenants in Wales Withhold Rent if Landlords Fail to Provide Electrical Safety Reports?
Author: Alun Edmunds
Key Contact: Jennifer Butcher
The Divisional Court has clarified that contract holders in Wales can withhold rent during any period of occupation where their landlord has not provided them with a copy of a valid electrical condition report (“ECR”). The ruling applies to both the social housing and private rented sectors and will potentially have huge financial consequences for some landlords.
Background
The Renting Homes (Wales) Act 2016 (“the Act”) came into force on 1 December 2022. It replaced the landlord and tenant regime in Wales and introduced entirely new concepts and provisions designed to ensure, among other things, that rental properties are fit for human habitation.
Pursuant to Section 91 of the Act, landlords under secure contracts, periodic contracts or fixed term contracts for a term of less than seven years must ensure that the dwelling is fit for human habitation. Whether a dwelling is fit for human habitation or not is determined by reference to the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022 (“the Regulations”).
Under the Regulations, landlords must ensure that there is a valid ECR in respect of the dwelling during each period of occupation and, within 14 days of the occupation date, provide the contract holder with a copy of the most recent ECR.
The Renting Homes (Supplementary Provisions) (Wales) Regulations 2022 (“the Supplementary Provisions”) provide that contract holders are not required to pay rent in respect of any day or part day during which the dwelling is unfit for human habitation. As the name suggests, this is a supplemental provision, meaning that it can be excluded from the occupation contract by agreement between the landlord and contract holder. Landlords and tenants alike should therefore check whether they have agreed to exclude the supplemental provision relating to withholding rent in their occupation contract.
Coastal Housing Group Ltd (“Coastal”) and others v Mitchell and others [2024] EWHC 2831 (CH) is the first reported decision on the interpretation of the Act. Here, test cases were brought before the court where the landlords had obtained valid ECRs which determined that the dwellings were fit for human habitation, however they only provided the contract holders with a copy of the ECRs several months after they were supposed to under the Regulations.
Coastal and three other community landlords sought declarations from the court as to the consequences of these shortcomings.
The court’s ruling
The court confirmed that a failure to provide a contract holder with a copy of a valid ECR is a breach of the electrical safety provisions in the Regulations. Such a breach of the Regulations will result in the dwelling being automatically deemed to be unfit for human habitation under the Supplementary Provisions until such time that the landlord provides the ECR to the contract holder.
In the test cases before the court, the occupation contracts incorporated the Supplemental Provisions relating to withholding rent. Consequently, the court held that rent was not payable for the period in which the dwelling was deemed unfit for human habitation as a result of the failure to provide a copy of the ECR to the contract holders. This is irrespective of the fact that ECRs had been obtained confirming that the dwellings were safe and free from any electrical defects.
This clarifies that whilst late provision of a copy of the ECR to the contract holder will have the effect of lifting the ‘unfit’ tag and rent falling due again, it will remain the case that rent is not be payable for the period in which the contract holder was without a copy of the ECR.
The court considered that this provides contract holders with a simple and effective means of encouraging landlords to comply with the legislation and swiftly remedy any breaches.
Looking ahead
The court did not clarify what happens where the contract holder has nevertheless paid their rent during periods when the dwelling would be deemed unfit for human habitation simply because of them being unaware that they had the right to withhold rent.
This is the position of the contract holders in this case who have all pleaded counterclaims in restitution and equitable set-off. These counterclaims are due to be listed for hearing later in 2025 where the court will determine whether the contract holders are entitled to a refund of the rent paid during periods where the dwellings were unfit for human habitation.
The landlords in this case intend to raise an argument that the Regulations unlawfully interfere with their property rights under the European Convention on Human Rights, however the court will not determine these arguments until it deals with the counterclaims later this year.
If the court does determine that the contract holders are entitled to such refunds, the financial consequences for Coastal and the other community landlords in this case, and many other private and social landlords, are likely to be substantial.
The main takeaway from this ruling is that landlords must swiftly remedy any breaches that render a dwelling unfit for human habitation. Failure to do so could result in periods of rent being withheld where the relevant Supplemental Provisions are incorporated and, where these breaches are repeated across even a small portfolio, the financial consequences could be severe. Landlords should also pay close attention to the court’s determination of the contract holders’ counterclaims later this year. If the court finds in the contract holders’ favour, it potentially opens the door for huge numbers of claims for refunds by contract holders in respect of past breaches.