Diversification of property law in Wales: things to consider if you are looking to expand your portfolio across borders

With changes coming through thick and fast in the property sector, there is no place where this is becoming more apparent than with our Welsh neighbour.

When considering purchasing property in Wales, it is often easy to overlook discrepancies between the two legal systems which, as they increase, will necessitate extra due diligence to ensure that you have not missed any (potentially unknown) regulatory requirements governing Welsh property transactions.

We have, therefore, prepared an overview of some of the key existing and upcoming areas where English and Welsh property law diverge, that investors should be aware of when exploring the possibility of cross-border expansion within their portfolio.

What are the areas of new divergence between property laws in England and Wales?

Renting

From 1 December 2022, substantial changes are being made by the Renting Homes (Wales) Act 2016, which will see a new framework for the way that rented homes in Wales are let, managed and occupied.

For landlords, these changes will result in:
•    The introduction of a simpler renting system, limited to two types of contract – “secure” contracts for social renting and “standard” contracts for private renting. Many existing tenancies will “convert” to standard contracts
•    Changes to the grounds for possession and to notice periods given for no fault evictions. Notice periods of 6 months are required and, on the basis of a recent consultation, it seems likely that a 6 month notice period will also be brought in for existing tenancies that convert to standard contracts when the Act comes into force;
•    An increasing emphasis on ensuring that all homes are fit for human habitation, including focus on electrical safety testing and the working order of smoke alarms and carbon monoxide detectors within rented properties;
•    The ability to regain possession of abandoned rental properties without the need for a court order.

The changes will not just affect new lettings, existing lettings will be converted as well.

As evidenced above, it is essential that all landlords are preparing to take steps to ensure their properties are regulation-compliant when the new law kicks in.

What are the areas of existing divergence between property laws in England and Wales?

Planning

The planning rules in Wales have been diverging from those in England since 1999, when the majority of legislative powers in the then current planning law were devolved to the National Assembly for Wales (and now sit with the Welsh Ministers).

The increasing differences have become particularly apparent in relation to the categories of uses assigned to land and buildings, known as use classes. Whilst England and Wales both follow the basic premise established by the Town and Country Planning (Use Classes) Order 1987, substantial amendments were made to the Order by England via the Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 (SI 2020/757) revoking a number of the original main categories of use classes from 1 September 2020. This change did not apply to Wales, and therefore the designation of use classes available between England and Wales is now markedly different, as shown in the table below, which highlights some of the areas of divergence.

England and Wales are also adopting an increasingly different approach to permitted development rights, being rights to make changes to land and buildings without planning permission. The introduction of the Town and Country Planning (General Permitted Development) Order 2015 has seen English planning law veer off in a different direction.

The divergence is only likely to increase. As part of an effort by the Welsh Government to consolidate the existing law of Wales, the wheels are in motion for a Consolidation Bill which simplifies and modernises planning law in the region. Following the publishing of the Law Commission’s Report on Planning Law in Wales in November 2018, which recommended the introduction of a new planning code in Wales to bring the various provisions of existing legislation into a single statute, property developers will need to keep their ears to the ground to make sure they are aware of any implications these changes may have for their future development plans.

Whilst the focus appears to be on the consolidation of existing law, rather than any substantial change to their contents, the Bill is only a starting point in the grander scheme of diversification of Welsh law that is afoot.

Tax

Stamp Duty Land Tax (SDLT), a tax payable on property purchases, has been replaced in Wales by the Land Transaction Tax (LTT). This change took effect from 1 April 2018. Whilst the taxes are applied in a similar way, the bands at which the tax rates increase in line with the value of property are distinct from one another, as exemplified in the summary table below relating to non-residential property purchases.

Take extra care if you are thinking of entering into a cross-border transaction. Divergence is only likely to increase as time goes by. If you have any questions about the points raised in this article, please get in touch info@ts-p.co.uk.