Wales Scraps Plans for Section 173 Compensation

The Welsh Government has recently announced that it will no longer pursue the controversial proposal requiring landlords to pay tenants compensation equivalent to two months’ rent when serving a Section 173 possession notice. This decision marks a significant development in the ongoing discussions surrounding no-fault evictions and tenant protections under the Renting Homes (Wales) Act 2016.

Background on Section 173 Notices

Section 173 of the Renting Homes (Wales) Act 2016 provides landlords with a legal mechanism to regain possession of their property without needing to prove fault on the part of the tenant. Often described as a ‘no-fault’ eviction notice, it allows landlords to end an occupation contract by giving the contract holder six months’ notice.

The Proposed Tenant Compensation Plan

In late 2024, the Welsh Government proposed new legislation that would require landlords to pay tenants compensation equivalent to two months’ rent upon issuing a Section 173 notice. This proposal was intended to provide additional financial support to tenants facing eviction through no-fault notices, helping them manage relocation costs and mitigate the disruption caused by losing their home.

The compensation plan was part of a broader effort to strengthen tenant protections and improve security of tenure in the private rented sector. However, it quickly attracted mixed reactions from landlords, letting agents, and housing professionals, who raised concerns about the potential financial impact and practical challenges for landlords.

For a detailed overview of the original proposal and its implications, see our previous article: Landlords face relocation tax for no-fault evictions.

Reasons for Scrapping the Plan

Following extensive consultation with stakeholders, including landlords and industry representatives, the Welsh Government has decided not to proceed with the compensation requirement. Feedback highlighted concerns that mandatory compensation payments could discourage landlords from letting properties or lead to increased rents to offset the additional costs.

What This Means for Landlords and Contract Holders

For landlords, the scrapping of the compensation plan means the continuation of the current process for serving Section 173 notices without the added financial obligation of paying relocation compensation. This maintains the status quo, allowing landlords to manage their properties with clarity and certainty.

For contract holders, while the compensation plan will not be introduced, the protections under the Renting Homes (Wales) Act 2016 remain in place. Contract holders are still entitled to the notice periods and legal safeguards associated with Section 173 notices.

Conclusion

The Welsh Government’s decision to drop the tenant compensation plan linked to Section 173 notices is a notable development in the evolving landscape of rented housing in Wales. It highlights the complexities of policy-making in the private rented sector, where the interests of tenants and landlords must be carefully weighed.

For further information on the original proposal and its context, please visit: Landlords face relocation tax for no-fault evictions.