Commentary on Sections Part 2 – Prohibitions of Certain Payments Payments in default
28.A payment in default is a payment that is required under a standard occupation contract, as a result of the contract-holder’s “default”. “Default” for this purpose is the failure to make a permitted payment by the due date, or to comply with a contractual term. The result is that a contract-holder can be required by a landlord to make a payment in default.
29.Say, for example, a term of the contract requires the contract-holder to carry out works or repairs such as unblocking a sink and the kitchen is subsequently flooded because this work was not done. The clean up and repair costs for that work might be £200. Provided the contract stipulates that the contract-holder is liable for the costs of repairing damage resulting from failure to comply with a contractual term, a payment of £200 would be required. The £200 will be a permitted payment.
30.In the case of a failure by the contract-holder to pay rent by the due date to the landlord, a payment in default is permitted provided it does not exceed any limit specified by or determined in accordance with regulations. Any excess would be a prohibited payment. The Welsh Ministers may also make regulations to impose a limit in relation to any additional descriptions of default (which are also specified by regulations), so that if the amount of a payment contractually required in the event of the default in question exceeds the prescribed limit, the amount of the excess would be prohibited, although it is required by the contract.