New consumer rights legislation will impact on tenants, landlords and agents

The main elements of the Consumer Rights Act 2015 (the Act) came into force on 1st October 2015. The Act aims to make the laws on consumer protection clearer and easier to understand, saving consumers and businesses time and money.

While the focus of the Act is on provision of goods and services to consumers, it also contains welcome news for private tenants.  This act updates the law on unfair terms in consumer contracts; legislation that also extends to tenancy agreements.  This act provides the statutory framework for the assessment of unfair terms in consumer contracts, which will include tenancy agreements made after 1st October 2015.

The Act also contains provisions requiring letting agents to publicise their fees.  Although this part of the Act does not currently extend to Northern Ireland, a 2013 ruling from the Committee on Advertising Practices already places a requirement on letting agents to disclose fees in all property advertisements. 

Unfair contract terms

The Act provides the statutory framework for the assessment of unfair terms in consumer contracts, including tenancy agreements.

The Act retains the definition of an unfair term used in previous legislation, including the Unfair Terms in Consumer Contracts Regulations 1999.  A term will be unfair if “contrary to good faith, it causes a significant imbalance in the parties’ rights to and obligations to the detriment of the consumer.”

The Act however notes that ‘relevant terms’ are not subject to the fairness test provided they are

• transparent, written in plain and intelligible language; and
• prominent, meaning the terms are brought to the consumer’s attention in such a way that the average customer who is well informed and observant would be aware of them. 

Relevant terms are any term specifying the subject matter of the contract or setting the price.

Existing legislation required that contract terms be transparent.  However, the ‘prominence’ test is a new requirement for businesses. This addition means that agents and landlords will need to be more vigilant in ensuring that ‘relevant terms’ are clear to consumers. Consumers will be able to challenge terms which are

• unfair
• hidden in small print or
• written in unintelligible language.

No more exceptions for individually negotiated terms

Significantly, the Act extends the assessment of unfair terms to include individually negotiated terms as well as standard terms.  Previous legislation excluded these terms from fairness requirements.

An individually negotiated term is one which is not a standard clause in the contract and which has been negotiated between both parties to meet a specific request or requirement. 

The inclusion of individually negotiated terms within the fairness test goes much further than the previous law and European Union law. Although consumers in the general retail world rarely have the bargaining power to negotiate contract terms individually, these can be common within tenancy agreements and may have an important impact on contracts for tenancies. A landlord may, for example, agree to rent to a tenant with two large dogs on the proviso that the property is professionally cleaned at the end of the lease.  The landlord and tenant could agree this arrangement and add it to the standard tenancy agreement as an individually negotiated term.  

A non-exhaustive list of terms which may be regarded as being unfair is included within Schedule 2 of the Act. The list provides a useful indication of the types of terms which are likely to be considered unfair.

Court scrutiny of unfair terms

Significantly, under the Act the court is now under an obligation to consider contractual terms of fairness, even if fairness is not raised as an issue by the parties during proceedings. This will likely lead to increased scrutiny by the courts and, as a corollary, certain terms may be held to be unfair even if the consumer has not complained about them.

This is a further attempt to level the playing field between consumer and trader. This may have particular relevance for landlords, agents and tenants who appear in court on a tenancy related issue.  Landlords and agents should ensure that any standard agreements in use in their business will hold up to scrutiny under this new legislation.  

Positive consumer progress

The legislation encourages transparency, fairness and reasonableness. The new law makes it easier for the average consumer to learn and understand their rights. The strengthening and development of the unfair contract terms provisions is a positive step in dealing with the imbalance in resources and knowledge between tenants and landlords.