Unfair terms in tenancy agreements:
A guide for tenants
The ‘Unfair terms in consumer contracts regulations 1999’ provides guidance on what is and isn’t fair in any contract.
This article will be useful to tenants who wish to clarify their current legal position and check what action to take for redress.
If you are a landlord and need guidance on the regulations and hints for compliance, you might like to read Unfair Tenancy terms – a guide for landlords.
- The regulations apply to consumers only. The regulations do not apply to lodgers.
- The regulations do apply to land and do apply to public authorities such as a local council.
- A consumer is a person not acting in the course of their business. These regulations only apply to consumers.
- The consumer is not bound by the contract if it includes unfair terms.
- A term is unfair if it gives excessive power to the landlord, at the expense of the tenant.
- The regulations do not cover rent specifically, or the terms defining the product.
- The contract should be written in plain English.
- Each party has rights and responsibilities. These rights cannot be removed, even if the contract says they can. Clauses exempting or limiting liability are difficult to enforce.
Why introduce these regulations?
The changes have been made in order to protect you, the consumer. The way contract are drafted today, compared to ten years ago is vastly different. Contracts with complex small print, which carefully exclude the landlord’s liability, are now open to enforcement action, and may prove to be unenforceable.
How will this affect me?
Your rights as a consumer / tenant are better protected by the regulations. However, you must still read through a contract before you sign or agree to it. You might have to read and re-read a contract before you sign it. This may take some time in order for you to fully comprehend all the terms. If you still do not understand the terms after reading it thoroughly, you should contact the landlord and ask them to explain the meaning and if necessary, re word the contract so that you do understand it. It is the landlord’s responsibility to ensure that there are no unfair terms in the agreement.
What is an unfair term – test of fairness?
A term is classed as unfair if it causes an in balance in the parties’ rights and responsibilities, to the detriment of the tenant. An unfair term will give excessive power to the landlord. The regulations apply to all standard terms. A standard term is one which has not been individually negotiated. A term that has been individually negotiated, such as those regarding price, or the details of the property, are called ‘core terms’.
A tenancy agreement requires that the landlord has drawn the terms in good faith – i.e. that they are in plain, easy to understand English, and are clear and accessible. This is called transparency. A term which is written in small print, at the end of the contract, is not transparent. The landlord must also make sure that s/he does not take advantage of the tenant’s weaker bargaining position, or their inexperience.
Examples of unfair terms:
Terms may be unfair if it makes the tenant:
- pay excessive interest for late payments
- pay extra penalty charges for late payments
- give the property back in a better state than it was given over in
- pay for unreasonable costs that should be covered by the landlord
- pay for landlord’s repairs
Or if it:
- allows the landlord to decide what the tenant should pay
- allows the landlord to visit without proper notice
- allows the landlord to decide how much of the initial deposit he keeps
- limits or excludes the landlord from liability
Landlords cannot exclude or limit liability
Exclusion clauses are not looked upon favourably with either the OFT or the courts.
Any term which seeks to reduce or exclude liability of any kind is an unfair term. Terms which exclude liability for death are unfair.
- The landlord should always maintain common areas of the property in a reasonably safe way and has a duty of care to all tenants and their visitors. The landlord’s duty of care is not to keep the building safe, although this is recommended, but to keep the tenants and visitors safe.
Excluding / limiting liability under these circumstances is unfair. The landlord cannot exclude themselves from their responsibilities. This is especially so for the responsibility of personal injury or death.
- Terms that exclude or limit liability “as far as the law permits”, or “save as may be prohibited by statute” are also unfair. As well as unfair, they are not clear – the average tenant is not going to have an understanding of the statute that relates to tenancy contracts.
- A landlord cannot exclude or limit liability for repairs which by law, they should carry out, nor can they charge ‘call out’ charges in order to repair something that is by law, their responsibility.
Terms excluding the right of “set-off”
“Set-off” means that a tenant is allowed by common law to make necessary repairs to the property and then “set off” the associated costs against their rent payments. Any clause which limits this is unfair.
Pre contract deposits and ‘security’ deposits
A payment to the landlord before the tenancy agreement has been signed is likely to be unfair. Once the agreement has been signed, a ‘security’ deposit is frequently asked for by the landlord, in case the tenant damages the property and will not agree to pay for the damage. This is fair, so long as there is no term stating that the refund of the sum will not be provided where the property is returned in the same quality it was received in.
Refund of pre-payments
A pre-tenancy agreement usually requires the tenant to provide a sum of money to the landlord. If the agent or landlord decides to cancel the agreement, a term stating that the tenant is not allowed the pre-payment returned to them is an unfair term.
A landlord is not allowed to increase the rent without prior notice or agreement from the tenant. The tenant always has the choice not to agree to the increase – this will end the contract.
Rent increases are only fair in certain circumstances.
- Any rise in line with RPI is acceptable.
- Any rise that has been previously agreed in the contract is acceptable
- A price variation clause, outside the landlord’s control, such as an increase in council tax, is usually fair. The landlord must be able to justify the rise.
Any rent review must be given with enough time for the tenant to provide the extra rent. This varies from property to property. One month’s notice is usually suffice.
There must be a term in the contract that states that where there is an increase in the rent; the tenant must be given enough time to leave the property before the increase takes place if the tenant chooses. However, this does not mean that the increase is fair.
The advice of an independent valuer is always useful in times of disagreement. They could state whether a rent increase is acceptable or not.
There are standard terms that will always be unfair. Examples can be found above. You can get assistance with resolving your problem in a number of ways. Ultimately, it is for the courts to decide whether a term is unfair or not. Net Lawman tried to avoid court for any party, at all costs. We therefore advise you to:
- read through all contracts carefully
- make sure you understand all of the terms
- ask for the term to be re-worded if you do not understand it fully
If you believe a term in your contract is unfair, it is your responsibility to address it. You should discuss it with your landlord and if you can’t resolve it between yourselves, you can report it in writing or by email to the Office of Fair Trading (OFT).
The OFT, must consider each complaint they receive. If they believe the term to be unfair, they will take action in order to stop the unfair term. If the term is not removed from the contract, the OFT can take the landlord to court. The court may make an enforcement order against the landlord. This means that the landlord will have to amend the contract to expel the unfair term.
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