Tenants are Consumers?

Landlords beware! Do you let properties as part of your business? Did you know as a result of a recent Court of Appeal decision you must avoid unfair terms in your tenancy agreements?

The Unfair Terms in Consumer Contracts Regulations 1999 can apply to your tenancy agreements. If it does, you must ensure the agreement is drafted without any “significant imbalance” in your own, or more unusually, the Tenant’s rights. The Regulations mean that terms in tenancy agreements must be fair and clear. The requirement for clarity is simple. If it is not sufficiently clear what a clause is intended to achieve, it will be construed in the Tenant’s favour. It is more difficult, perhaps, to determine what is “fair”. More importantly, you may wonder how it will affect you, the Landlord, practically.

Well, a common clause found in tenancy agreements is a “no set-off” clause. That allows a Landlord to apply for possession on the grounds that rent is unpaid whilst preventing a Tenant from relying on a claim for damages for disrepair to avoid payment of the rent. The Regulations mean that, despite such a clause, the Tenant can argue (assuming disrepair exists) that damages due to the Tenant mean that the rent arrears are extinguished, or at least bring the arrears below the eight weeks or two months (the statutory minimum) so as to avoid a mandatory possession order.

To prevent tenants raising disrepair claims solely as a means for preventing possession, a clause that may be deemed as “fair” might be to allow a set-off clause, provided notice (in writing) of the disrepair has been given to the Landlord. If that notice has not been given then set-off cannot be claimed. Whilst that has not yet been tested, it is clearly arguable and does not create any imbalance, let alone any significant imbalance between your respective rights!

So, Landlord’s drafting is yet again high on the agenda. Will your standard tenancy agreements pass the Regulations?