Let’s Unwind – Leases and Consumer Law

This blog was originally aimed at housing and landlord and tenant law. It has expanded, as the list of topics down the side will show, but I still tend to avoid consumer law because it is suprisingly complex for a field that is directed at the consumer and becase it is difficult to make a living doing it, so I don’t want a long line of readers beating a path to my door with your consumer problems. However, sometimes the areas overlap, and this is one of them.

The Consumer Rights Act 2015 has all the recent publicity, but I am looking at its less prominent cousin, the Consumer Protection (Amendment) Regulations 2014. These have their snappy title because they amend the now middle-aged Consumer Protection from Unfair Trading Regulations 2008, which do what they say on the tin – protect the consumer from various unfair commercial practices. To save my typing I’ll refer to this lot by their dates from now on.

Most of these don’t normally apply to land or leases, but the 2014 regs do apply to “a relevant lease” which is defined in Regl 27C.

Unpicking the legalese, it means that ordinary ASTs or holiday lettings are covered, but not ones provided by social housing organisations, or as part of shared ownership schemes, or equity release schemes, or provision by local councils for homeless people.

For those who need chapter and verse:

(2) In this regulation “relevant lease” in relation to England and Wales means—

(a)an assured tenancy within the meaning of Part 1 of the Housing Act 1988(1), or

(b)a lease under which accommodation is let as holiday accommodation.

(3) But none of the following are relevant leases for the purposes of paragraph (2)(a)—

(a)a lease granted by—

(i)a private registered provider of social housing(2), or

(ii)a registered social landlord within the meaning of Part 1 of the Housing Act 1996(3);

(b)a lease of a dwelling-house or part of a dwelling-house—

(i)granted on payment of a premium calculated by reference to a percentage of the value of the dwelling-house or part or of the cost of providing it, or

(ii)under which the lessee (or the lessee’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house or part;

(c)a lease granted to a person as a result of the exercise by a local housing authority within the meaning of the Housing Act 1996 of its functions under Part 7 (homelessness) of that Act.

There are similar provisions for Scotland and Northern Ireland, but I will leave you to follow them up yourselves if you wish. So far so good.

What is Prohibited?

The 2008 regs prohibit unfair commercial practices, which are defined as being

  • misleading actions (regl 5)
  • misleading omissions (regl 6)
  • agressive behaviour (regl 7) or
  • behaviour listed in sch 1.

The 2014 regs give consumers a right of redress (reg 27A) if, among other things,

  • a consumer enters into  a contract with a trader for the sale or supply of a product to the consumer; or
  • a consumer makes a payment to a trader for the supply of a product; and
  • the trader engages in a prohibited practice in relation to that product, ie
    • misleading actions (regl 5) or
    • agressive behaviour (regl 7); and
  • the prohibited practice is a significant factor in the consumer’s decision to enter into the contract.

It’s not clear why the misleading omissions or the sch 1 actions are excluded, but they are for these purposes. And note that the practice has just got to be “a significant factor”, not necessarily the crucial one.

And then there is aggressive behaviour. This also allows the same remedies if decisions have been caused by harassment, coercion or undue influence. See Regl 7 of the 2008 regs for more details.

How can this affect a Lease?

Surprisingly easily. Prospective tenant looks at flat and asks agent “is it noisy/damp/expensive to heat/secure?” and is told no (or yes) as applicable when this is untrue. Tenant signs lease and then finds out that it is noisy etc and complains. This is misleading and so a breach of regl 5. The definition of “misleading” in regl 5 means “contains false information” – there is nothing about whether the giver believed it, or indeed had reasonable cause to do so. The only test is whether it

causes or is likely to cause the average consumer to take a transaction decision he would not have taken otherwise, taking account of its factual context and of all its features and circumstances. (Regl 5(3))

There is a long list of features that may be covered and you can see them in the 2008 regs if you need to. They include “the main characteristics of the product.”

The point is that it is easy to imagine a claim arising over an AST, and even easier for a holiday letting.

A trader is defined as being  a person acting for purposes in relation to that person’s business, whether in person or through an agent, and a consumer is somebody acting wholly or mainly outside their business. Virtually all landlords operate businesses, and most tenants are consumers.

What are the Consequences?

Well, they can be pretty dire form a landlord’s point of view. Because the principal remedy of the right of redress is the right to unwind (regl 27E and 27F) which is the right within 90 days of the start of the lease (or supply of goods etc) to bring the arrangement to an end by rejecting it, which in the case of a lease means, as far as I can see,

  • ending the lease,
  • repaying any deposit, and
  • repaying any rent paid, (although if the lease is rejected more than one month after the start date then the landlord can retain the appropriate part of the rent paid, less any deduction caused by the misleading action.)

If the tenant doesn’t reject the lease in the first 90 days (and the rejection does not have to be in writing but has to be “clear”) then they have a right to a discount (regl 27I) calculated according to the seriousness of the prohibited practice. There is a scale:

  • more than minor – 25%
  • significant – 50%
  • serious – 75%
  • very serious – 100%

This discount can apply to sums already paid or payable in the future. However it is expected that if the lease has not been rejected a court will take this into account in deciding how serious the practice was in misleading the tenant.

What is more, there is even a right to damages (regl 27J) if the tenant has suffered other financial loss, or even alarm, distress, or physical inconvenience or discomfort, although the landlord has a defence to these claims if they can prove that the matter was caused by a mistake etc and that they took all reasonable precautions and exercised all due diligence to avoid the occurrance.

All of this is enforcable in the County Court, which can grant injunctions etc to enforce the consumer’s rights. Or local councils can prosecute for various offences in the 2008 regs.

And the Moral is?

Well, I’m surprised how little effect this has had on things so far, which I must assume is due to consumer lawyers keeping away from landlord and tenant work, and vice versa. It must also be a reflection of the generally weak position that AST tenants have in disputes with their landlords, because of the ease of eviction under s21, and the need to give a reference for their next property. So this will only come to light when everything else has gone wrong already and there is no need to hold back. Perhaps a bit unlikely in the first 90 days of the lease.

Anyway, if you are a landlord or advising one, be very aware of what your agents are telling people, and if you are a tenant then there may be a way out if you respond early enough.

If you want more information there is a surprisingly good guide produced by BIZ  – link here. And there are the usual culprits of Landlord Law and Nearly Legal.

 

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Author: Coventry Man

A perspective from a litigation lawyer in the Midlands. After many years in Coventry I am now with David Lee Solicitors in Kenilworth, helping people with all sorts of litigation, especially property and landlord & tenant problems.

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