The Competition and Markets Authority has issued two updates on its work regarding the housing sector. The two updates concern its market study in the housebuilding sector, and consumer protection in the lettings sector.
The CMA has said that although many landlords and letting agents provide a good service, it heard many complaints suggesting that a significant minority are not complying with consumer protection law.
To help landlords and letting agents understand their obligations, the CMA will update its guidance for lettings professionals. The CMA does not rule out enforcement action if any letting agency or landlord is found to be in breach of the law.
The CMA’s investigation will explore the five areas highlighted by complaints:
- Zero deposit schemes: These schemes alleviate the need for tenants to come up with a significant deposit when they enter into a tenancy agreement, but the CMA has heard concerns that tenants may be unaware of their liabilities under such schemes, alongside reports of pressure selling and undisclosed commissions earned by letting agents.
- Sham licences: The CMA has been told that there are landlords who claim that tenants have licences to occupy rather than assured tenancies and who fail to recognise the rights that consumers tenants have under a tenancy.
- Guarantees: The CMA has seen examples of onerous guarantee clauses which impose wide obligations on tenants – such as requiring them to provide extensive evidence of assets.
- Activity that could constitute unlawful discrimination: This includes, for example, looking at those who advertise properties as not available to housing benefit claimants (such as ‘no-DSS’).
- Retirement housing fees: There were also concerns around so-called "event fees" charged to vulnerable tenants entering specialist retirement housing. The CMA will review practices in the sector and whether elderly consumers are appropriately protected.
The CMA points out that under the Consumer Protection from Unfair Trading Regulations 2008:
- terms in tenancy agreements may be unfair if they purport to make the tenant liable for repairs that it is the landlord’s legal responsibility to carry out;
- it may be a misleading action to provide tenants with inaccurate information about their legal rights in relation to the tenancy;
- it may be a misleading omission to fail to mention that they receive a commission payment or other benefit for passing work to a third party;
- it may be an aggressive practice to use harassment, coercion or undue influence to convince a tenant to agree to certain contract terms, products or services; and
- it may be a breach of professional diligence to fail to comply with recognised standards, such as those set out in guidance or codes of practice, for landlords or letting agents.
The housebuilding market study is considering housebuilding in England, Wales and Scotland and the CMA is consulting on carrying out a market investigation.
The update provides a useful insight into the CMA's thinking. Although it relates to a particular sector, the principles apply to any dealing with consumers and illustrate the importance of considering if your terms and sales practices comply with consumer law. Often, traders say "well everyone in our sector is doing it". That may well be true, but it doesn't mean that everyone is complying with the law. We can help advise on whether your terms and sales practices are compliant.