Jessica Powers reviews current consumer protection measures in the estate and letting agency field and considers the changes the new legislation is likely to bring
The Consumer Rights Bill (“CRB”) will reach its committee stage in the House of Lords on 13 October 2014.
Estate and letting agents are currently subject to consumer protection measures contained in a number of disparate pieces of legislation. The aim of the CRB is to consolidate and simplify existing legislation.
The CRB’s passage through the House of Commons generated a number of proposed amendments to deal with specific issues facing consumers. Issues highlighted in the estate and letting agency context included “double-charging” by estate agents, unexpected letting agent fees, and the level of disclosure of agents’ fees generally.
A criticism levelled at the CRB is that it has achieved its aim of consolidating consumer protection legislation without facing modern commercial practices affecting consumer rights head-on.
Common consumer protection issues
Consumer protection legislation affects every stage of an estate or letting agent’s business, from advertising and marketing through to the charging of fees and commission, and the enforceability of contracts as against landlord or tenant principals. The most common consumer complaint, and the subject of the majority of litigation in this area, relates to agents’ fees and commission, relying on the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR 1999”).
It is now common practice for tenants and landlords to be charged a renewal fee if a tenant remains beyond the initial term negotiated by a letting agent. Some estate agents are charging a fee to both seller and buyer. Such fees may be subject to complaints that they are unfair and unreasonable, or that the consumer landlord or tenant was not made aware of their liability to pay.
Other typical complaints are about agents’ handling of deposits, misleading omissions or statements about properties by the agent, and failure to carry out contractual services, such as completing a check-in inventory.
Legislative change
The CRB will replace the provisions of the Supply of Goods and Services Act 1982 (“SGSA 1982”) and the Unfair Contract Terms Act 1977 (“UCTA 1997”), which apply to business to consumer contracts, and those Acts will be amended accordingly.
The UTCCR 1999 will be replaced in their entirety by the CRB. The clauses of the CRB that replace this legislation have, on the whole, been directly imported, with minor changes intended to simplify the wording. The CRB does, however, introduce some relevant new consumer protection provisions.
Under clause 50 of the CRB anything said or written to the consumer landlord or tenant by the agent about them or their service will be a binding term of the contract if the consumer takes it into account when deciding to contract, or when making a post-contract decision about the service. The term may be qualified by anything said or written by the agent on the same occasion, or may be modified by express agreement between the parties.
Agents will need to be alert to the risk of pre-contract marketing or negotiations resulting in the creation of binding contract terms. Additional statutory remedies for breach of terms implied by clause 50 are repeat performance or, as is more likely in this context, a reduction in price. Liability under clause 50 cannot be excluded or restricted.
Where proceedings before a court relate to a term in a consumer contract, clause 71 of the CRB requires the court to consider whether that term is fair of its own motion, providing that there is adequate material before the court for it to do so. A defendant’s failure to raise a defence relying on UTCCR 1999 will no longer mean that the fairness of a term relied on, which will almost invariably be a clause relating to the agent’s fees, will not be considered.
Part 3, chapter 3 of the CRB introduces a new duty for letting agents to publicise their fees. Letting agents must display a list of their fees in a prominent place in every office and on their website. The list must include:
- a description that is sufficient to enable a landlord or tenant to understand why it is imposed and what service it covers. By way of example, “tenancy administration fee” will not be a sufficient description: the list must state what administrative costs or services the fee relates to;
- for a tenant-only fee, whether the fee relates to the property or each individual tenant; and
- the amount of each fee, inclusive of tax, or, where the fee is not fixed, a description of how the fee is calculated.
Failure to comply with the duty may be punished by a civil penalty of up to £5,000 for each breach. Letting agents will be given a right of appeal to the First-tier Tribunal.
Should more be done?
Complaints to the Property Ombudsman about estate and lettings agents increased by 23% in 2013, but equally the number of cases resolved by the Property Ombudsman increased by 30%. The government’s stance throughout the passage of the CRB has been that consumer protection legislation, in its effect rather than form, is largely sufficient.
By contrast, the Opposition have sought to bolster the protection of consumers. For example, they proposed an amendment to clause 64 of the CRB, which imports and amends regulation 6(2) of the UTCCR 1999 by requiring that a term must be both prominent and transparent to be excluded from an assessment of fairness. The Opposition expressed concern that a consequence of the Supreme Court judgment in The Office of Fair Trading v Abbey National [2009] UKSC 6 was that it had become harder to challenge “small print” terms.
Further, it was noted that terms prescribing future or contingent charges, like renewal or check-out fees, could escape an assessment of fairness even though a consumer tenant’s focus in deciding to contract would likely be only on up-front fees. It was proposed (albeit later withdrawn) that a term must be involved in the consumer’s purchasing decision to be “prominent”.
“Small print” is a consumer’s nightmare, and it has been judicially noted that contingent or future fees can have little bearing for a consumer entering into a contract. However, it seems right that the test for exemption from an assessment of fairness should not require a subjective consideration of the consumer’s decision-making. In any event, while “small print” or contingent terms may pass the transparency and prominence test, it is still open to the consumer to argue that the term is not the main subject matter of the contract.
The opposition, on the war path against “double-charging” estate agents, further proposed two amendments to the “grey list” of terms which may be regarded as unfair to include:
- a term which requires a consumer to pay for a service that another party has also been charged for in the course of the transaction; and
- a term which restricts the ability of a consumer to access information to enable them to discover whether the contract undermines their statutory rights.
On the first amendment, the government’s stance was that “double-charging” could be dealt with by Powys County Council or through redress schemes. On the second proposal, the government agreed that consumers should not be prevented from, for example, finding out whether they are buying a house at a fair price, but stated that it was not minded to legislate until the conclusion of its review into a project to allow consumers better access to their own data.
In summary, the CRB is hardly an earth-shattering piece of legislation in the field of consumer protection: while it does introduce a few new provisions, its purpose is largely to consolidate. It is telling of the satisfactory state of consumer regulation in the estate and letting agency field that the Opposition’s proposed amendments are founded in fact-specific scenarios. The consensus appears to be that the statutory framework offers sufficient protection, and that specific cases are best protected by complaints to the Property Ombudsman or in proceedings before the courts.
A summary of existing key legislation
| Legislation | Key protection |
|---|---|
| Supply of Goods and Services Act 1982 (SGSA 1982) | Implies terms that an agent will perform the contract with reasonable care and skill, and within a reasonable time, and at a reasonable charge where no fee or time is agreed. |
| Unfair Contract Terms Act 1977 (UCTA 1977) | Prohibits terms excluding liability for loss or damage resulting from an agent’s negligence, and terms in standard form contracts restricting liability for breach of contract by an agent, or enabling the agent to render a substantially different contractual performance or no performance at all, unless the term is reasonable. |
| Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR 1999) | Renders a term in standard form contract unfair, and therefore unenforceable, if contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the landlord or tenant. |
| Consumer Protection from Unfair Trading Regulations 2008 | Prohibits unfair commercial practices which contravene the requirements of professional diligence, distort the economic behaviour of the average consumer, mislead by action or omission, are aggressive, or fall within a list of specifically banned practices. |
| Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 | Requires specified information, and a cancellation form in respect of off-premises and distance contracts, to be given to a consumer before a contract is entered into. The information required to be given includes the total price for the service and the duration of the contract. Any information given to the consumer is treated as a term of the contract. Failure to give the information is a criminal offence. |
Jessica Powers is a commercial barrister at Five Paper
