The Competition and Markets Authority (CMA) will investigate five issues regarding landlord and letting agents and their duties to private tenants. Sarah Cardell, CMA’s CEO, states their commitment to improving the housing market for all parties. For renters, they’re updating guidance to clarify rights and responsibilities. Concerns include zero deposit schemes, sham licenses, guarantee clauses, and potential discrimination, which will be thoroughly examined, with enforcement action possible if required.
The CMA’s statement released today acknowledges that while several landlords and letting agents offer commendable service, concerns from stakeholders indicate that a notable minority might not adhere to consumer protection regulations. The CMA aims to enhance understanding of obligations among letting agents through updated guidance. Should any agency or landlord violate the law, the CMA remains open to taking enforcement measures.
Building on its initial engagement, the CMA’s inquiry will delve into the five issues underscored by stakeholder grievances:
- “Zero deposit schemes: These initiatives eliminate the necessity for substantial tenant deposits during tenancies. Concerns raised with the CMA include potential tenant unawareness of responsibilities, instances of pressurized selling, and undisclosed commissions earned by letting agents.
- “Sham licences: Landlords asserting occupancy licenses instead of assured tenancies have been reported to neglect consumers’ tenancy rights.
- “Guarantees: Onerous guarantee clauses demanding extensive tenant asset evidence have been highlighted by the CMA.
- “Potential unlawful discrimination: The investigation includes properties advertised as unavailable to housing benefit claimants (i.e., ‘no-DSS’).
- “Retirement housing fees: Concerns about ‘event fees’ charged to vulnerable tenants entering specialist retirement housing prompted CMA scrutiny into practices and potential exploitation of elderly consumers.
This morning, the CMA released a comprehensive 37-page interim report outlining its current findings and the rationale behind singling out these five areas for deeper examination.
A significant segment states:
A consistent theme from stakeholders is that there is a lack of understanding on the part of consumers and landlords about their rights and obligations. Tenants need to engage early in the letting process with the steps necessary to protect themselves, for example by collecting their own thorough evidence of the condition of rented property and understand how to communicate with their landlord when they think things are going wrong. There is also consensus that tenants find it hard to exert their rights against landlords, despite the existing statutory and contractual protections that are in place. This is a significant shortcoming given the importance of the services supplied to over 5 million households.
We have been told repeatedly that avoiding the escalation of disputes is a very important element of maintaining a good relationship between landlord and tenant. We think revised guidance for lettings agents should help to raise consumer and landlord awareness of their respective rights and responsibilities because within the PRS the following practices, when undertaken by a landlord or letting agent acting as a trader, may amount to a breach of consumer protection law. For example (and highlighting in bold applicable legal standards):
(a) 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;
(b) it may be a misleading action to provide tenants with inaccurate information about their legal rights in relation to the tenancy;
(c) 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;
(d) 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
(e) 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.
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You can see the full interim report here.
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