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Monday, May 16, 2011

Tips on Tenancy Deposit Disputes 42: Unfair Terms

Tip 42: Unfair Terms
One of the things that most surprises landlords in deposit protection claims is the willingness of adjudicators to enforce the Unfair Terms in Consumer Contract Regulations 1999. For some reason, landlords tend to think that UTCCR is not proper law, and shouldn’t be applied. The regulations are European law and are directly enforceable in England and Wales.
The Office of Fair Trading has produced some useful guidelines on the applicability of UTCCR to tenancy agreements, which I fully recommend. They are available at The OFT guidance is too long and comprehensive to go into on this blog, but it is a very useful reference point, particularly for landlords looking to get an idea of the adjudicator’s likely position on a non-standard contractual provision they might be hoping to enforce against the tenant.
The actual regulations themselves are quite simple and a good example of the principle based legislation that comes out of Brussels.
There are three basic tests that the contract must pass:
  1. The contract may not cause a significant imbalance between the obligations of the parties. i.e. It must not require the tenant to do lots and the landlord do little.
  2. The landlord must deal fairly and openly with the consumer, and not go further than necessary to protect their commercial interests.
  3. The agreement must be in plain language, that can be readily understood by a layperson, not just a lawyer.
The regulations apply to contracts between a business (landlord) and a consumer (tenant)., but may not apply if the contract can be shown to be individually negotiated. The regulations do not apply to the amount of rent payable, or to what makes up the property.
A real world example of an unfair term that was not allowed by an adjudicator is a clause requiring the tenant to completely redecorate the property at the end of the tenancy, regardless of whether the property required it, because it requires the tenant to spend a lot of money doing something that is potentially unnecessary, while the landlord isn’t required to do anything.
Tom Derrett is the Principal of Deposit Claim, an experienced deposit protection adjudicator and an expert on the Deposit Protection Schemes. Tom helps landlords to claim money through the deposit protection schemes.

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Gareth C Thomas said...

I've read the OFT guidance and will re-read it at some point again.

Would the following be deemed "unfair terms" in an AST?

1. A clause requiring the tenants must pay for a report on condition at the end of their tenancy - given that the landlord has paid it at the beginning of the tenancy.

2. The tenants must keep the garden tidy and certainly at the end of the tenancy.

3. That notices/requests to tenants may be given by text message (SMS service) via mobile phones or email rather than in writing using "snail mail". I do NOT mean S21 notices or other official notices. I'm referring to requests for access for visits, inspections, work, or viewings etc.

I would be interested to hear your views.

Pat Ryan said...

I'd like to know whther it would be a reasonable requirement to expect a tenant to pay for limescale preventer e.g. Calgon. in a washing machine. I've just had to buy a new one and would like it to "live longer".

I'd be hahppy to provide a bottle or two myself at the outset.

Tom Derrett said...

Hi Gareth and Pat,

This thing about unfair terms is that whether a term is unfair is as much about how the term is written and the operation of the term in context with all the other terms of the agreement, so it can be difficult to give an opinion on a requirement without seeing the rest of the contract.

Regarding the examples given:

The requirement for the tenant to pay for a check-out report look like an unfair term. The landlord is under a reciprocal obligation so the clause doesn’t appear to create an unbalance in contractual duties. In the real world, this is a common clause to find in a contract and one that is regularly enforced by deposit protection adjudicators (although there may be reasonable exceptions). I personally approve of the tenant paying some of the inventory cost, as a good third party report benefits the tenant just as much as it does the landlord.

I’m not sure if he gardening clause is an unfair term. That would depend on the context, but a requirement to keep the garden tidy at all times is more or less unenforceable. Would the tenant have to keep it tidy during a storm? I could foresee circumstances where an adjudicator might hold up a landlord’s right to carry out necessary repair work to the garden during the tenancy, but we’d get into a whole discussion about how necessary it was. Ultimately, the normal measure of damages would be related to the condition the garden was left in at the end of the tenancy. The landlord wouldn’t ordinarily be able to claim damages for it being untidy during the tenancy.

Delivery of notices is not my favourite area of law and whenever I say anything about it I usually get a string of comments from people who know much more about it than me. My view is that a landlord’s 24 hours notice of entry for repairs, viewing etc is an official notice and must be given in writing. Courts accept post and (sometimes) email as writing. I would be hesitant about using text messages as anything other than a backup service (please check your email etc) because of the very real possibility that the tenant lose their phone or change their number without telling you.

The limescale clause doesn’t, on the face of it, seem like it would fall within the unfair terms legislation, unless there is some onerous punitive term attached. Again, however, I would suggest it is more or less unenforceable. You cannot gain access to check whether they are using it, and even if the machine quickly became scaled and stopped working, it probably wouldn’t be cost effective to instruct an expert to prove the tenant hadn’t complied with the limescale clause. Not that I am advising you to remove the term. I’m sure a reasonable tenant would be happy to comply in the circumstances you have described.