Residential tenancy agreements and unfair terms

The majority of residential tenants enter into contracts (tenancy agreements)  with landlords as a consumer and therefore legislation which acts to protect the rights of consumers will often apply. This prevents landlords from including terms within their tenancy agreement which act to limit the tenants’ rights or their own liability.

Under The Unfair Terms in Consumer Contracts Regulations (1999) a tenant is not bound to any unfair term within a contract with a landlord. This can be any term that intentionally or otherwise removes or reduces a tenant’s rights awarded by statute and common law; does not adhere to the requirement of good faith; imposes an unreasonable charge on the tenant or constrains the tenant’s rights for the benefit of the landlord without reasonable justification.  Further, if the terms of an agreement are difficult to understand these may be deemed unfair and the terms in question deemed unenforceable.

Commonly, landlords will often amend terms of a tenancy agreement such as those listed in bold below and in so doing render them unfair:

Rent reviews

A landlord cannot usually increase the rent of a residential property without the prior agreement of the tenant, or a decision of the rent assessment committee. The landlord must give the tenant sufficient notice of the rent increase. Rent cannot be increased during a fixed term tenancy but can be increased in certain situations once the tenancy has become periodic.

A rent review and increase in rent will be deemed fair in a number of situations, including where the increase is in line with the current rate of inflation; it was agreed in the tenancy agreement or a price variation clause accounts for changes in costs outside the control of the landlord (e.g. council tax).

Limiting the landlord’s liability

Landlords are not able to legally exclude or limit their own liability. Exclusion or limitation clauses are deemed unfair and frowned upon by the Office of Fair Trading and courts. Examples of typical attempts by landlords to limit liability include:

• A landlord has a duty of care to keep their tenants safe and cannot contract out of this duty. Clauses inserted in an attempt to limit a landlord’s liability for personal injury or death will not be upheld in court.
• A landlord cannot contract out of their legal responsibility to maintain the let property and carry out repair works. Neither can a landlord insert clauses that require the tenant to cover the associated costs of any works which are the legal responsibility of the landlord.
• Any clauses inserted in an attempt to limit the landlord’s liability generally through the use of phrases such as ‘as far as the law permits’ will be deemed unfair.

Imposing penalties on the tenant

A landlord cannot legally require a tenant to pay an unreasonable or unjustifiable cost and any clause that attempts to contract the tenant to do so will be held to be unfair.

The Unfair Terms in Consumer Contracts (1999) regulations, and the extra protection they award tenants, only apply to residential tenancy agreements where the tenant is a consumer (not a company) and the landlord lets the property on a commercial basis.

Whilst the inclusion of unfair terms in a contract is not illegal in itself, such terms will not be enforced. Further, a tenant can make a complaint to their local Trading Standards office if they believe the terms of their agreement are unfair.

For landlords to ensure a tenancy agreement and the terms contained within it are enforceable and act to properly protect their interests, it is advised they seek legal advice before amending or drafting a new agreement.

David Dixey is Holmes & Hills Solicitors' specialist landlord legal advisor, representing landlords across Essex and Suffolk.