Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Consumer Rights Act 2015 and lettings agent fees. More duties for lettings agents?

From 27 May 2015 there will be a statutory duty on lettings agents in England  to publicise the fees they charge.

What needs doing?

  1. Agents need to display prominently in each office and on the agent’s website ( if there is one):
    1. A list of fees. The list must give enough information so that a person can work out what exactly they are paying for, and why, and how much it will cost. The list must set out whether the fees are per property or per individual. Where there is a joint tenancy is it one fee for all, or for each individual to pay? The fees must be set out inclusive of VAT ( and any other applicable tax), and where that fee is not determinable in advance, a description of how the fee is calculated, for example Landlord’s commission fees.
    2. If the agent holds client monies, a statement as to whether the agent is a member of a client money protection scheme.
    3. A statement to say that they are member of a redress scheme and giving the name of that scheme.

Who needs to do it?

Lettings agents in the Private Rental sector. Local authorities are excluded. The duty (and therefore any penalty) falls upon the agent and not salaried employees of the agent.

What does “fees” mean in this context?

For the purposes of this legislation “fees” means “ the fees, charges or penalties which a landlord or tenant pays to the agent in relation to letting agency work, property management work or otherwise in connection with an assured tenancy or a dwelling-house let under an assured tenancy”. Some exclusions are set out. Rent and Deposits are excluded ( but not “holding deposits”) and some third party fees e.g. agent paying a contractor on behalf of a landlord.

Penalties for non compliance

Trading Standards can fine an agent up to £5000.00. The first step is that they would serve a “notice of intent” upon the agent setting out the proposed penalty and reasons for it. The agent has 28 days to respond. Trading Standards then decides whether to impose the penalty and if it does, will send a “final notice” requiring payment within 28 days. If the penalty is imposed an agent has a right to appeal through the FTT .

More detail can be found in the explanatory notes to the act.

When does it need doing?

Agents will need to be in compliance by 27th May 2015

In fact, most agents who are already adhering to the requirements of membership of a particular professional body and complying with the rules of their redress scheme, are likely to already be doing the above.   Of course all agents should check that they are compliant with the new legislation, but those who are not already doing the above need to put measures in place to ensure that they are doing so by 27 May 2015.

Filed under: England only, , , , ,

New CMA Guidance for Lettings Professionals

The Competition and Markets Authority (CMA) which replaced the OFT earlier this year issued on the 13th June 2014 “Guidance for lettings professionals on consumer protection law”. Plainly for anyone involved in the Lettings Industry a must read document!

Much of what is included within the guidance is not new. It helpfully pulls together various guidance which has been issued and incorporates it in one document. The underlying principle throughout is that letting professionals must act fairly with all they come into contact with. This is a positive obligation which you must actively set out to achieve. This objective mirrors the Consumer Protection Rules and also the CAP Guidance on advertising issued last year.

We will be studying the guidance carefully and watching how over the ensuing months this is applied by both CMA and Trading Standards officers in their dealings with agents.

Filed under: England & Wales, , , , , , ,

Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013

As many of you are aware the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 came into force on 13 June 2014 (the Regulations).

Rental agreements are specifically excluded so the Regulations do not apply to tenancy agreements but all other contracts are potentially caught. Particularly, the Regulations do apply to lettings and sales terms of business with landlords/sellers that are individuals acting outside their business.

To comply with the Regulations, you are required to give certain information to the consumer. What is required depends on where the contract is concluded. A notice of right to cancel may also have to be given.

If you are required to give notice of the right to cancel, you are advised not to undergo any work during the cancellation period (14 days) unless and until the client requests you to do so in writing otherwise you will not be entitled to charge for the work undertaken.

In light of the Regulations, we have updated our template lettings and sales terms and these are available for purchase from our online shop. Alternatively, if you want to keep your standard form, we have produced a stand-alone template of clauses to be inserted to help you when you are amending it (please note though that this is a template and may need to be adapted to fit your own documents). All versions come with guidance as to when and how the Regulations apply.

If you would like assistance in tailoring to your terms please contact us and ask for a quote.

Prices at going to press:
£150.00+VAT Sales Terms
£150.00+VAT Lettings Terms
£75.00 Guidance and clauses

Filed under: England & Wales, , , ,

Office of Fair Trading to study Residential Property Management services

The OFT last week announced that it intends to launch a market study into the residential property management field for leasehold property in England and Wales.

Ahead of the study the OFT has invited interested persons to tell them about what areas they should be concerned about. Their Press Release sets out what areas the OFT is particularly interested in and so if you are involved in this sector you should be reviewing this and consider what if anything you want the OFT to look at.

Recently leasehold law does seem to have come on to the political agenda so it will be interesting to see what steps the OFT takes following on from its investigation into retirement home security services.

Filed under: England & Wales, , , , , , ,

Advertising guidance for letting agents and private landlords

…..is finally with us. Readers will recall the case involving a complaint against Your-move.co.uk Ltd ( Your Move) stating that an advert that had been placed on Rightmove did not contain details of compulsory charges such as administration fees. We blogged on this here.

So six months down the line we have some guidance from the Committee of Advertising Practice Compliance team (CAP). The CAP has written to various organisations in the lettings sector with guidance on how to comply with the advertising code.

See here for the guidance. Readers should look especially at the key points 1-9, and also the helpful examples.

The CAP letter warns that they will be “closely monitoring ads in all media from 1 November 2013 onwards and will consider appropriate follow-up action against non-compliant ads from this date”.

Agents should also take a look at the CAP advice targeted at letting agents here:

Filed under: England & Wales, , ,

Whose address? Sections 47 and 48 Revisited

We have heard on the grapevine that some agents are currently being advised that following the Land Tribunal ( Upper Chamber) decisions of Triplerose Ltd v Grantglen and Beitov Properties Ltd v Elliston Martin , they should not use an agent’s office and address as an address for service for the purposes of Sections 47 and 48 of the Landlord and Tenant Act 1987 (LTA1987). There have even been suggestions that tenancy agreements should be amended to require the tenant to serve notices on both the landlord and the agent. We disagree.

The Beitov and Triplerose cases concerned service charges, and the decision was crucial to long leasehold premises. We blogged on this here.

Section 47 of the Landlord and Tenant Act 1987 (LTA1987) provides that where any written demand is given to a tenant of residential leasehold property, then that demand must contain:
a) the name and address of the landlord and
b) if that address is not in England and Wales, an address for service.
and that any part of the amount demanded that consists of a service charge will not be treated as being due until such information is furnished by notice given by the landlord to the tenant.

The Beitov case decided that the wording of s47 means that where any written demand is given to the tenant the Landlord must put his or her actual address on the demand, not a care of address or agent’s address. A demand for service charges will be invalid without. The sanction for failing to give the actual landlords address in section 47 of the LTA 1987 is that service charges are not due.
However assured shorthold tenancies do not require the payment of service charges. The sanction for breach of section 47 is of no consequence.

By contrast, ASTs are affected by the provisions of s48 of the Act. The sanction for failing to comply with s48 is that rent is not treated as falling due BUT s48 requires only “an address in England and Wales at which notices may be served on him by the tenant”.

In short we disagree for two reasons:

1. Rent is covered by s48 – and where it is demanded the requirement is only to supply an address for service in England and Wales
2. Requiring tenants to serve notices on both landlord and agent is too onerous an obligation in residential AST lets. There is too much scope for the tenant to get confused and fail to serve on one or other address. Arguably such a term would be unfair and unenforceable, especially as Landlord only has to serve on the property.

Our position remains that it is fine to use an agent’s address for service in ASTs.

Filed under: England & Wales, , , , , ,

Lettings Fees in the news

Shelter has stepped up its campaign to make it unlawful for lettings agents to charge any fees at all to tenants. You can read their report here. The average compulsory lettings fee that renters pay to a landlord’s agent in setting up a tenancy is £355.00. The charity would like to see tenants’ costs limited to the protected deposit and rent in advance as it is in Scotland.

Painsmith receives frequent queries about agents’ fees, and what can and cannnot be charged. The position currently is that agencies must be transparent about their fees, which should be an accurate reflection of their actual reasonable costs rather than an unsubstantiated sum. We have blogged on this before .

The Advertising Standards Authority recently ruled that agents must publicise their fees and charges in their quoted prices, or at least provided enough information for potential renters to calculate what they will be charged.

There is already a great deal of consumer protection legislation, e.g CPR Consumer Protection from Unfair Trading Regulations 2008, UTCCR, as well as regulatory bodies such as the Property Ombudsman. Regulation 6 of the Consumer Protection Regulations prohibits misleading omissions, which includes the providing of material information in a manner that is unclear, unintelligible, ambiguous or untimely. To charge extortionate fees is already either unlawful or unenforceable.

If it becomes unlawful to charge tenants any fees at all it has been argued that the cost will have to be picked up by tenants later on down the line through higher rents ( although in its report Shelter says that since Scottish law was clarified there has been no significant rise in rents). That said, if Shelter succeeds in effecting a ban on lettings fees, agencies will no doubt adapt. It may even cause a demise in the number of rogue agencies that are currently operating.

Filed under: England & Wales, England only, , , , , ,

Private Rented Sector Consultation

Just a reminder to everyone in the Rental Industry that the Communities and Local Government Select Committee is currently conducting an enquiry into the private rented sector. Submissions have been invited from any interested party dealing with the private rented sector. Submissions should be emailed to clgev@parliament.uk by 17th January 2012.

In particular submissions are being sought in connection with possible rent control and also regulation of the sector. Full details can be found here.

Filed under: England & Wales, , , , , , , , ,

Security for landlords

From the 1st of this month the Land Registry launched Form LL which allows landlords to register a restriction for free against the title of their home when they do not live at the property. The restriction is designed to help prevent forgery by requiring a solicitor or conveyancer to certify they are satisfied that the person selling or mortgaging the property is the true owner.

Property is usually the most valuable asset people own. It can be sold and mortgaged to raise money and is therefore an attractive target for fraudsters. The properties most vulnerable to fraud are usually empty, tenanted or mortgage-free. To help prevent forgery, absent owners can ask the Land Registry to enter a Form LL restriction on the title.

This is something that landlords that are abroad or far from the tenanted property should consider and agents are asked to consider mentioning this to their clients.

The cynics out there are probably thinking that there is another reason why the Land Registry has released this practise note and it is to do with the compensation they have to pay out when something like this happens however it’s easier to register a restriction than seek compensation when you are abroad.

Filed under: England & Wales, FLW Article, , , ,

A survey of tenants experience……

A survey of tenants experience……

Resolution Foundation, an organisation that works to highlight the experiences of low-to-middle earners (LMEs) through its research has published a report on its survey of tenants experience in the private rented sector.

Resolution Foundation conducted I mystery shopping exercise of 25 letting agents and also spoke to tenants about their experience in the lettings market where a letting agent was involved. The main cause for concern appears to be that the lettings agents are unregulated and that there is a lack of transparency with agents charging arrangements.

The survey found that many agents do not confirm what these fees are in the initial paperwork which can cause some financial difficulty even before the tenancy has begun. PainSmith Solicitors has for many years stressed the importance of confirming these fees at the outset so these results are alarming especially given that in some cases they may not be recoverable under the Consumer Protection from Unfair Trading Regulations.

The report has therefore made the following recommendations:

-letting agents to be brought under the Estate Agents Act (1979), thereby giving the Office of Fair Trading powers to ban agents who act improperly;

-all letting agents to become members of an ombudsman service, giving tenants the opportunity to pursue redress in cases of poor practice;

-an amendment to the code of practice of the ombudsman service to make it a requirement for agents to present landlord and tenant fees on their websites, in adverts and in all paperwork in a way that is easily comparable across agents;

-government to make use of the 2012 retendering process for the tenancy deposit protection schemes to find ways to make it easier for tenants to use their old deposits when moving in the private rented sector;

-local authorities to extend rent deposit schemes to members of the low-to-middle income group.

Whether or not you agree with the recommendations it is important that tenants understand what they are expected to pay and when. These fees should therefore be confirmed in writing before any agreements are concluded to ensure that the fees are recoverable.

Filed under: England & Wales, England only, , , , , ,

Association of British Insurers

I was reluctant to blog this but I have been persuaded that it might help some readers. The ABI has released some factsheets on what to do if you have been affected by the current unrest. The good news is that most domestic and commercial insurance policies will cover you for fire and looting.

Filed under: England & Wales, FLW Article, , ,

Cancellation Notice

In a recent case in Watford County Court an agent sought his commission for the successful sale of a property in October 2009.

The Defendant defended the claim on the basis that no Cancellation
Notice in the prescribed form pursuant to the Cancellation of Contracts in a Consumer’s home or Place of Work etc Regulations 2008 had been served.

In response to this defence the agent was relying on schedule 3 of the Regulations which excludes certain contracts from the Regulations. One such contract is for the sale or rental of immovable property.

However, the court held that the contract entered into by the parties was not a contract for the sale or rental of immovable property but one of marketing and as such schedule 3 did not apply.

The court also held that this was a commission contract and therefore caught by the Regulations. Therefore where no Cancellation Notice had been provided then pursuant to clause 7(6) the contract is unenforceable.

The agent’s case was dismissed.

Thank you to Mr Kennedy who brought this case to our attention.

Filed under: England & Wales, FLW Article, , , , ,

County Court Judgement on Renewal Fees

We have just been made aware of a case in Lambeth County Court in relation to lettings agent’s renewal fees which has gone poorly for the agent concerned.

Chestertons Global Ltd v The Waterfront Partnership & Nicholas H Finney, heard in March 2010 before DJ Wakem, Chestertons sought to recover the sum of £3,807.20 in unpaid renewal commissions. Mr Finney counter-claimed for renewal commissions already paid in the sum of £3667.83.

Initially it was accepted that the proceedings against Waterfront were improperly brought and these were dismissed.

Chestertons first sought to argue that Finney was not a consumer based on the fact that he had purchased the property as an investment. However, Finney only owned one such property and, as we have suggested in a previous post, this is not sufficient to prevent a landlord being a consumer. Accordingly, the Court found against Chestertons on this issue.

Chestertons conceded in Court that the renewal provisions were not a core term of the agreement and were therefore susceptible to a test of their fairness. Given the comments of the Supreme Court in OFT v Abbey National & Others this may have been unwise.

At this stage the Court reviewed the clauses themselves. The Court found that the clauses were not particularly hidden in the manner that was criticised in the Foxtons case. However, they remained insufficiently clear in that they were not specifically flagged to the consumer, they were not expressed in strong enough language, and their effect was not given significant clarity despite their long-term impact on the relationship between agent and landlord and the onerous monetary obligations that they created.

Chestertons were further damaged by the fact that the tenancy agreement they had drawn up contained an option to renew which would leave the landlord tied to a renewal at the tenant’s whim at a rental to be fixed by Chesterton’s themselves and therefore paying a commission on the basis of decisions made by the tenant and Chestertons.

Interestingly the Court also made an order for the agent to return monies already paid by the landlord by way of renewal fees. This was ordered following the House of Lords decision in Kleinwort Benson v Lincoln City Council. The Court asserted that this case found that “where payment was lawfully due under a binding contract but it subsequently became apparent that was not the case the paying party was entitled to return of the payment”. This would appear to be a misunderstanding of the decision in Kleinwort and of the UTCCR itself. In Kleinwort the Lords decided that money paid under the basis of a mistaken that the contract was binding should be returned. However, the UTCCR does not operate in this manner. In Kleinwort the contracts involved were in themselves void. Th UTCCR does not make a contract, or any part of it, void but rather makes certain clauses unenforceable. We have previously posted on the issue recoverability of monies paid under an unenforceable contract.

However, agents would be well advised to take careful note of this case. Irrespective of the merits of all parts of the decision it seems clear that lower Courts have taken note of the decision of the high Court in OFT v Foxtons and are increasingly unhappy with renewal commission clauses that create an indefinite liability. Foxtons settled the case against them by changing their terms of business to limit the time during which they could seek renewal commission. It may be sensible for other agents to do the same.

PainSmith Solicitors supply terms of business for lettings agents and the current version of those terms includes a clause allowing for the length of time that renewal commission is to be recoverable to be limited in the manner adopted by Foxtons. These terms can be purchased online from our document shop.

Filed under: England & Wales, Northern Ireland, Scotland, ,

OFT v Foxtons- The Final Order

The final sealed order in the OFT v Foxtons case has been made available on the OFT website. A copy can be found here. This order gives effect to the judgement of the High Court and is now the final word on the matter as Foxtons have withdrawn their appeal.
There are some interesting points to note:

  1. Nothing in the order prevents Foxtons from defending claims against them based on monies already paid under clauses that have now been found to be unfair;
  2. Foxtons are entitled to keep using the original renewal commission clauses in full management agreements;
  3. The wording of the offending clauses used by Foxtons is quite extreme in terms of their ability to charge commission on a long-term basis even where the tenant has been changed. The new terms (in the last Schedule) are much less severe
  4. The approved terms are still charging a renewal commission even though Foxtons has no involvement in the negotiation of a renewal but it is limited to 2 years after the initial tenancy and is clearly stated at the start of the terms of business
  5. Fxotns have removed their ability to take a fee where the landlord has sold the property to another landlords with the tenant in place and where the landlord has sold the property to the tenant

The OFT has made clear in its press releases that it intends to use this decision to put pressure on other agents. How far this will go is unclear and whether the OFT will seek to impose a limitation on other agents as to how long they can continue to collect a renewal commission for.

Unfortunately this will probably lead to another raft of ill-informed letters from landlords stating that the renewal fees they have been charged are unfair. However, agents should consider how they wish to move forward and take advice as to their fee structures to avoid a visit from the OFT.

Filed under: England & Wales, Northern Ireland, Scotland, , , ,

Building Regulation Consultation

The Department of Communities and Local Government has today (just in time for Christmas!) published a new consultation regarding the authorisation of self-certification schemes under the Building Regulations. Essentially as the Regulations have become more complex they have become difficult to police effectively. This was recognised back in 2002 and was dealt with by licensing certain organisations (such as CORGI, FENSA and OFTEC) to ensure that their members carried out work to the appropriate standard. Therefore where work had been carried out by a member of an approved organisation it could be assumed that it complied with the Regulations and it would not need to be inspected by the relevant local authority’s building inspectors.

Over time this system has got a bit mixed up due to slightly differing standards applied to and adopted by various licensing organisations. This has led to suggestions that work done by one organisations tradesmen is of a lower standard than another which also causes an unfair competition model.

In an effort to resolve these issues the Government has already suspended the certification of new bodies and now plans to provide new criteria for certifying approved bodies. Existing bodies will have to be recertified under the new criteria.

The consultation itself is on the nature of these criteria, the new application process and the consumer protection aspects. The consultation closes on 19 March 2010.

Filed under: England & Wales, , ,

Distance Selling

We have noted a marked increase in queries regarding consumer protection legislation. As such a little reminder about the The Consumer Protection (Distance Selling) Regulations 2000 may be of some help.
These regulations are secondary legislation under the European Communities Act 1985 and the intention behind them is to regulate distance selling business transactions. That is contracts concluded at a distance where there has been no face to face contact, which are for the provision of services. Tenancy agreements are specifically included within the general scope of the Regulations, because the tenant will have been supplied with a service, and so the Regulations will apply to landlords in distance selling situations and therefore agents should familiarise themselves with the basic provisions.
The regulations have 2 important effects for landlords regarding distance contracts, which the agent should ensure that the Landlord is aware of:
1. allow the tenant the right to cancel the distance contract
2. require that a landlord (or agent on his behalf) provides certain specified information to the tenant
The Regulations imply a right to cancel by the tenant into any distance contract under the Regulations unless this right has been specifically excluded by agreement of the parties.
Cancellation operates when the tenant gives a notice of cancellation to the landlord or the agent on his behalf if permitted. Where it applies, the right to cancel can be exercised by the tenant within seven working days of concluding the agreement if the Written Information requirements have been complied with, or within three months and seven working days if they have not.
Agents should note that the tenant’s right to cancel does not apply for the supply of services if the tenancy has started and the tenant has been informed that there will be no rights to cancel the contract once it had started. It is therefore recommended that agents attempt, where possible, to have the agreement signed in their presence at the time they release the keys for the property.
The Written Information that must be supplied to the Tenant prior to the signing of the tenancy agreement is mostly in the tenancy agreement itself and includes such things as the Landlord’s and where applicable the Agents contact details, the fees in arranging the agreement if applicable, the rent payable, the duration of the agreement and so on.
We have noted that many people assume that the Regulations apply to Guarantor Agreements however given that the Guarantor receives no service for entering into the agreement, this is inaccurate.
Incidentally, contrary to some advice we have seen, the Cancellation of Contracts Made in a Consumer’s Home or Place of Work Etc Regulations 2008 also does not apply to guarantee agreements as no service is provided and it does not cover tenancy agreement but do cover agent’s terms of business.

Filed under: England & Wales, , ,

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