Ending A Fixed-Term Tenancy Early – Part II: Unfair Trading Practices
This blog post is the second of a three-part series discussing when a tenant of a fixed tenancy may terminate or otherwise set aside a tenancy agreement. This post discusses when a tenant of a fixed-term tenancy may unwind a contract under consumer protection law.
The Consumer Protection from Unfair Trading Regulations 2008 prohibits the use of ‘unfair trading practices’ by a Landlord. These Regulations as amended by the Consumer Protection (Amendment) Regulations 2014 provide a tenant with a series of remedies where the Landlord or his agent has used an unfair trading practice.
What constitutes an ‘unfair trading practice’
Under the Consumer Protection from Unfair Trading Regulations 2008 practices by a Landlord or his agent which are considered to be ‘unfair commercial practices’ by the Regulations are prohibited. The Regulations consider the following to be ‘unfair commercial practices’[1]:
- A misleading action
- A misleading omission
- An aggressive practice
For examples of unfair trading practices by a Landlord or his agent see the Government Guidance for lettings professionals on consumer protection law.
1) A misleading action
The Consumer Protection from Unfair Trading Regulations 2008 defines a misleading action as an action (or statement) which contains false information and is therefore untruthful in relation to a series of matters including, amongst others: the extent of the Landlord’s commitments to the tenant, the need for repairs in the rented property, the rent payable, the handling of complaints about the property, the fitness of the property for habitation, etc. The misleading action must cause the average prospective tenant to enter into the tenancy agreement when they would not otherwise do so.
Example 1:
If a Landlord informs a prospective tenant prior to the signing of the tenancy agreement that the property subject to the lease is not in need of any repairs when in fact a window in the property is broken and in need of replacement. This would constitute a misleading action as it is a statement that contains false information about the need for repairs in the rented property.
Alternatively, a misleading action is where the Landlord or his agent presents information in a way that deceives or is likely to deceive the average tenant in relation to the matters discussed above.
Example 2:
If an estate agent when giving a virtual viewing of a property fails to show the existence of separately rented rooms in the property so as to give the prospective tenant the impression they would be the sole occupant of the property. This would be a misleading action as the virtual viewing is presented in such a way as to deceive the prospective tenant into thinking they would be the sole occupier of the property.
2) A misleading omission
The Consumer Protection from Unfair Trading Regulations 2008 defines a misleading omission as a failure of the Landlord or his agents to bring material information to the prospective tenant’s attention. Alternatively, a misleading omission may occur where the Landlord or his agent hides material information or provides that information in a way that is unclear, unintelligible, ambiguous, or untimely which causes the average prospective tenant to enter the tenancy agreement when they would not otherwise have done so.
The Regulations define ‘material information’ as information that the average prospective tenant would need, according to the context, to take an informed decision to enter the tenancy agreement.
Example 3:
If an estate agent when giving a virtual viewing of a property fails to mention that certain rooms of the property are already rented by other tenants. This would be a misleading omission as the existence of other tenants is information an average tenant would need to know to make an informed decision to enter the tenancy agreement.
3) An aggressive practice
The Consumer Protection from Unfair Trading Regulations 2008 defines an aggressive practice as ‘the use of harassment, coercion or undue influence’ which ‘significantly impairs or is likely significantly to impair the average consumer’s freedom of choice or conduct’ in relation to the lease and causes them to enter the tenancy agreement when they would not otherwise do so.
Undue influence is defined by the Regulations as the exploitation of a position of power in relation to the tenant so as to apply pressure in a way that significantly limits the tenant’s ability to make an informed decision. Coercion for the purposes of the Regulations includes the use of physical force.
Example 4:
If a Landlord threatens a prospective tenant with physical violence unless they sign a tenancy agreement at a higher than market rent this would constitute an aggressive practice
What remedies are available where a Landlord has used an unfair trading practice?
For tenancy agreements entered into on or after 1 October 2014, where an unfair trading practice is a significant reason for the tenant entering into the tenancy agreement, the Consumer Protection from Unfair Trading Regulations 2008 as amended by the Consumer Protection (Amendment) Regulations 2014 provides the tenant with a civil law remedy. Only misleading actions or aggressive practices but not misleading omissions give rise to the below civil law remedies.
A) Right to unwind
The tenant may ‘unwind’ (terminate and be released from any obligations under) the tenancy agreement by informing the Landlord of their intention to reject the contract within 90 days of the tenancy’s start date. It is advisable that a tenant seeking to unwind the tenancy agreement put such a request in writing. If the tenant informs the Landlord that they intend to unwind the tenancy agreement within one month of the tenancy’s commencement, the tenant is entitled to a full refund of the money they have paid out under the tenancy agreement (including the deposit and rent).
B) Right to a discount
Where the 90-day time limit has expired a right to discount may be claimed as an alternative to the right to unwind the tenancy agreement. A tenant may choose to exercise their right to discount in place of the right to unwind even before the expiry of the 90-day time limit. The discount awarded to the tenant will be calculated by the court according to the severity of the prohibited practice used by the Landlord. This discount increases by increments of 25% starting at a 25% discount for a minor prohibited practice ranging to a 100% discount for a very serious prohibited practice. The seriousness of a prohibited practice is assessed by reference to the behaviour of the Landlord, the impact of the practice on the tenant and the time that has passed since the prohibited practice took place. A claim to a discount must be made within six years.[2]
C) Right to damages
A tenant may have a claim for damages as a result of a Landlord’s use of prohibited practices if the tenant has incurred a financial loss or suffered alarm, distress, physical inconvenience, or discomfort. As with the right to discount, claims for damages must be brought within six years.
What if a Landlord refuses to accept the unwinding of a tenancy agreement?
Where a Landlord does not agree to any of the above forms of redress provided to the tenant by the Consumer Protection from Unfair Trading Regulations 2008 as amended by the Consumer Protection (Amendment) Regulations 2014, it will be necessary for the tenant to apply to the court for a declaration that the contract is unwound, a discount is to be awarded or damages are to be awarded.
[1] Reg 3 Consumer Protection from Unfair Trading Regulations 2008 SI 2008/1277. The regulation also defines an ‘unfair trading practice’ as a contravention of the requirements of professional diligence which materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the lease.
[2] This is the limitation period for actions founded on ‘simple contract’ under the Limitation Act 1980
