Part VI
The consumer approach: focussing on the agreement
6.1 We have already indicated that we want to develop a consumer approach to the regulation of the residential housing relationship. Whilst not a new idea,[1] it has not until recently attracted a great deal of attention in the housing context. As the discussion in this Part will show, consumer law should now be seen as an integral part of modern housing law.
6.2 We see considerable advantage in this approach. It should ensure that the terms of agreements are fairly balanced, rather than having unfairly balanced contracts which have to be overridden by other statutory rules. Furthermore, the Office of Fair Trading and other bodies acting on behalf of the Director-General of Fair Trading[2] can require suppliers (landlords) to change the terms of the contract itself without reference to an individual consumer (occupier). In addition, undertakings can be required as to future use of similar contractual terms.
6.3 We build on the recent extension of consumer protection legislation in the UK to housing. The provisions of the Unfair Terms in Consumer Contracts Regulations 1999[3] now apply to tenancy agreements and we think would equally apply to contractual agreements under our proposed scheme.
6.4 The discussion which follows is divided into a number of sections.
(1) The need for a contract.
(2) The application of the law on unfair contract terms to housing agreements.
(3) The need for a written agreement.
(4) The terms of the agreement.
(5) Sanctions.
(6) Variation of agreements.
(7) Ensuring respect for the contract.
(8) Alternative dispute resolution.
6.8 We provisionally propose that our scheme should, subject to the discussion in Part IX, apply to any contract for rent which confers a right to occupy premises as a home.[4]
6.10 Equally it would exclude from our scheme those agreements where no rent is payable and there is no other consideration.[5] It will also exclude those family and other arrangements which are clearly designed to operate informally. Therefore acts of generosity in allowing someone to occupy property rent-free would operate outside the proposed scheme.
6.11 The Office of Fair Trading states that their Guidance on Unfair Contract Terms in Housing aims “to help ensure fair and equitable relations between landlords and tenants”.[6] Historically, governments have intervened in the housing market to provide a legislative counter-balance to the inequalities of bargaining power that exist there. Contractual terms have been over-ridden by statute law. This has been a source of confusion, as documents do not have the legal effects that they appear to have; and landlords and tenants have often failed to understand how statute law affects their position.
(1) greater clarity, given that the two parties will have in front of them a single document with all the relevant terms in plain English[7], rather than having to find and understand various statutory provisions;
(2) the ability to translate such a document into other languages for the benefit of those whose first language is not English;
(3) additional flexibility in what can be agreed;
(4) an appreciation that being a residential landlord – whether on a large or small scale – is as much about providing a service to customers as it is about temporarily granting a right to occupy land; and
(5) a clearer recognition of the role of consumer protection in housing.
6.14 We propose to increase this emphasis on the contract in two principal ways.
6.16 Second, we propose that the written agreement should set out clearly the circumstances in which possession may be recovered by the landlord.[8] Our detailed proposals on security are set out in Parts VII and VIII.
6.17 Some may object that a consumer approach is not appropriate for renting homes. For example, a defective house cannot simply be returned to the landlord for a cash refund[9] (although of course the same could be said of services). We intend to be guided rather than led by the consumer approach, to ensure that it is applied appropriately in the housing context.
6.21 The European Council of Ministers passed the Directive on Unfair Terms in Consumer Contracts in 1993.[10] It applies a test of “fairness” to standard terms in consumer contracts. The Directive was first implemented in the UK by the Unfair Terms in Consumer Contracts Regulations 1994, but it was not clear whether they covered housing. This uncertainty was removed by the 1999 Regulations[11] of the same name, which revoked and replaced the 1994 Regulations. They make it clear that the EU Directive applies to housing contracts.[12]
6.22 Enforcement action started to be taken on such agreements from the time the new Regulations came into effect.[13] The impact of this has become clearer since November 2001, when the Office of Fair Trading published its Guidance on Unfair Terms in Tenancy Agreements. This interprets[14] the Regulations as they apply to terms in assured tenancy agreements which have come to the attention of the Office.[15] The guidance reflects the Office of Fair Trading’s view of the law; there have been no definitive judicial statements on the correctness of their views.[16]
6.24 The Law Commission is working on proposals to create a new unified and simplified unfair contracts regime to replace the two distinct regimes which currently operate under the Regulations and the Unfair Contract Terms Act 1977[17] (“UCTA”).
6.25 The Regulations do not apply to terms that reflect “mandatory statutory or regulatory provisions”.[18] Recital 13 of the Directive states that the phrase “mandatory statutory or regulatory provisions” includes “rules which, according to the law, shall apply between contracting parties provided no other arrangements have been established” on the basis that such mandatory (and default) provisions “are presumed not to contain unfair terms”.[19] The exemption therefore applies to default rules intended to apply in the absence of any express contractual provisions, but which may be excluded by agreement, and to terms which attempt to reflect such default terms. This appears to cover our proposed default terms and any express terms in an agreement which reflect our default terms, provided they are in plain intelligible language and are not significantly different from our default terms to the detriment of the consumer.
(1) This may therefore apply to some requirements imposed on registered social landlords by the Housing Corporation.
(2) It could also apply to terms required of a private landlord by the local authority under a licensing scheme[20] (such as, that for houses in multiple occupation under Housing Act 1985, or the Department for Transport, Local Government and the Region’s proposed selective licensing of private landlords in areas of low demand).
(3) The residential management codes produced by the Royal Institute of Chartered Surveyors do have statutory authority[21] but are probably not covered, in that they do not impose mandatory requirements on the terms of a tenancy agreement.
6.27 The aspects of the Regulations most relevant to housing agreements are those relating to transparency and fairness, procedural and substantive.[22]
6.28 The Regulations require all relevant terms to be expressed in “plain, intelligible language.”[23] The Guidance stresses that terms must be in plain language so that they are intelligible to occupiers without legal advice, that occupiers must have an adequate chance to read them before becoming bound by them and that important terms should be drawn to occupiers’ attention. The Guidance objects to legal terminology such as “indemnify”.[24]
6.29 The Regulations provide that if a term is ambiguous, the interpretation which is most favourable to the occupier will prevail.[25]
6.31 The Regulations prohibit procedural unfairness. Thus terms which are substantively fair may be rendered unfair in light of the surrounding circumstances at the time of the conclusion of the contract.[26] Recital 16 to the European Directive states that the relevant circumstances include the respective bargaining strength of the landlord and occupier, any inducement provided by the landlord to enter the contract, unfair surprise and whether the contract was entered into fairly and equitably. However, these circumstances have not been set out in the Regulations. One relevant circumstance could be any previous enforcement action taken against that landlord’s use of related terms. The Guidance suggests it will consider factors such as the length and complexity of the contract and whether the occupier was given adequate time to read the terms.
6.32 The main aim of the Regulations is to eliminate substantive unfairness. Under the Regulations, a term will be unfair if its substance causes a “significant imbalance” in the parties’ rights and obligations, to the detriment of the consumer (in our case, the occupier).[27] There need not be a particular imbalance to a particular occupier. A term will be unfair simply if it is has the potential to cause detriment to occupiers. The Guidance stresses that a term can be unfair irrespective of the landlord’s intention in drafting it, and whether or not it is actually used in a way that is detrimental to the occupier.
6.34 In applying the test of fairness, the Guidance emphasises the breadth of the requirement of good faith[28] and focuses on terms which give power to the landlord that the landlord would not otherwise have or protect the landlord in a way that puts the occupier at a disadvantage.[29] The general starting point for the Office of Fair Trading is to ask what would be the position for the occupier if the term did not appear in the contract.
6.36 Under the Regulations, if a court finds a term to be unfair then it will not be bindingon the occupier and the landlord will not be able to rely on it.[30] This means the occupier will have a defence against any action taken by the landlord to enforce the term, whether by repossession, injunction, damages or otherwise.
6.37 The rest of the contract will continue if it is able to exist without the unfair term.[31] The effect of removal of the term is that the general housing law, both common law and statute law, will apply to regulate the parties’ obligations in the area that was covered by the unfair term.[32] In the context of our scheme, this means that the appropriate default term is substituted for the unfair term.
6.38 It is less clear whether occupiers can take their own court action to have unfair terms struck out. Under current housing legislation, each of the three principal Acts confers a power on the county courts to make declarations. However, they are inconsistent and unclear.[33] In particular, none of them appears to give the courts the power to make declarations as to what are the express terms of the original tenancy agreement. (This can be contrasted with section 1 of the Employment Rights Act 1996, which gives an employee a right to receive a written statement of the terms of the employment contract and to go to the Employment Tribunal to provide a declaration as to the terms, if none is forthcoming.)
6.39 The Regulations require various enforcement agencies,[34] including the Director General of the Office of Fair Trading and local authorities with trading standards functions,[35] to consider all complaints about unfair terms (except frivolous or vexatious ones[36]) and to give reasons[37] if they do not take the matter further. The enforcement agency may apply for an injunction[38] which the court may grant on such terms as it sees fit.[39] The court may grant an injunction not just against the use of the particular unfair term in question but also against any similar term or terms having like effect, used or recommended for use by any person.[40] Alternatively, the enforcement agency may seek an undertaking from the landlord that the term will no longer be used.[41] Office of Fair Trading cases are usually resolved by the Director General accepting informal undertakings in lieu of court proceedings.
6.40 The Regulations contain three key limitations. They are
(1) limitation to cases where landlords are ‘suppliers’ and occupiers are ‘consumers’;
(2) limitation to cases where terms are not individually negotiated; and
(3) exclusion of “core” terms.
6.42 The Regulations define a “supplier” as “any natural or legal person who… is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned.” The definition of “supplier” appears to include letting and estate agents, local or public authorities, Government departments and housing associations.[42] The Regulations define a “consumer” as “any natural person who… is acting for purposes which are outside his trade, business or profession”.
(1) There has never been any limitation of housing rights to cases where the landlord is acting in the course of a business. Housing law has sought to make housing contracts fair to occupiers of even the casual or small landlord.
(2) We are also anxious not to distinguish between different categories of landlord. “Landlord neutrality” is one of the goals of the reform we are suggesting. We would want to see the new housing scheme applying to any agreement covered by it.
6.46 At present, the Regulations are designed to target unfair terms in pre-formulated standard contracts only. They do not apply to terms that have been individually negotiated.[43] The onus is on the landlord to demonstrate that a term has been individually negotiated.[44] A term will always be regarded as not having been individually negotiated where it has been drafted in advance[45] and the occupier has thus not been able to influence its substance.[46]
6.48 The Law Commission will be provisionally proposing that the new unified regime of unfair contract terms should extend the Regulations to both negotiated and non-negotiated terms.[47] If this happens, all terms in housing agreements, other than core terms, will be subject to the test of fairness, whether they have been negotiated or not.[48]
6.49 We wish to promote fairness and transparency in the terms of housing contracts. We also wish to encourage negotiation of terms, but not at the expense of fairness and transparency. We believe that the whole agreement should be fair and transparent (except that the idea of fairness does not apply to core terms[49]). This logic applies as much to the negotiated terms as to the new default terms (proposed at paragraph 6.117 below). The default terms will be designed to be fair and transparent, even though they fall outside the scope of the Regulations.[50] The only way to make negotiated terms fair and transparent is to subject them to the Regulations test.
6.51 The test of fairness in the Regulations does not apply to terms which relate to the “definition of the main subject matter of the contract” or to the “adequacy of the price or remuneration”.[51] The extent of the “core” is thus not precisely defined. The Guidance explains that – in the context of housing agreements – these “core terms” include those stating the rent, the details of the property and the length of the agreement. It may well be the case that a requirement for payment of a deposit would be regarded as a core term. (On the other hand a term dealing with the return of a deposit at the end of the agreement would probably not be part of the core.)
6.57 The courts have been robust under previous security of tenure regimes in disregarding “sham” terms, which the parties did not mean to be taken literally but were intended by the landlord to avoid statutory provisions. Shams have faded in importance as landlords have been able to use assured shorthold tenancies, without the uncertainty of avoidance devices. However, one landlord recently sought to enforce a term allowing a rent increase sufficient to take the tenant outside of the scope of the Housing Act 1988.[52] Following other decisions on shams, this was held invalid by the Court of Appeal. It is reasonable to assume that the courts will continue to declare obviously sham terms invalid.
6.58 Another area of law which may render contract terms invalid is discrimination law. Identical provisions exist in section 77 of the Sex Discrimination Act 1975 and section 72 of the Race Relations Act 1976, with similar provisions in section 26 of the Disability Discrimination Act 1995, which render void any contract term which is discriminatory. An example of the effect would be that if a landlord decided to negotiate more restrictive nuisance clauses for single mothers than other occupiers (in particular single fathers) or tougher restrictions on making noise for black occupiers than white occupiers. Such terms would be void.[53]
6.62 At present there are four sets of requirements relating to writing. They are
(1) requirements relating to initial validity;
(2) requirements for provision of information about the terms of the agreement;
(3) requirements for provision of information about the landlord; and
(4) requirements relating to rent books.
We believe these should be made much more coherent.
6.64 The contract between the landlord and the occupier may comprise a lease or a licence. A lease is, in most cases, an estate in land, and is therefore potentially binding on persons outside the landlord-tenant relationship (third parties). Whether the lease has this proprietary impact will depend on its compliance with statutory formality requirements and on its registration.[54]
6.67 These proposals do however raise a further question: at what point should the agreement become fully effective? On land law principles, oral agreements only take effect when the tenant enters into possession.[55] Were our scheme to apply only to leases, this might be the preferred approach.
6.71 We also propose that default terms should be imposed if the oral agreement is not put into writing within a defined period of time.[56] In addition we propose that the landlord who fails to provide a copy of the written agreement should be subject to the sanction of loss of rent (and possibly criminal sanctions).[57]
(1) Assured shorthold tenancies. Following amendments to the assured shorthold tenancy regime in 1996, it is now provided that a tenant who has not been given a written statement of certain key provisions[58] in the assured shorthold tenancy agreement may require the landlord to provide that evidence.[59] Failure to provide this information is a criminal offence.[60]
(2) Accelerated possession proceedings.[61] The rules relating to the accelerated possession procedure[62] provide that the procedure cannot be used unless the claimant is able to provide a written copy of the tenancy agreement available for the court to peruse. This amounts, in practice, to a further requirement that the terms of the tenancy be set down in writing, which particularly impact upon private sector landlords.
(3) Secure tenancies. Landlords letting secure tenancies are under an obligation to provide written details of the express terms of the secure tenancy,[63] the provisions relating to the Right to Buy, and the provisions of sections 11 to 16 of the Landlord and Tenant Act 1985, which relate to the landlord’s repairing obligations.[64] Local authority landlords are required to provide the latter two elements of this information annually.[65] There is no obvious sanction for failure to comply with these provisions, though no doubt any such failure would be regarded as maladministration by the Local Government Ombudsman.
6.75 We further provisionally propose that the duty to put the agreement into writing should fall on the landlord; that the landlord should be required to provide a copy for the occupier; and that in any court proceedings that might arise under the agreement, the landlord should be required to produce a copy of the written agreement. [66]
(1) On assignment – where a landlord assigns his interest in premises, which includes a dwelling, to a new landlord, then the new landlord is to give any tenants notice in writing of the assignment and of his or her name and address.[67] Failure to do this is a summary offence, punishable by fine.
(2) On request – a tenant has the right to make a written request for the landlord’s name and address to the person who demanded or who last received the rent payable, or to any other person acting as agent for the landlord, and that person must provide a written reply within 21 days.[68] Again failure to do this is a criminal offence, punishable by fine.
(3) Service of notices – there is an obligation on landlords to provide tenants with an address in England and Wales at which notices, including notices in proceedings, may be served on them by tenants.[69] Failure to comply with these requirements renders any rent or service charge not due until the requirements have been satisfied. While this does not make the rent irrecoverable from the tenant, such failure does mean a tenant who delays paying is not in arrears. Thus there may be delay in the payment of the rent, to the temporary benefit of the tenant and to the detriment of the landlord. However, tenants may not understand they are still liable for the rent which may lead to a problem with arrears once the details are provided.
(4) Service charges and demands for rent – there is a general requirement that any written demand for rent or other sums due under the tenancy must include the name and address of the landlord and, if that address is not in England and Wales, an address in England and Wales at which service of notices on the landlord by the tenant may be made.[70] However, there is no specific sanction for failure to comply unless part of the amount demanded is a service charge, rather than rent. If so, then the service charge element – but not any rent element – will be treated as not being due until the details are provided, in a similar fashion to that described above.
6.83 Under the current law there is a requirement that in situations where rent is payable weekly the landlord must provide a rent book. Failure to do so is a criminal offence.[71] However the limitation that the rent be “payable weekly” means that in many situations where a rent book might be thought appropriate, for example where rent is payable fortnightly or monthly, these requirements do not apply. Also the statute does not define a rent book.
(1) The importance of the issue does not vary according to whether the rent is weekly, fortnightly or monthly.
(2) We are not convinced that criminal sanctions are appropriate or effective in this area.
(3) These provisions go back to a time when rent was usually collected personally in cash. They do not reflect the increase in payment methods which are automatically documented, such as cheques and direct debits.
The problem appears to be essentially one of evidence and perhaps the discouraging of fraud, when rents are collected in cash.
6.91 The format of written agreements is a key issue in consumer law. It is essential that important contractual obligations are not hidden in the “small print”. We envisage the regulations containing a Schedule which sets out a full model agreement[72] including the core and compulsory terms, as well as the default terms.
6.98 Assistance with drafting the model agreements can be gained from the range of model contracts currently available, particularly for housing associations. Models from other legal systems such as the Scottish model secure agreement[73] may also assist.
(1) the names and addresses of the parties;
(2) the address and details of the property;
(3) the rent and the frequency of its payment;
(4) the date of commencement of the tenancy; and
(5) the length of any fixed term.
6.102 We provisionally propose that the core terms should be included in the written agreement.
6.104 We believe that the written agreement must set out these terms on its face and in clear terms. They will need to be included in the requirement for writing and in any model agreement. The terms will have to be drafted with gaps which will require completion by the parties with the details of each individual agreement.[74]
6.105 These terms will also be the “core” terms as defined in regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations. As such they will not be subject to the requirement of fairness, as long as they are expressed in plain and intelligible language.[75]
6.107 The security terms are those which, under our proposals, set out the circumstances in which the landlord can go to court to seek an order for possession. These are discussed in detail in Parts VII and VIII.[76]
6.109 The statutorily implied terms as to repairs and fitness in section 8 and section 11 Landlord and Tenant Act 1985 would be included here if they are to be retained. (The Law Commission[77] has proposed that any new lease of a dwelling should include a requirement on the landlord that the dwelling should be fit when first let, and maintained in a fit condition thereafter. The Government supports this general approach,[78] but the Department for Transport, Local Government and the Regions is developing a new system for the fitness standards for rented housing. The exact delineation of the implied terms will therefore depend on the outcome of those changes.) In any event these terms are likely to require some revision if they are to apply to all residential occupancy agreements – licences as well as tenancies – covered by our proposals.
(1) The parties will be able to adopt the default terms expressly, and by doing so will be guaranteed that those terms are compliant with the Unfair Terms in Consumer Contract Regulations.
(2) They will also fill the void that would be caused by the failure of the landlord to provide a written agreement, or, where a written agreement is provided, a failure to deal with all the issues listed.[79]
6.116 If the landlord does not provide a written version of any oral agreement made before the occupier moves in, the default terms will apply instead of the orally agreed terms from the end of the 2 week period of grace.[80]
6.117 We provisionally propose that
(1) the regulations should prescribe a list of items relating to the parties’ rights and obligations under the agreement which must be covered by a term in the agreement and which will be set out in Part C of the agreement;
(2) that in relation to each item there will be a default term which takes effect in default of an express term but can be overridden by an express term;
(3) that the agreement should set out the terms in full, not just by reference to the regulations; and
(4) that the default terms will be applied either where the landlord has failed to provide a written agreement, or where the agreement fails to address all the prescribed matters.
6.118 We invite views on the issues which should properly be prescribed in Part C of the agreement.
6.123 In making our proposals we have borne the following factors in mind.
(1) We are not convinced that criminal sanctions are, on their own, a realistic or appropriate way to enforce writing requirements. We understand that landlords are only rarely prosecuted under the existing offences, and they do not seem to be well known, which makes their efficacy open to doubt. A civil sanction should be the primary sanction, and should be serious enough to motivate landlords.
(2) While failure to provide a written agreement means that default terms will be imposed and will apply instead of any relevant terms agreed orally,[81] this is not sufficient to enforce the requirement for writing.
(3) We are not convinced that the sanction currently available for the landlord’s failure to provide an address for service,[82] which renders the rent not due until the address for service has been provided, is in the occupier’s interest. It may well lead to an occupier already in financial difficulty getting further into debt, as the liability accumulates and the whole rent becomes due once the address for service is provided.
(4) While occupiers may be able to apply to the rent assessment committee or the court[83] for an order that the landlord should provide an accurate or corrected written copy of the agreement, this might not be sufficient to cover the whole of the writing requirement.
6.125 We think landlords (some of whom may be former owner-occupiers letting only one property) should be given a period of grace, perhaps two weeks from when the occupier moves in, in which to put the agreement in writing if they have not done so already.[84] We would then propose that, if they fail to do so, they should be deemed to owe the occupier an amount equivalent to the rent for each day of delay – starting with the day on which the occupier went into possession of the dwelling and continuing up to a maximum of, say, two months’ rent. The occupier would be entitled to sue for this money or – more practically – to withhold rent[85] in order to recover it.[86]
6.130 We explained above that default terms will be implied into an agreement where either no term has been agreed or a term has been agreed but not put into writing.[87] In some cases landlords may want to adopt these terms wholesale; in others they will be forced to rely on them, because of their failure to put them into writing before the end of the two-week period of grace.
6.137 We provisionally propose that provision of information about the landlord should be treated as one of the matters on which written information must be provided, so any failure will attract the rent sanction we provisionally propose.[88]
6.143 We note that the Unfair Terms in Consumer Contracts Regulations require variation clauses to be fair to the occupier. The way that types of variation clause are covered in the “grey list” suggests that there are limits on how they can be seen as fair.[89]
6.146 A particular problem has arisen from section 13(1)(b) of the Housing Act 1988 which removed any control from contractual rent variation clauses. Some registered social landlords have complained that the timing requirements in the section make it too difficult to use and that the alternatives are also awkward, leading to widespread problems over potentially invalid rent increases.[90] Recently the Court of Appeal struck down a sham use of a rent variation clause.[91]
6.150 Statutorily implied terms are listed in Part B of the agreement.[92] We envisage that any change to these terms should be reflected in an amendment to the statutory instrument which prescribes the terms of the agreement. There should be a term in section B of the agreement which warns the parties that statutorily implied terms may be subject to change by Parliament. Any sidenotes to such provision could refer to any website where up-to-date information could be found.
6.151 In the current secure tenancy scheme there is an effective bar in section 102(1) of the Housing Act 1985 on the use of contractual variation clauses.[93] Instead a statutory procedure is prescribed, as an alternative to agreement, which involves consultation of tenants over the changes. Challenges as to the adequacy of the consultation can therefore be made by judicial review.
6.152 Other landlords who fail to include a variation clause (or who include one which is wholly invalid under the Unfair Terms in Consumer Contracts Regulations) will have no power to vary non-rent terms without agreement.[94]
6.159 Where landlords are able to seek an order for possession, without the need to prove any occupier default, but simply by giving notice,[95] the occupier’s lack of security may make it hard to enforce the landlord’s contractual obligations. Depending on the state of the local housing market, a landlord may feel able simply to look for a more compliant occupier. The ability to evict without reason limits the extent to which a landlord will comply with a term he or she does not like; the same could be true of occupiers in areas of low housing demand.
6.162 One of the arguments in favour of retaining the six months’ moratorium on the power of the court to order possession is that occupiers may need a period of protection against notice-only eviction so that they can enforce their rights to repairs, although it is open to question how realistic this protection is in practice.[96]
6.165 A regular feature of housing law in the Commonwealth and the United States is protection against “retaliatory eviction”.[97] When landlords take possession proceedings where they do not need to prove occupier default, occupiers can defend the eviction – and possibly claim damages – if they can prove the eviction is motivated solely by the occupier’s assertion of a statutory or contractual right. In some jurisdictions there is a presumption of such a motive if the eviction comes within a certain time of the occupier claiming the right (for example, by reporting a problem to the relevant enforcement agency).
6.167 In any event, there would be serious problems in proving the landlord’s motivation.
6.168 In UK discrimination law, which also applies to housing, there are separate protections against “victimisation” for asserting rights against discrimination.[98] It does not appear that these could be used as a defence to an eviction but might form the basis for a claim for damages, the prospect of which may deter the landlord from acting in such a retaliatory fashion. It would only apply in a context where the anti-discrimination legislation operated.
6.169 In UK employment law no detriment can be imposed on an employee for claiming any of a set of statutory rights.[99] Normally an employee must have a year’s service to qualify for rights against unfair dismissal. But where a dismissal can be shown to be motivated by the employee’s assertion of a statutory right, then it will be automatically unfair and the employee will be protected even before completing a year’s service.[100]
6.173 We seek the view of consultees on the following questions:
(1) Should the landlord’s desire to evict an occupier who has sought to assert his contractual or statutory rights be the basis of a defence to possession proceedings, as is common in the Commonwealth and the USA?
(2) Should a former occupier be able to use the landlord’s “improper motive” as the basis of a claim for damages after the eviction?
(3) Where the landlord’s improper motive could be shown, should the court have power to order reinstatement of the occupier in the premises, notwithstanding the complications that might arise, particularly where premises had been re-let?
6.177 In the specific context of possession proceedings, we are currently of the opinion that there will only be limited scope for use of the various forms of alternative dispute resolution. Indeed we have adopted the fundamental principle that orders for possession should be made by a court.[101]
6.179 Another argument in favour of seeking alternatives to litigation is the notable feature of housing relationships that they have the potential to be long lasting. Avoiding the inherently adversarial proceedings of the court proceedings may be critical to maintaining long-term relationships. Therefore in housing law, generally, we think alternative dispute resolution has a great deal to offer. We support the powerful steer of the Civil Procedure Rules and the recent comments of Lord Woolf in Cowl v Plymouth City Council.[102]
(1) The Independent Housing Ombudsman[103] deals with disputes between registered social landlords and their occupiers, and has extended his scope to private landlords that wish to subscribe to his services.
(2) The tenancy deposit scheme is a pilot scheme run by the Independent Housing Ombudsman, which holds the deposits of private sector tenants and provides a speedy resolution of disputes about the return of deposits.
(3) The Office of Fair Trading and local authority tenancy relations officers are increasingly using persuasion to get landlords to adhere to the law, without having to start proceedings for civil and criminal sanctions against landlords to enforce compliance.[104]
(4) Community mediation can play a very significant role in resolving neighbourhood disputes, although it is seriously constrained by insecure funding and its availability is limited.[105]
[1]See eg the paper by A Murie et al, “The Consumer Implications of the Housing Act 1988” (1988) SAUS Working Paper 77, University of Bristol.
[2]Principally local authorities with trading standards departments.
[3]SI 1999 No 2083.
[4]In considering this approach we have considered statutory provisions in a number of Commonwealth countries.The New Zealand Residential Tenancies Act 1986 applies, except where specifically excluded, to every tenancy for residential purposes. The South Australian Residential Tenancies Act 1995 states its purpose as regulating the relationship of landlord and tenant under residential tenancy agreements. Similarly the New South Wales legislation focuses on the residential tenancy agreement. Section 3 of the New South Wales Residential Tenancies Act 1987 defines this as “any agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence: whether or not the right is a right of exclusive occupation, whether the agreement is express or implied, and whether the agreement is oral or in writing, or partly oral and partly in writing, and includes such an agreement granting the right to occupy residential premises together with the letting of goods”. A tenancy is defined as “the right to occupy residential premises under a residential tenancy agreement”. This definition makes the agreement the key to statutory rights and avoids the lease/licence distinction.
[5]For example, the provision of money’s worth. To a large extent, this replicates the current law. Paragraph 3 of Schedule 1 to the Housing Act 1988 excludes tenancies for no rent.
[6]Office of Fair Trading, Guidance on Unfair Terms in Tenancy Agreements (November 2001) Part I para ii. Cf http://www.oft.gov.uk/News/Publications/Leaflet+Ordering.htm under the Reports link.
[7]One of the tests of fairness is that drafting should be in plain English.
[8]These will replace the existing statutory grounds for possession, set out in the tables in paras 3.41 to 3.46.
[9]Though see Hussein v Mehlman [1992] 2 EGLR 87 where it was held that tenants can accept landlords' repudiatory breaches as terminating tenancy under normal contract rules despite the property nature of a tenancy.
[10]Council Directive 93/13/EEC.
[11]The Unfair Terms in Consumer Contracts Regulations 1999, SI 1999 No 2083.
[12]This was achieved by removing the words “goods and services” from the Unfair Terms in Consumer Contracts Regulations 1994, SI 1994 No 3159.
[13]This has been documented on the Office of Fair Trading’s website; cf the unfair contract terms bulletins at http://www.oft.gov.uk/News/Publications/Leaflets+Ordering.htm under Reports and then Unfair contract terms categories.
[14]The Office of Fair Trading, Guidance on Unfair Terms in Tenancy Agreements (November 2001) Part II para i makes it clear that the courts will have the final decision as to whether any term is unfair.
[15]In particular, to pre-formulated assured and assured shorthold tenancies and pre-tenancy agreements in England and Wales.
[16]So far as we are aware there are no cases currently pending before the courts.
[17]The 1977 Act differs, for our purposes, from the Regulations in that does it not apply to interests in land; it deals, in the main, with terms such as exclusions clauses and it applies to both negotiated and non-negotiated forms of such terms.
[18] SI 1999 No 2083, reg 4(2)(a).
[19]These words from the Recital are not repeated in the Regulations but we believe – as does the Consumer Affairs Directorate of the Department of Trade and Industry – that they should be used to interpret the Regulations. The Department’s Response following the European Commission’s consultation recommends redrafting the Regulations to apply clearly to “terms which in substance are simply the ‘default rules’ which would apply were there no express clause on the subject”. Cf Department of Trade and Industry, Commission Review of Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts (February 2001) para A1(b)(i); cf also: http://www.dti.gov.uk/CACP/ca/consultation/uct.htm.
[20]Cf Housing Act 1985, Part XI and Department for Transport, Local Government and the Regions, Selective Licensing of Private Landlords – A Consultation Paper (November 2001). Cf also: http://www.housing.dtlr.gov.uk/information/consult/licensing/.
[21]Under the Leasehold Reform, Housing and Urban Deve7lopment Act 1993, s 87.
[22]In the following paragraphs we use the term “occupier” rather than “tenant” to reflect the terminology we have adopted in this paper; the Guidance itself refers to “Tenancy Agreements”.
[23]SI 1999 No 2083, reg 7(1).
[24]The Office of Fair Trading, Guidance on Unfair Terms in Tenancy Agreements (November 2001) Part 2, para vii and Part 5. The Department of Trade and Industry Response at para A3 recommends that such requirements should be spelled out in the European Directive.
[25]SI 1999 No 2083, reg 7(2).
[26]Ibid, reg 6(1).
[27]SI 1999 No 2083, reg 5(1)
[28]The Office of Fair Trading, Guidance on Unfair Terms in Tenancy Agreements (November 2001) Part II para iii – emphasising that it should not be possible to use a term in a deceitful way, whether it is so used or not.
[29]Ibid, Part II para iv.
[30]SI 1999 No 2083, reg 8(1).
[31]Ibid, reg 8(2).
[32]We provisionally propose in our consultation paper on Unfair Terms in Contracts (forthcoming) that the new legislation should provide that a term which is unfair should be of no effect to the extent that it is detrimental to the consumer, so that the court can strike out only that part of a clause that is unfair, leaving the rest intact. The contract would continue to bind the parties if it was capable of continuing its existence without the unfair term.
[33]The clearest is Housing Act 1985, s 110 which includes an express power to make declarations even where this is the only remedy sought. Narrower is Rent Act 1977, s 141 which has a specific list of issues. Declarations are not mentioned in Housing Act 1988, s 40 but s 6 gives the rent assessment committee power to decide on variations of the terms of a statutory tenancy, while s 20A merely creates a criminal offence of failing to provide a written version of the terms.
[34]SI 1999 No 2083, Sched 1 lists the Qualifying Bodies – including eg the Consumers’ Association.
[35]Defined by the Weights and Measures Act 1985, s 69 to include county, metropolitan district and London borough councils.
[36]SI 1999 No 2083, reg 10(1)(a).
[37]Ibid, reg 10(2). According to reg 3(1) “court” in relation to England and Wales and Northern Ireland means a county court or the High Court.
[38]Ibid, reg 12.
[39]Ibid, reg 12(3).
[40]Ibid, reg 12(4).
[41]The Director is entitled, if he considers it appropriate to do so, to take into account such – and any other – undertakings in deciding whether or not to apply for an injunction: SI 1999 No 2083, reg 10(3).
[42]In our consultation paper on Unfair Contract Terms, we provisionally recommend that the new legislation should make it quite clear that contracts between consumers and government departments, local or public authorities may count as consumer contracts.
[43]SI 1999 No 2083, reg 5.
[44]Ibid, reg 5(4).
[45]Ibid, reg 5(2). This means that if a term was drawn up before any negotiations and was not itself negotiated, it will be covered by the Regulations.
[46]Ibid, reg 5(2). Where the standard terms remain untouched by any negotiations (eg where one party has tried to negotiate an improvement to the contract but has failed to obtain it) then the final deal will be considered to have been made on the defendant’s standard terms: cf St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481.
[47]Law Commission, Unfair Terms in Contracts (forthcoming).
[48]At present the enforcement authorities do not have power to take action against such terms; the Law Commission will be consulting on whether these authorities should have power to act against particular practices of negotiating unfair terms.
[49]See paras 6.51 and 6.52 below on the exclusion of core terms from the requirement for fairness in the Regulations, though not from the requirement for transparency.
[50]See para 6.25 above on the relationship of the default terms to the Regulations.
[51]SI 1999 No 2083, reg 6(2).
[52]Bankway Properties Ltd v Penfold-Dunsford and another [2001] EWCA Civ 528; [2001] 1 WLR 1369.
[53]The statutes allow the victim of the discrimination to apply to the county court to remove or modify the offending term .These provisions do not apply to “small landlords”.
[54]See generally C Harpum, Megarry and Wade: The Law of Real Property, (6th ed 2000) at 14–029 to 14–053. These requirements date back to the Statute of Frauds 1677.
[55]An oral agreement to create a fixed term tenancy may take effect as a periodic tenancy. Cf Long v Tower Hamlets London Borough Council [1996] 2 All ER 683 and the commentary on the issue by Susan Bright, “Beware the Informal Lease” [1998] 62 Conv (NS) 229, 229 to 235. Until that case it was generally thought that tenancy agreements could be signed in advance of the tenancy without using a deed, but there does not appear to have been any significant subsequent move to use deeds or to sign agreements only on the day of the start of the tenancy.
[56]See below para 6.117.
[57]See below paras 6.126 and 6.128.
[58]These provisions are: the date on which the tenancy began or, if a statutory periodic tenancy, the date it came into effect; the rent payable under the tenancy and the dates on which it is payable; any term providing for review of the rent. Cf Housing Act 1988, s 20A (2)(introduced by Housing Act 1996, s 97).
[59]Housing Act 1988, s 20A (1) (introduced by Housing Act 1996, s 97); it applies only to assured shorthold tenancies created after the 1996 amendments came into effect (28 February 1997).
[60]In the light of Shaw v Groom [1970] 2 QB 504 (see note 71 to para 6.83 above) it is unlikely that failure to comply would render rent irrecoverable.
[61]See para 8.13 below.
[62]CPR Pt 55, r 12.
[63]The specific requirement for provision of copies to individual tenants only relates to those terms which are not implied by law and are not already contained in any written lease – cf Housing Act 1985, s 104(2)(b). There is also a duty to provide tenants with a copy of general information; the authority must publish it in such form as it considers best suited to explain in simple terms, and so far as it considers it appropriate, the effect of the express terms of its secure tenancies – cf s 104(1)(a) and s 104(2)(a).
[64]Housing Act 1985, ss 104 (1) and (2).
[65]Housing Act 1985, s 104(3), inserted by the Leasehold Reform, Housing and Urban Development Act 1993, s 123.
[66]Under the CPR Practice Direction 16, para 7.3(1) requires a claimant suing on a written agreement to attach a copy of it to their particulars of claim. There is no mention of what happens when the claimant has lost their copy, but the purpose of the requirement does not seem to be to stop someone being able to sue in that case.
[67]Landlord and Tenant Act 1985, s 3.
[68]Landlord and Tenant Act 1985, s 1. Under s 2, where the landlord is a corporate body, there is a separate right to obtain the names and addresses of the directors and the secretary of the landlord company.
[69]Landlord and Tenant Act 1987, s 48.
[70]Landlord and Tenant Act 1987, s 47.
[71]Landlord and Tenant Act 1985, s 4. Sections 5 and 6 require certain prescribed information to be printed in rent books. Cf also the Rent Book (Forms of Notice) Regulations, SI 1982 No 1474. However rent due is still recoverable despite the failure to provide the rent book: Shaw v Groom [1970] 2 QB 504.
[72]There could be more than one model agreement eg one for type I, one for type II fixed terms and one for type II periodic.
[73]See para 4.35 above. The model agreement is produced under the Housing (Scotland) Act 2001, s 23(3) along with guidance. It is published as the Scottish Executive, Housing (Scotland) Act 2001: Model Scottish Secure Tenancy Agreement (October 2001) and is available at http://www.scotland.gov.uk/library3/housing/msst-00.asp, along with guidance.
[74]An example might be “ … the rent will be £ [insert figure here] per [insert period here, for example, week, fortnight, calendar month] … ”
[75]See above paras 6.51 and 6.52.
[76]Many years ago Professor A A Nevitt, the distinguished housing policy scholar, described the Rent Act grounds for possession as “the poor man’s lease” for they do, in effect, set out in statutory form the conditions for bringing a tenancy to an end that would in practice be found in a privately drawn contractual lease.
[77]Landlord and Tenant: Responsibility for State and Condition of Property (1996) Law Com No 238.
[78]Department for Transport, Local Government and the Regions, Quality and Choice: A Decent Home for All, The Housing Green Paper (April 2000), para 5.29.
[79]This will also apply to the compulsory terms.
[80]See para 6.126 below.
[81]See para 6.117 above.
[82]See para 6.79(3) above.
[83]Depending on the response to the issue raised in para 6.55 above.
[84]We would also see this as catering for cases where there are legitimate reasons for starting a tenancy while negotiations are still ongoing, although we would not be keen to encourage the idea that doing so is a sensible approach given the scope for disputes.
[85]Whether this sum was the first two months’ rent or the rent of any later period, subject to the normal limitation rules.
[86]This might be difficult in housing benefit cases.
[87]See para 6.117 above.
[88]See para 6.126 above.
[89]Cf the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999 No 2083 Sched 2, paras 1(j) to (l) – as limited in scope by paras 2(b) to (d). Cf also the Office of Fair Trading, Guidance on Unfair Terms in Tenancy Agreements (November 2001) Part 3, Groups 10 to 12. In particular, it should be noted that although the clause setting the original price or rent would appear to be a “core” term, and therefore not covered by the requirement of reasonableness, nevertheless para 1(l) of Sched 2 makes it appear that the regulations treat a rent variation clause as not being a core term.
[90]Cf Andrew Arden, “The Section 13 Debacle – A Job for Government” [2001] JHL 61.
[91]Bankway Properties Ltd v Penfold-Dunsford and another [2001] EWCA Civ 528; [2001] 1 WLR 1369.
[92]See paras 6.108 to 6.110 above.
[93]“The terms of a secure tenancy may be varied in the following ways, and not otherwise …”
[94]Councils’ use of variation is subject to judicial review and the Human Rights Act 1998. Registered social landlords who do include a variation clause can be subject to Housing Corporation and Independent Housing Ombudsman controls over their use. Private landlords on the other hand are not generally subject to such controls.
[95]This currently applies to assured shorthold tenancies and would apply to our type II agreement.
[96]See paras 8.15 to 8.28 below, where we consider whether the moratorium should be a feature of the type II tenancy.
[97]See para 4.60 above.
[98]Sex Discrimination Act 1975, s 4; Race Relations Act 1976, s 2 and Disability Discrimination Act 1995, s 55.
[99] Eg Employment Rights Act 1996, Part V.
[100] Employment Rights Act 1996, ss 99 to 105.
[101]Whether it needs to be a court, as currently constituted, or a new type of housing court or tribunal is not considered here.
[103]Established under the Housing Act 1996, s 51.
[104]David Cowan and Alex Marsh, “There’s regulatory crime and then there’s landlord crime: from ‘Rachmanites’ to ‘Partners’” (2001) 64 MLR 855; and Dermot McKibblin, “Unfair contract terms in tenancy agreements”(January 2001) Legal Action 6.
[105]Nuffield Foundation, Linda Mulcahy and Lee Summerfield, Keeping it in the Community: An Evaluation of the Use of Mediation in Disputes Between Neighbours (2001).