Factsheet 10b - Office of Fair Trading Guidance on Unfair Terms in Tenancy Agreements

  

Office of Fair Trading Guidance on

Unfair Terms in Tenancy Agreements

(November 2001 & September 2005)

Applicability:

This guidance was originally published by the Office of Fair Trading (OFT) and was adopted by the Competition and Markets Authority (CMA) when the OFT closed in March 2014.  The guidance sets out terms which are believed to be potentially unfair terms in assured and assured shorthold tenancy agreements. It is based on a sample of agreements in use and on the OFT’s experience of enforcing the Unfair Terms in Consumer Contracts Regulations 1999 (SI 2083) [see Letting Factsheet 10]. These regulations implement the European Communities Council Directive 93/13/EEC. The guidance is aimed at those in England and Wales who use, or supply standard tenancy agreements and at housing advisers.

The guidance represents the OFT’s considered views and the basis on which it is likely to take enforcement action.  The Letting Centre does not accept the OFT’s interpretation in some parts of this guidance. The OFT Guidance recognises that is ultimately for the courts to decide whether any term is unfair. The guidance deals with standard terms that are drawn up in advance, and not those that are individually negotiated with the tenant.

The guidance is designed to help landlords, letting agents and suppliers of standard or model terms to meet the requirements of the Regulations. It will also be useful for housing advisers. The OFT expects those who use or supply standard pre-formulated tenancy agreements to review their terms and conditions in the light of the guidance and amend or remove any unfair terms from these contracts. Enforcement action will be taken either by the OFT, or by the local authority trading standards service.

The Test of Fairness:

The Regulations apply a test of fairness to most standard terms in tenancy agreements. It does not apply to ‘core’ terms, which set the price or describe the main subject matter of the agreement, provided that they are in plain and intelligible language. A standard term fails the test of fairness “if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” (Regulation 5(1)). The courts have held that: -

“The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps.”

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