Letting Agents may be Breaching Consumer Law, Which? Investigation Reveals

Letting agents in England are using potentially unfair terms and conditions, and could be breaching consumer law by demanding deposits before allowing prospective tenants to even see a contract, a new investigation by Which? reveals.

The consumer champion visited 20 letting agents across England, posing as potential tenants looking for a rental home.

Which?’s mystery shoppers asked to see a copy of the terms and conditions that they would be signing up to, but one in four agents failed to produce a contract.

Five letting agents, including a branch of Connells, which has almost 200 offices nationwide, required a commitment or a holding deposit before tenants could view a sample tenancy agreement. Connells informed Which? that tenancy agreements should be freely available upon request.

In some cases, the letting agent also required a reference check to be paid for and completed before tenants saw the terms of the contract.

Letting agents have a duty by law to provide prospective tenants with the key information that they need to make an informed decision about the property. Which? believes that demanding a financial commitment before tenants can view the terms and conditions could fall foul of consumer law, by trapping renters into contracts that they haven’t had an opportunity to review.

Worryingly, three of the letting agents that required a commitment or deposit before tenants could view a contract are members of ARLA Propertymark (the Association of Residential Letting Agents) – a leading membership body for letting agents.

One agent in Leeds requested that the tenant visit its office to read the tenancy agreement. While the contract was accessible in this case, Which? fears that this practice could deter or place undue pressure on the tenant to read the contract quickly.

A report published last year by Which? found that only two-thirds (65%) of tenants read their tenancy agreement in full before signing it. Meanwhile, almost two-thirds (64%) of tenants who used an agent during their property search experienced problems, such as having to make decisions without enough information.

In 13 tenancy agreements collated and inspected from other letting agents, Which? found evidence of potentially unfair terms and clauses that could breach the Consumer Rights Act.

In seven of the analysed documents, tenants were required to seek permission to notify their landlord or agent before switching utilities supplier, which could prohibit their right to choose for themselves and could mean that they are stuck on expensive tariffs.

Which? also found evidence of unclear language, which could confuse tenants, in at least eight contracts. These agreements included vague descriptions that tenants may be required to pay a “reasonable” amount or “a fair proportion of” additional charges.

But, without adequate explanation of what those charges would be for, or what constituted “reasonable” or “fair”, renters could risk being hit with extortionate fees during their tenancies.

All of the contracts reviewed referenced statutes and legislation that were not attached or explained further within the agreement, putting tenants (most of whom are not experts in property law) at an unfair disadvantage.

In all but two agreements, Which? found a clause that allowed landlords or authorised workpeople access to the property without prior consent, as long as 24 hours’ notice was given. It was not always specified that this notice should be in writing, and these contracts gave no indication that landlords and agents would take their tenant’s objections into account.

A template contract from the Ministry for Housing, Communities and Local Government (MHCLG) includes some examples of good practice, such as guidance notes explaining legal jargon. It also features a note outlining how tenants have a right to quiet enjoyment of a property, even if landlords provide 24 hours’ notice, so, if visits are very frequent or do not have a good reason behind them, the landlord may be breaching those rights.

However, even in that case, Which? believes that tenants’ rights to enjoy exclusive possession of their homes could be made clearer, and they should be empowered to push back if landlords seek non-urgent access at inconvenient times.

The organisation is concerned that many tenants could be rushed into signing contracts that they don’t fully understand and that contain potentially unfair clauses, as they may feel pressured to secure a property quickly, particularly in areas where demand is high.

According to the latest results from the Which? Consumer Insight Tracker, just one in ten people trust estate and letting agents, meaning that only car dealers are trusted less.

It has heard complaints from tenants who had landlords that entered their homes without prior notice or faced excessive charges for minor repair work.

The findings of this investigation suggest that tenants cannot always trust letting agents to act in their best interests, and, with some agencies apparently skirting the law, Which? is calling on the Competition and Markets Authority (CMA) to investigate further issues relating to practices, and tenancy terms and conditions in the private rental sector, and to take action where needed.

The consumer champion also calls on the Government to move forward with introducing a mandatory code of practice for letting agents, which is legally enforceable and ensures that all agents are held to an agreed set of professional standards.

Natalie Hitchins, the Head of Home Products and Services at Which?, says: “It is outrageous that some agents are demanding cash upfront before tenants are even shown a contract – committing them to agreements before they know what they’re signing up to.

“The results of this Which? investigation show how vital it is for the Government to introduce a legally enforceable code of practice, to ensure all letting agents act in a professional manner.”

She adds: “The CMA must also investigate the sector, and take action where needed to tackle unfair practices and contract terms.”

David Cox, the Chief Executive of ARLA Propertymark, responds to the report: “There is currently no legal requirement in England or Wales to have a tenancy agreement, and, as legal statute overrides contract, any unreasonable terms in a contract would be unenforceable in a court of law. As such, we would question the suggestion that agents are breaching consumer protection law. We have long been advocating for a legal requirement to have a written tenancy agreement, as they have in Scotland, to avoid many of the misunderstandings cited in this research. Which? implies that even MHCLG’s template tenancy agreement is in breach of their best practice; this demonstrates just how complex the issue around terms and conditions can be.”

Dan Wilson Craw, the Director of tenant lobby group Generation Rent, has a more positive reaction: “Renters are under pressure to sign up to anything that a letting agent puts in front of them, knowing that, if they hesitate, someone else will take the property. The good news is that, from next month, tenants who are asked to sign up to unreasonable terms are entitled to back out and get their holding deposit refunded, under the new Tenant Fees Act. But, as Which?’s investigation shows, unscrupulous letting agents are adept at finding ways to bamboozle tenants. There is a constant need to identify and expose these unfair practices.”