Watchdog to Probe Five Issues Involving Agents and Landlords

The Competitioin and Markets Authority is to probe five activities involving letting agents and landlords and their responsibilities to private tenants.

Sarah Cardell, Chief Executive of the CMA, says: “The CMA alone can’t resolve the problems in the UK housing market. But we have a role to play and will do our part to help ensure the private rental and housebuilding markets work better for people and businesses.  

“For private renters, we’re taking action to provide updated guidance for lettings agents so that both tenants and landlords are really clear about their own rights and responsibilities. We’ve also identified areas of concern relating to zero deposit schemes, sham licences, onerous guarantee clauses, and possible unlawful discrimination. These warrant further investigation and we stand ready to take enforcement action if needed."

The CMA's statement this morning says: "While many landlords and letting agents are providing a good service, initial engagement by the CMA heard many complaints raised by stakeholders suggesting that a significant minority are not complying with consumer protection law. 

"To help letting agents understand their obligations, the CMA will update its guidance for lettings professionals. If any letting agency or landlord is found to be in breach of the law, then the CMA does not rule out launching enforcement action.

"Following its initial engagement, the CMA’s investigation will explore the 5 areas highlighted by stakeholder complaints:

​"Zero deposit schemes: These schemes alleviate the need for tenants to come up with a hefty deposit when they enter a tenancy, but the CMA has heard concerns that tenants may be unaware of their liabilities under such schemes, alongside reports of pressure selling and undisclosed commissions earned by letting agents.

"Sham licences: The CMA has been told that there are still landlords who claim that tenants have licences to occupy rather than assured tenancies and who fail to recognise the rights that consumers have under a tenancy.

"Guarantees: The CMA has seen examples of onerous guarantee clauses which impose wide obligations on tenants – such as requiring them to provide extensive evidence of assets. 

"Activity that could constitute unlawful discrimination: This includes, for example, looking at those who advertise properties as not available to housing benefit claimants (i.e. ‘no-DSS’).

"Retirement housing fees: The CMA’s initial engagement also heard concerns around so-called ‘event fees’ charged to vulnerable tenants entering specialist retirement housing. The CMA will review practices in the sector and whether some businesses are taking advantage of elderly consumers."

There will be updated guidance issued to agents by the authority.

The CMA has this morning issued a detailed 37 page interim report on its findings so far and why it has selected these five areas for further investigation.

A key section reads:

A consistent theme from stakeholders is that there is a lack of understanding on the part of consumers and landlords about their rights and obligations. Tenants need to engage early in the letting process with the steps necessary to protect themselves, for example by collecting their own thorough evidence of the condition of rented property and understand how to communicate with their landlord when they think things are going wrong. There is also consensus that tenants find it hard to exert their rights against landlords, despite the existing statutory and contractual protections that are in place. This is a significant shortcoming given the importance of the services supplied to over 5 million households.

We have been told repeatedly that avoiding the escalation of disputes is a very important element of maintaining a good relationship between landlord and tenant. We think revised guidance for lettings agents should help to raise consumer and landlord awareness of their respective rights and responsibilities because within the PRS the following practices, when undertaken by a landlord or letting agent acting as a trader, may amount to a breach of consumer protection law. For example (and highlighting in bold applicable legal standards):

(a) terms in tenancy agreements may be unfair if they purport to make the tenant liable for repairs that it is the landlord’s legal responsibility to carry out;

(b) it may be a misleading action to provide tenants with inaccurate information about their legal rights in relation to the tenancy;

(c) it may be a misleading omission to fail to mention that they receive a commission payment or other benefit for passing work to a third party;

(d) it may be an aggressive practice to use harassment, coercion or undue influence to convince a tenant to agree to certain contract terms, products or services; and

(e) it may be a breach of professional diligence to fail to comply with recognised standards, such as those set out in guidance or codes of practice, for landlords or letting agents.

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You can see the full interim report here.