Hitting home

The UK's residential property market bottomed out by the end of the first quarter of 2009 as the recession really began to take hold. According to the Council of Mortgage Lenders, in September 2010 there were just 50,000 loans for purchase advanced (the lowest level in a decade).

With the vast majority of potential first-time buyers unable to live the dream of their first home, we have seen a massive demand for private rented accommodation coupled with a corresponding fall in supply of housing stock due to less 'buy to let' mortgages being made readily available.

This means rich pickings for unscrupulous letting agents and rogue landlords as the private letting sector is currently unlicensed. Many poor consumers who have nowhere to go are putting their money in the hands of unqualified and unethical agents who are not members of a professional body. Such dilatory representatives of this unregulated sector do not offer consumer redress '“ only hidden additional charges through carefully worded tenancy agreements. The most common concealed extra fees include charges for checking references, inspecting the property or renewing the tenancy.

More alarmingly, poor practice means that independent legal advice is seldom offered to a prospective tenant, and, when a lawyer is instructed by a cautious consumer to advise on the draft papers and make appropriate amendments, a blasé 'take it or leave it' is the agent's usual retort!

Basic consumer right

Kite v Rasini [2009] WTLR 969 stresses the importance of independent legal advice when entering into a lease. In that case, the claimant sought an order setting aside a lease that had been granted by her late mother to her sister, Rasini. While the judge, Paul Chaisty QC, found in favour of the defendant, because the claimant's mother granted the lease as a result of her own independent choice and had received advice from a solicitor as to the terms and effect of the lease, he confirmed the principle that where a transaction calls for explanation there is always evidence of undue influence unless the donee is able to produce evidence to counter that inference (applying Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44).

Young tenants are often refused housing unless their parents enter into deeds of guarantee. My daughter was placed in a similar invidious position when finishing university and securing employment in Sheffield. The letting agent, who purported to be one of the country's leading rental specialists, demanded an executed deed of guarantee without any explanation. The guarantee bristled with many unfair contract terms and looked like botched surety provisions taken from a commercial lease. This one-sided, poorly written document provided no opportunity for the guarantor to investigate or put right any alleged breach on the part of the tenant and there were no automatic release provisions on the expiry of the assured shorthold tenancy.

I was appalled to hear that no amendments would be accepted let alone any suggestion that independent legal advice should be sought. Sadly, there are many who sign documents of this nature every day out of sheer desperation for suitable accommodation.

Abandon all hope

For many years the lack of rules and standards in this sector has been a matter of public concern. In May 2009, the government published its response to the Rugg review: The Private Rented Sector '“ Professionalism and Quality. While the consultation paper and Rugg report have been criticised by some academic commentators, their purposes are laudable and, if properly implemented, would create a fair regulatory regime protecting the young and vulnerable from greedy agents and racketeers. The reports identified four broad issues:

• The establishment of a national register of private landlords.
• Requirements on landlords to provide a tenancy agreement.
• Proposals for the compulsory licensing of letting agents.
• Raising the AST threshold rent level to £100,000.

The use of tenancy agreements and guarantees that comply, in all respects, with the Unfair Terms in Consumer Contracts Regulations 1999 together with an effective system of licensing are prerequisites to improving standards in the private sector letting market working in tandem with a system of consumer redress.

The consultation paper suggested two ways in which the standard of tenancyagreements could be improved:

1. The introduction of legislation setting out the minimum requirements for a valid agreement with flexibility for the individual landlord/letting agent to structure their agreement on these minimum standards.

2. Devising a model tenancy template (by statute) to which additional clauses could be added.

I suggest a modified version of option 1 whereby all charges (such as the ones mentioned above) including the passing rent are displayed prominently on the front page in the same way as the total credit cost of a loan agreement or mortgage offer is brought to the attention of the borrower in the documentation. Also, a 'health warning' should be displayed in a conspicuous box advising the tenant to take advice from a professional before proceeding.

Landlord registration and removal from the register for persistent abuses together with fines for poor practice should be carried out by an independent body.

I believe that failing to offer advice and concealed charges (not qualified on the cover sheet as suggested) should warrant mandatory fines. How the scheme would work in practice is, at present, uncertain but the current system of self regulation and watchdogs with rubber teeth is a travesty of natural justice that urgently needs redress.

Alas, the much-awaited plans have been abandoned by the government because it was felt they would introduce too much additional bureaucracy. Thus, there will be no national register of landlords, nor further regulation of the private rented sector. The plans of the Rugg report and consultation paper have since June last year been shelved.

Until the housing market embraces full-scale regulation, and judging by current political apathy this is a long way off, anyone contemplating renting a property through a private letting agent should use one who is a member of the Royal Institution of Chartered Surveyors or the Association of Residential Letting Agents. The agent selected should be asked in advance whether amendments to the tenancy agreement will be accepted.

Take action

Solicitors, as officers of the court, play an important role in well-ordered society and thus should be instrumental in bringing to the attention of the Office for Fair Trading tenancy agreements which contravene the Unfair Terms in Consumer Regulations.

Where there is demand, there is profit, and the unfettered letting market yields the awful results of selfishness, greed and avarice, so inexpressibly odious in the absence of a professional body. As with all aspects of life, there is good and bad, so what is needed is the implementation of a strategy to ensure basic tenant protection.

Tenancy documentation should be offered with clear, understandable information without hidden charges. Prospective tenants should be advised to take independent legal advice in all cases, and if letting agents do not adhere to this they can be guaranteed of investigation from the Office for Fair Trading or another suitably appointed statutory body.

It is time for the regulator to overturn the tables on bad letting agents through fines and repudiation. Despite the number of complaints against rogue landlords and letting agents, and the threat they pose to consumers in the private rented sector, the housing minister, Grant Shapps, said: 'With the vast majority of England's three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords.' Oh really, Mr Shapps?