Landlord and tenancy update
Tenancy agreements are often too saturated with legal jargon that can lead to confusing clauses, or even worse, the agreement being unenforceable, says Tessa Shepperson
Tenancy agreements serve three main purposes: as a document of title, as evidence of the terms and conditions of the contract, and as a guide or manual for both landlords and tenants.
A document of title is perhaps the least important of the three. A tenancy is a form of ownership of land – a term of years as per section 1(b) of the Law of Property Act 1925 (LPA).
The LPA provides that transfers of title must be by deed except for short lets, section 54(2). Here, an oral agreement is sufficient to create a legal tenancy without a written document.
As well as being a legal interest in land, a tenancy is also a contract made between the landlord and tenant. The tenancy agreement is evidence of the terms of that contract.
As such, it is an important document and landlords are well advised to have a carefully drafted tenancy agreement to protect their position.
Two examples demonstrate its importance:
- Rent: under the common law, rent is payable by default in arrears. It is only the presence of a clause in the tenancy agreement that makes it payable in advance. Rent in advance is now industry practice, but this will not be the case with your tenancy if there is no tenancy agreement.
- Tenancy deposits: the deposit is the tenants’ money and landlords can only make deductions if this is authorised by the tenancy agreement. It is a waste of time taking a deposit for an oral tenancy agreement, as there will be no written authority for deductions for damage. And if your claim goes to adjudication, the adjudicator will throw it out.
A guide or manual is a relatively recent concept and comes from the idea of a tenancy as a consumer contract. Government and the courts are increasingly looking to treat tenancies as consumer contracts – consider the application of the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) to tenancy agreements, discussed below.
However, standard average tenancy agreements will fall lamentably short as a working guide. Tenancy agreements are misleading, and there are laws that apply whether they are in the tenancy agreement or not.
One thing most people know about tenancy and or housing regulation is that there is a lot of it. Housing is an important social service and many laws have been passed to protect tenants.
Nevertheless, there wouldn’t be much point in having them if they could be excluded by the landlord in the tenancy agreement. Therefore, the majority of laws contain clauses that say they will apply irrespective of tenancy agreement exclusions.
Although this makes sense from the point of view of the enforceability of the regulations, it means many tenancy agreements will be misleading, for example if they provide for the regulations to be excluded or if they don’t mention them at all.
Thus, reference should be made to all relevant regulations along with any common law rules that apply to tenancies in any consumer guides on tenancy agreements (see box).
There are tenancy agreement clauses which are unenforceable. First, there are those clauses void under the Unfair Terms in Consumer Contracts Regulations 1999.
These come from a European directive and apply across Europe, to contracts made between a business and a consumer. We know they apply to most tenancy agreements because of LB Newham v Khatun [2004] and the more recent European decision in the Dutch case of Brusse and Garabito v Jahani Ltd [2013] EUECJ C-488/11.
There are a number of reasons why clauses may be void under the regulations. They may take away a right that a tenant would otherwise have had or may give the landlord an unfair advantage, for example a break clause, which is solely in the landlord’s favour.
Other reasons include using confusing language, or an attempt to prohibit something a tenant would normally have the right to do without using the phrase ‘save with the landlords consent, which will not be unreasonably withheld or delayed’ or similar.
But how do you know that any one clause is or will be invalid? It is difficult to tell for sure unless there has been a case on it. It is also tricky for non-lawyers to even predict whether a clause is likely to be invalid unless you have a clear understanding of what those rights are in the first place.
Clauses inapplicable to the tenancy type are also unenforceable. For example, if a tenancy is an assured shorthold tenancy, any clauses that refer to the landlord being entitled to forfeit the lease for non-payment of rent or serve a notice to quit, will be unenforceable, as these are both things outlawed by the Housing Act 1988.
However, these clauses will be valid if the tenancy is a common law or unregulated one. Many tenants do not know the difference between the two, or understand their tenancy type.
Confusing agreements
The reason most tenants put their tenancy agreements in a drawer and never look at them again is because they are such difficult documents to read. Tenants find that they are written in a confusing ‘legal’ style, contain terminology that lay people do not know and refer to statutes that only help lawyers. Plus, the layout comprises jumbled-up clauses in no clear order. Any of these points can make those clauses invalid under the unfair terms regulations.
The most important practical function of a tenancy agreement is to act as a guide to the tenancy and that ideally it should be a clear document to which both landlords and tenants can refer.
However, for this to be the case, the tenancy must be in a form that both parties can understand and must include all the relevant regulations that will apply.
At present, we don’t have this. In most cases, a tenant will be presented with a document, some of which may or may not apply to their particular tenancy, depending on the circumstances. This is unsatisfactory.
In its report Renting Homes in 2006, the Law Commission recommended standard forms of tenancy agreement – some parts of which would apply to all tenancies and others that could be varied by the parties to reflect the circumstances of their particular situation. The advantage of this would be that the mandatory part of the document would include all relevant law and would have no ‘unfair terms’ uncertainty.
Unfortunately, the report was kicked into the long grass by the government a long time ago, although the Welsh government has recently revived part of it.
If the Law Commission’s proposal is revived in England, which many think is a good idea, hopefully its proposals on tenancy agreements would also be revisited and implemented.
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RELEVANT REGULATIONS
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Tessa Shepperson is a lawyer specialising in landlord and tenant law and publishes the Landlord Law Blog