GUIDANCE ON UNFAIR TERMS IN RESIDENTIAL TENANCY AGREEMENTS

EXTENSION OF THE CONTRACT

A term which automatically extends the contract period beyond what the tenant would normally expect could be unfair. This is a difficult area because the term may be treated as a core term which is not subject to review under the Regulations. It could rely on the tenant's inertia/ignorance. The OFT Guidance does not address this issue of how this ties in with the concept of a statutory periodic tenancy. An explanatory note (as opposed to a term) could be included or the tenancy could run on as a monthly tenancy once the fixed term has ended.

If the agreement provides that it will be renewable (assuming all obligations have been observed) a term requiring the tenant to give an excessive period of notice in order to renew could be unfair.

Final decision clauses

A term which allows the landlord to unilaterally take himself outside the normal rules of law would be unfair.

A term saying the landlord's decision would be final in the event of dispute or that the decision of the landlord's surveyor is final, would be unfair.

If the landlord reserves the right to decide whether or not he has performed an obligation this would be unfair. This would include a term giving the landlord's surveyor the final decision on whether or not repairs have been satisfactorily carried out.

Terms which allow the landlord to decide whether or not the tenant is in breach of his obligations are unfair e.g. a provision allowing termination if, in the opinion of the Landlord, the Tenant is guilty of nuisance.

A term allowing the landlord a right to decide the meaning of a provision of the tenancy agreement is unfair.

Formality requirements

Excessive formality requirements may be unfair. A landlord must not be able to opt out of important obligations where the tenant commits only a technical breach. Technical breaches for these purposes include failure to comply with administratively convenient formalities.

Forfeiture Clauses (Also see Termination)

The OFT object to terms which appear to reserve the right of forfeiture for any breach of covenant (however minor). The forfeiture clause must acknowledge the tenant's legal rights i.e. it must be made clear that they can only be exercised by Court order.

A forfeiture clause needs to be intelligible.

Frost precautions

A requirement to drain down appliances whenever the property is left vacant will be unfair. However, a requirement for appliances to be drained down when left for a significant period in winter could be fair.

Furniture (see also Variation of Terms)

A provision allowing the landlord to substitute or remove furniture could be unreasonable. It should therefore be restricted so as to require replacement of broken items or replaced by items which are at least good/useable. It may be fair to prohibit tenants from removing fixtures or bulky or fragile furniture. It will not be fair to prohibit the tenants from moving other furniture such as chairs from one room to another.

Indemnity clauses

A term under which the landlord must be "indemnified" for the costs which could arise through no fault of the tenant will be unfair. The word "indemnified" should not be used. Use "compensate" or "reimburse" instead. An indemnity against all legal costs would be unfair.

Inflammable materials

Whilst the landlord has a real interest in prohibiting the storage of materials presenting a potential fire hazard, the term should not be worded so widely that it would cover e.g. a box of matches.

Interest

A requirement to pay unreasonable interest e.g on arrears of rent may be unfair. The Tenant should only have to pay the cost of making up the deficit. If the Landlord, because of personal circumstances, is charged an above normal rate of interest this should not be passed on.

Legal Costs

The recovery of legal costs on an indemnity basis, not just costs reasonably incurred, i.e. the standard basis, would be unfair. Costs should be limited to reasonable legal costs.

A term may be acceptable where the tenant can expect to have to meet any reasonable legal costs properly incurred as a result of the tenant's default.

Legal Jargon

The OFT object to the use of the following expressions:-

"Indemnity"

"Indemnify"

"Force Majeure"

Avoid Latin words.

Keys

A term requiring payment of full rent until all keys are returned could be unfair.

BACK Page 5 of 7 NEXT

Guide correct as of 16th March 2015

V1-JC-16032015
Landlord & Investment Show
Martin Co
Six Hills House
Landlord Broadband

Help us improve this page - rate how helpful you found it:

Thank you for your feedback. How could we make the page more helpful?

Thank you for your feedback.

Share this page