GUIDANCE ON UNFAIR TERMS IN RESIDENTIAL TENANCY AGREEMENTS

NOTICES

A requirement to use registered post for notification when notification by ordinary post would be perfectly adequate can be unfair.

Outgoings and taxes

A term suggesting the tenant's obligations to pay charges (e.g. Council Tax) can never come to an end before the expiry of the agreed term of the tenancy could be unfair.

A provision requiring the tenant to "meet all existing and future charges and outgoings in respect of the property" could be unfair. It is too wide.

Whilst this could refer to utility bills/Council Tax/water charges the wording could cover other outgoings which have nothing to do with the tenant e.g. a service charge payable by the landlord where the property is a "flat".

Penalties

A term is a penalty where it requires the tenant to pay more compensation for a breach by the tenant than a reasonable pre-estimate of the loss caused to the Landlord.

If there is a term in the tenancy agreement requiring the tenant who left early (without the Landlord's agreement) to pay rent for the remainder of the period this will be unfair. This is however the position at common law. It is better to leave out any such express term.

A clause which will allow the Landlord to reclaim more compensation from a Tenant than a Court would actually be awarded would be unfair.

A term requiring excessive payment in the event of the Tenant's early termination of the Agreement or where the Tenant does anything else against the Landlord's wishes may be unfair.

Pre-tenancy agreements/deposits

Any payments under a contract which does not go ahead or which ends before the Tenant has enjoyed any significant benefit is an unfair term. It may be the case that a refund is due even though it is the Tenant who brings a contract to an end. A prohibition on the refund of a deposit in any circumstances will therefore be unfair. If the tenant cancels wrongfully causing loss to the Landlord there may not need to be a full refund. A term depriving the Tenant of everything paid in advance (disregarding the actual costs/loss caused by the cancellation) is likely to be unfair. Where cancellation is due to the Tenant's fault a reasonable sum to cover either the net cost to the Landlord or loss of profit resulting directly from the Tenant's default is payable. For instance the Landlord is not entitled to keep any money that could reasonably be saved by re-letting the property.

A non-refundable deposit is particularly open to challenge if the tenant becomes bound before he has had the chance to be acquainted with the terms of the tenancy agreement itself.

A clause allowing the Landlord to withhold a deposit merely because he thought the references of a prospective tenant were not sufficient could be unfair.

Rent increase clauses/rent review

A term requiring the tenant to pay increased rent to reflect an improvement to the property which has been unilaterally imposed by the landlord without the tenantís agreement will be unfair.

Rent review clauses which allow rent to be increased by the landlord without reference to clear and objective criteria or which do not provide reference to an independent valuer will be unfair. A right to increase the rent to cover increased costs incurred by the landlord during a fixed term tenancy of short duration may be unfair.

A term permitting an increased rent linked to the Retail Price Index would be fair. A rent review clause allowing the rent to be increased in the light of defined criteria by a person who is independent to the landlord would be fair.

Rent suspension

A clause requiring the tenant to continue to pay for a property substantially different from the one he agreed to rent would be unfair. There should be a rent suspension clause e.g. in the event of fire.

Repairs

A requirement to "keep the property in good repair" obliges the tenant to put the property in repair at the start of the tenancy if it is in a state of disrepair. This requirement must be made clear and its effect explained.

It may be unfair to expect a tenant to comply with a repair notice immediately regardless of the particular circumstances. A reasonable time should be allowed.

Risks transferred to tenant

A requirement for the tenant to bear the risk a landlord himself could remove or at least reduce by taking reasonable care could be unfair. An example is a requirement for the tenant to meet all or part of the excess payable on a building insurance claim. Requiring the tenant to insure the landlord's own furniture could also be such a term.

Rules made by the Landlord (also see Variation of Terms)

Some terms require tenants to accept rules and regulations not embodied in the tenancy agreement. A requirement to accept rules made after the tenancy agreement is signed may be unfair. In effect this is a variation of terms.

Seizure of tenant's goods

The clause allowing the landlord to enter the property without notice and take goods in lieu of unpaid rent could be unfair.

Set Off

A term prohibiting the Tenant from setting off a claim which he/she may have against the Landlord (e.g. for damages for disrepair) will be unfair.

Statutory Notices

A requirement to join with the landlord in opposing statutory notices could be unfair.

Statutory references (e.g. to Section 196 of the Law of Property Act 1925 or the Housing Act 1988

Statutory references should be avoided. Alternatively, there could be an explanation in summary form.

Sub-letting (See also under Assignment)

An absolute prohibition on sub-letting is potentially unfair. Prohibition on sub-letting for a minimum initial period (the first three months) may be acceptable. The prohibition on sub-letting may be acceptable if a tenant can assign and vice versa.

Tenant's belongings

It is fair to provide that belongings left behind may be sold upon notice or where the tenant cannot be found after reasonable steps have been taken to trace the tenant. It is permissible to deduct the landlord's reasonable costs including reasonable storage costs.

A term requiring payment of damages to an amount equal to the full former rent under the tenancy for the period when Tenant's belongings are left at the property would be unfair. This is because it would only be fair if the items left were large items but not where the tenant may have left a few small items that can readily be removed. On the other hand a term making a tenant liable to pay the reasonable cost for removal and storage/disposal would be fair.

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Guide correct as of 16th March 2015

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