OFT secures fairer contracts for tenants

105/05 10 June 2005

The OFT has secured fairer contracts for tenants of two large property companies – Bankway Properties Ltd and the William Pears Group.

The companies, which have thousands of properties in London and the South East and are run by the same group of directors, were using contracts that contained potentially unfair terms such as:

financial penalties for breach of the agreement
a term stating that the tenant would automatically forfeit their deposit in full if they ended the tenancy early
terms passing the landlord's legal obligations for repair of the property to the tenant
a term requiring the tenant to pay the landlord for the cost of any repairs arising from damage to the property, even where the tenant may not have caused it
unreasonable restrictions on the tenant, such as a term prohibiting the tenant from putting up a flag, poster or sign anywhere on the property where it could be seen from the outside.

The OFT has obtained undertakings from the companies that they will amend their tenancy contracts.

Penny Boys, OFT Executive Director, said:

'Landlords should take proper account of the legitimate interests of tenants in drawing up tenancy contracts. As a result of our intervention, thousands of current and future tenants will benefit from improved terms.'

NOTES

1. The Unfair Terms in Consumer Contracts Regulations (UTCCRs) came into force in 1999 (superseding the UTCCRs 1994) and apply to standard contract terms used with consumers in contracts made after 1 July 1995. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders.

The OFT, together with certain other bodies, can take legal action to prevent the use of potentially unfair terms. A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. Standard terms may be drafted to protect commercial needs but must also take account of the interests and rights of consumers by going no further than is necessary to protect those legitimate commercial interests. An unfair term in a contract covered by the UTCCRs is not binding on the consumer. Ultimately, only a court can decide whether a term is unfair.

2. A summary of the changes that the companies have agreed to make to their contracts is available from the Consumer regulations website.

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