Unfair terms in a lease

Tenancies are governed by common law, the relevant provisions of statutory law, and by the specific terms of the lease. There is, however, legislation that governs whether some of the terms in a lease may be unenforceable because they are unfair. [1] This applies to all leases entered into from 1st October 2015.  Leases entered into prior to this they may be covered by The Unfair Terms in Consumer Contracts Regulations 1999 which had similar effects.

For the purposes of the unfair terms legislation, landlords are considered to be trader supplying a service and tenants are consumers. [2]

An unfair term is one which causes a significant imbalance in their rights and responsibilities, so that the tenant is adversely affected. [3]

However, terms that must be included in the contract as a result of legislation cannot be unfair. [4] Nor are terms relating to the main subject of the agreement (such as the length of the tenancy, or the price set) but only so long as the term is transparent and prominent. [5] In relation to residential leases this means that a term setting the level of rent cannot be unfair.

In addition, all of the terms of a lease must be written in plain language. [6] If there is any uncertainty about what a particular term means, then the interpretation that is most favourable to the tenant will apply. [7]

The legislation lists a series of potentially unfair terms, although this is only an illustration and is not exhaustive. [8] The Competition and Markets Authority has published details of how this may apply to residential leases. [9]

Examples of potentially unfair terms could include:

• making the tenant pay for repairs that are the landlord's responsibility

• giving the landlord the absolute right to decide when the terms of the lease have been breached

• absolutely prohibiting any assignation of the tenancy

• allowing the landlord to enter the premises without notice

• allowing the landlord to decide how much of the deposit to keep at the end of a tenancy, without challenge

• making unreasonable demands on the tenant

• not making it clear that a court order is required before the landlord can take possession of the property.

• imposing interest rates on late rent well above the clearing banks’ base rate or which will exceed the overdue amount owed by the tenant

• imposing charges to cover a landlord/agents total costs and expenses rather than just their net costs arising from a breach of the agreement

• imposing fixed charges to be paid in all circumstances regardless of the actual costs of the breach

English caselaw has held that a clause attempting to give a housing association the power to unilaterally alter tenancy agreements that contradicts a preceding clause, stating that any unilateral changes must be agreed between the tenant and the landlord, was an unfair term. [10]

A term in a lease that is found to be unfair is not binding on the tenant. [11] However, the rest of the lease will be binding if it is possible for it to continue without the unfair term. [12]

Further guidance on unfair terms can be sought from the local Trading Standards office.

In addition, in any court proceedings in relation to a term of a consumer contract, including tenancy agreements, the court has a duty to consider the fairness of that term, even if the issue of fairness is not raised by either party. [13]