Letting agents should beware of charging renewal fees to landlords.

New official guidance says that these run “a significant risk of being found to be unfair” in circumstances where there is no further work after the introduction of the tenant; where the landlord “may” decide not to continue instructing the agent; or where a renewal commission is charged simply where a tenant stay on after the initial period.

The guidance warns: “Agents who wish to charge renewal commission may therefore wish to seek legal advice.”

It goes on to say that it would be “surprising” for a tenant-find only agent to charge a renewal fee.

The document also advises on the circumstances where a tenant’s holding deposit should be refunded: where the tenant pulls out before any costs have been incurred; the property does not conform to its description; and where a landlord decides the pre-tenancy checks are unsatisfactory even if the tenant has been truthful and not misled either landlord or agent.

Agents are also warned that they must deal professionally with tenants in arrears for fear of breaching Consumer Protection Regulations (CPRs).

For instance, agents must not tell a tenant in arrears that they may face eviction without also making it clear this would take a court order.

The advice is in a new document published by the Competition and Markets Authority (CMA), which took over from the OFT.

However, the 97-page “Guidance for lettings professionals on consumer protection law” contains no advice as to how agents should handle client money, for example ring-fencing it and having Client Money Protection.

Instead, it simply suggest that agents “take proper care of their [landlords’] money”.

The guidance concentrates on five key laws that were current at the time of drafting. These are:

• the Consumer Protection from Unfair Trading Regulations 2008 (CPRs)

• the Business Protection from Misleading Marketing Regulations 2008 (BPRs)

• the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)

• the Supply of Goods and Services Act 1982 (SGSA)

• Unfair Contract Terms Act 1977 (UCTA)

Notably, it does not cover the new cooling-off regulations that came into force last Friday (Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Nor does the guidance cover some other legislation that will be coming up, including the Consumer Rights Bill, and the Consumer Protection from Unfair Trading Regulations (Amendment Regulations).

Publication of the document follows the publication last year of a wide-ranging report into the lettings market by OFT, which raised concerns about a number of issues affecting tenants.

These included: unfair and ‘surprise’ fees and charges, poor service, and delayed and substandard repairs.

The OFT did not call for more legislation, but for considered greater compliance with existing legislation.

The CMA said it has worked closely with Trading Standards to agree how the law should be applied and to identify enforcement priorities.

The guidance includes advice on:

• Fees: agents should publish a full up-front tariff of fees.
• Advertising: avoiding using misleading advertising or statements, and ensuring that the tenant or landlord is given all the information they need, at the appropriate time. Agents should not, for instance, say they had a large number of tenants looking for somewhere to rent, if that is not so. Photos should not, for example, include a garden if the garden is not offered as part of the rental property.
• Information: providing clear information which the tenant needs to know before they move in (such as guarantor and deposit requirements, and the terms and conditions of the tenancy agreement). Information should be provided up-front, and not be more than one click away.
• CPR omissions: agents must provide information and not leave anything out which might affect a tenant’s “transactional” decision. A transactional decision might be a tenant’s decision simply to find out more about a property, or view it. An example which might affect a “transactional” decision includes omitting fees information.
• CPR checks: agents should not necessarily rely on landlords’ information. If a landlord says a gas safety check has been done but cannot produce the certificate, the agent should arrange both a check and certificate.
• Tenancy checks: agents should describe accurately to the landlord how comprehensive the checks will be, and highlight any gaps in their knowledge.
• Fair contracts: dealing fairly and professionally with tenants and landlords, and using fair contractual terms.
• Maintenance: ensuring that services and repairs are carried out in a timely manner and with reasonable care and skill.
• Agreements: giving clear and full information to tenants about how to end a tenancy agreement.

The guidance document is here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/319820/Lettings_guidance_CMA31.PDF