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TENANTS AND NEW HOME BUYERS PROTECTED FROM UNFAIR CONTRACT TERMS

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Tenants in both private and public sector accommodation and consumers ...
Tenants in both private and public sector accommodation and consumers

buying new homes from developers are protected by the Unfair Terms in

Consumer Contract Regulations (UTCCRs), the court of appeal confirmed

today.

In a case concerning Newham LBC's housing policy

for homeless people, the court decided, in line with the OFT's views,

that the UTCCRs apply to tenancy agreements and other contracts

relating to land transactions. It ruled that there is no basis for

excluding land transactions from the scope of the UTCCRs, and that

such an exclusion would be at odds with the purpose of the

legislation, which is to provide a high level of protection for

consumers.

The court also ruled that a public or government body can be a

supplier, and a tenant a consumer, within the meaning of the UTCCRs.

Newham had claimed that it was not a supplier, as it was fulfilling a

statutory duty as a housing authority; and that the tenant was not a

consumer, as she was seeking a benefit from the state.

OFT chairman John Vickers said:

'This important judgment confirms that tenants - including tenants

in public sector accommodation - have consumer protection from unfair

terms. So do buyers of new homes. With housing as with other

services, consumer contracts must be clear and free of unfair

standard terms.'

As directed by the court, the OFT will now consider whether the

terms of Newham LBC's standard non-secure tenancy

agreement are potentially unfair and will raise any concerns directly

with the authority.

* Newham LBC's reponse to today's judgement HOUSING POLICY IS NOT UNLAWFUL.

* Backgroundto the case and summary of October high court case TENANTS HAVE UNFAIR CONTRACT TERMS PROTECTION.

NOTES

1. The appeal was brought against the decision of the administrative

court in the judicial review by three tenants of Newham LBC's placement policy on housing homeless people. One of the

tenants also complained that Newham's standard tenancy agreement

contained unfair terms. Newham argued that the UTCCRs did not apply

to their tenancy agreement. The OFT intervened as an interested party

because it is the lead regulator with enforcement powers under the

UTCCRs. It was asked to defer any action regarding the unfair terms

complaint until after the judicial review had been heard. The Court

did not consider the fairness of the terms and was not asked to do

so.

2. At the judicial review, Mr Justice Newman found that contracts for

land were not excluded from the EC Directive which the UTCCRs

implement and that to exclude such contracts would impede the

purposes of the Directive and create a shortfall in protection

available to consumers (see PN 133/03). Newham's appeal against that

ruling was heard on 17 and 18 December 2003.

3. The Court of Appeal also ruled that Newham's housing placement

policy for the homeless was lawful. The OFT was not involved in this

part of the case.

4. Nearly four million UK households live in social rented accommodation

and 2.1 million UK households live in private rented accommodation.

Today's ruling applies to tenancies agreements after 1 July 1995

where the landlord is a 'seller or supplier' and the tenant a

'consumer' within the meaning of the UTCCRs.

5. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)

superseded the UTCCRs 1994, and apply to standard contract terms used

with consumers. 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 likely to be considered unfair if

it causes a significant imbalance in the parties' rights and

obligations under the contract, to the detriment of consumers. The

UTCCRs say that a consumer is not bound by a standard term in a

contract with a trader if that term is unfair. Ultimately, only a

court can decide whether a term is unfair.

6. The OFT published 'Guidance on Unfair Terms in Tenancy Agreements'

in November 2001 and a consumer leaflet entitled 'Unfair tenancy terms - don't get caught out' in April 2002.

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