On 26 March 2015, the Consumer Rights Act 2015 (‘the Act’) received Royal Assent. The main provisions of the Act come into force on 1 October 2015, (although since March, the Act has imposed a duty on letting agents to publicise their fees). The Act consolidates and reforms consumer legislation in the UK across a number of areas. This article considers several of the changes that are pertinent to property law.
Section 2 of the Act provides some helpful key definitions. A “trader” is defined as “a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf” (section 2(2)). This is likely to include landlords who own and let a number of residential properties. Similarly, vendors who deal with a number of residences may meet this definition.
A consumer is defined as “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession” (section 2(3)). This widens the definition of “consumer” found in the European Consumer Rights Directive 2011/83/EU. In the property sector, the CRA 2015 could apply when an individual (but not a company) enters into a residential tenancy or purchases a residential property. In the commercial property sector, whether an individual who purchases or enters into a lease for a commercial premises is acting as a consumer is not clear cut and may depend on the extent that the transaction falls wholly or mainly outside the purpose/s of the business. It is reasonable to expect further litigation on this point.
The Act combines consumer rights from two previously separate elements of the old consumer law regime: the Unfair Contracts Terms Act 1977 (‘UCTA 1977’) and Unfair Terms in Consumer Contracts Regulations 1999 (‘UTCCR 1999’). This has been achieved through section 75 and paragraph 34 of Schedule 4 of the Act which revoke UTCCR 1999 in its entirety and introduce a unified system governing unfair terms (from 1 October 2015).
Sections 61 to 76 regulate unfair terms. The new rules apply to “consumer contracts”, namely contracts between traders and consumers (as defined above) and “consumer notices”, which are communications (or purported communications) that “(a) relate to “rights or obligations as between a trader and a consumer, or (b) purports to exclude or restrict a trader’s liability to a consumer” (section 61). It is likely that a number of property related documents such as leases, contracts for sale will be consumer contracts and the notices made under them may also engage the rules on unfair notices.
The old requirement in UTCCR 1999 that the contract had to be of a standard form and not individually negotiated has been scrapped. Beyond that, the operation of the new system largely mirrors the old one. It includes the by now familiar definition of an unfair term (section 62(4) and (6)), an indicative “grey list” of terms that may be regarded as unfair (section 63 and Schedule 2), excludes certain terms (including those is sections 64 and 73), provides that the fairness of a term should be determined by reference to the subject matter and circumstances at the time of the agreement (section 62(5) and (7)) and allows for a consumer to rely on the unfair term if they chose to do so (section 62(3)).
By section 65 of the Act, a trader cannot exclude or restrict liability for death or personal injury resulting from negligence by a term in a consumer contract or notice. However, as before, this will not apply to any contract relating to the creation or transfer of an interest in land (section 66).
There is now a mandatory duty on the Courts (contained in section 71(2)) to consider the fairness of a term in any proceedings relating to a term of a consumer contract, regardless of whether any party has raised (or intends to raise) the issue. However, the duty only applies where the Court has sufficient legal and factual material to enable it to consider the issue (section 71(3)).
The CRA 2015 is a salient reminder of the relevance of consumer rights legislation in the property sector and in particular re-enforces the importance of advising on the rules that govern unfair terms in property transactions and litigation.
[This article originally appeared in the 36 Bedford Row Property Newsletter, Autumn 2015]