Tower Hamlets Council recently publicised a Magistrates’ Court decision to fine a company landlord and its director a total of £22,000. The fine was imposed after a finding that the landlord issued ‘sham’ licenses to occupiers and conducted ‘aggressive business practices’. The case was brought under the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs).
The Magistrates concluded that that the occupiers were in fact tenants and instead, they should have been granted Assured Shorthold Tenancies (ASTs). The Magistrates also declared that this was an unfair practice as the tenants were inaccurately led to believe they had limited rights in the property. As a result, the landlord was liable to pay a fine of £1,250 for 11 separate offences as well as an additional payment of £8,500 in legal costs.
Tower Hamlets summary of the case can be found here.
Consumer Protection from Unfair Trading Regulations (2008)(CPR)
The overall objective of the CPRs is to prohibit businesses engaging in unfair commercial practices with consumers and renders a breach of the regulations a criminal offence.
The CPRs regulate all estate and letting agents who conduct business with consumers, including tenants, prospective occupiers and licensees. It therefore attempts to capture all types of transactions, including the issuance of tenancy or license to occupy. All occupiers including licensees are recognised as being consumers under the law and are therefore protected under the CPRs.
Regulation 3 of the CPRs states:
Prohibition of unfair commercial practices
(1) Unfair commercial practices are prohibited.
(2) Paragraphs (3) and (4) set out the circumstances when a commercial practice is unfair.
(3) A commercial practice is unfair if—
(a)it contravenes the requirements of professional diligence; and
(b)it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product.
(4) A commercial practice is unfair if—
(a)it is a misleading action under the provisions of regulation 5;
(b)it is a misleading omission under the provisions of regulation 6;
(c)it is aggressive under the provisions of regulation 7; or
(d)it is listed in Schedule 1.
In addition, Regulation 8 states:
Offences relating to unfair commercial practices
(1) A trader is guilty of an offence if—
(a)he knowingly or recklessly engages in a commercial practice which contravenes the requirements of professional diligence under regulation 3(3)(a); and
(b)the practice materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product under regulation 3(3)(b).
(2) For the purposes of paragraph (1)(a) a trader who engages in a commercial practice without regard to whether the practice contravenes the requirements of professional diligence shall be deemed recklessly to engage in the practice, whether or not the trader has reason for believing that the practice might contravene those requirements.
In law, a tenant enjoys more rights than a licensee. A tenant cannot be evicted from a property without the landlord obtaining a Court order and ensuring that the requirements of serving section 8 and 21 notices are complied with. There is a misperception that licensees can be evicted without going to court. Although this is not accurate and only applies to a very limited category of licensees, eviction of licensees is a great deal easier as they can usually be terminated on less notice and for any reason. Therefore, some landlords and agents may try to avoid or shorten Court action by issuing licenses instead.
It is a criminal offence under the CPRs to issue licenses where the occupier pays rent and enjoy exclusive possession of the property. An occupier enjoys exclusive possession where they have a legal or factual right to exclude others, including the landlord from entering the property, irrespective of what the contract actually says.
A breach of the CPRs may mean that a company could face an unlimited fine whilst a company director could also face an unlimited fine and imprisonment for up to two years. While fines are considerably lower than this the Sentencing Council has issued new sentencing guidance which is likely to see a rise in such fines.
Rogue Landlord Checker
Where a London based landlord and /or its director is convicted of an offence under the CPRs, a local authority has the power to record the offence(s) on the Rogue Landlord Checker. Information about the landlord and the relevant offence is publicly accessible online and will be available until the conviction is deemed spent i.e. one year after the imposition of the fine