Latest

Real Insights

The Consumer Rights Act – does it affect property?
Inside Disputes

Real Insights - Property Update

Author
Johnny Kelly
Date
29 January 2016

This new Act came into force on 1 October 2015. It has increased the protection for people purchasing consumer goods, and these changes have been well publicised in the media.


The Consumer Rights Act – does it affect property?

This new Act came into force on 1 October 2015.  It has increased the protection for people purchasing consumer goods, and these changes have been well publicised in the media.

The Act does not make fundamental changes to real estate law, but it's worth understanding how it works.

When does the new Act apply?

When one party to a transaction is a "trader" and the other party is a "consumer".

"Trader" = somebody who is acting for the purposes of their business. 

"Consumer" = a private individual who is not acting for the purposes of a business. 

EXAMPLE

  1. Posh Properties Limited leases a flat to Mr Smith on an assured shorthold tenancy, for him to live in.  Posh Properties is a trader and Mr Smith is a consumer.  The Act applies.
  2. Posh Properties Limited leases a shop unit to Mrs Jones, for her to operate as a convenience store.  Both Posh Properties and Mrs Jones are traders.  The Act does not apply.

What does the new Act say?

It bans "unfair terms".  An unfair term is a contract term that gives the trader an unfair advantage.  For example:

  • Excluding the trader's liability completely if the trader is in breach.
  • Forcing the consumer to observe rules which he can't find out about until afterwards.
  • Unjustified penalty clauses.
  • Burying sneaky exclusions in the small print.

Sometimes it won't be obvious whether a term is unfair - it may depend on the circumstances.  For example:

  • If a contract clause says the trader is not liable at all for any breach, that will be treated as unfair.

BUT

  • If the clause says the trader's liability for any breach is capped at £500,000, that could well be fair.

If a consumer hired a lawyer to negotiate the contract for him, it will be harder for the consumer to claim later that a clause in it is unfair.

Does the Act apply to real estate contracts?

Generally speaking, yes, if one party is a "trader" and the other is a "consumer".  There are a few provisions in the Act which specifically don't apply to real estate.

Is this a major change from what the law was before?

Not really.  There have been regulations to protect consumers in real estate contracts since the 1990s.  The wording of the new Act is slightly different but the upshot is largely the same.

What else does the new Act do?

The Act makes major changes to the rules on sale of consumer goods, such as cars, clothes and white goods.  It beefs up a buyer's right to demand repair, replacement or a price reduction, or to hand the goods back and get a full refund.  It is now much clearer when each of these overlapping rights will apply.

New rules also clarify your rights when you buy digital downloads such as iTunes or eBooks.

Finally, the Act requires letting agents to publicise their fees at their place of business and on their websites.  This applies to letting agency work and property management work, for residential property only.