Letting Agencies: Are you getting the basics rights?
We look at some of the common legal pitfalls for letting agencies.
Recent reports of one letting agency receiving a hefty fine highlighted the importance of letting agencies keeping up to date with regulations covering HMOs and gas safety. Following on from Ross Brymer’s article (see related articles below) on getting your lettings business ready for sale we look at the key legal issues which agencies need to remember:
Letting agencies regularly handle the personal data of landlords and tenants and must comply with the UK General Data Protection Regulation (UK GDPR). This means observing the seven key principles set out in the UK GDPR, which should lie at the heart of processing personal data:
- Lawfulness, fairness and transparency: you must identify a lawful basis under the GDPR for the collection and use of personal data (e.g. performance of a contract, legitimate interest or consent), you must not use the personal data in a way that is unduly detrimental, unexpected or misleading to the individuals concerned. You must be clear, open and honest with landlords and tenants from the very beginning about how you will use their personal data through the use of appropriate privacy policies/notices.
- Purpose limitation: you must be clear about what your purposes for processing are from the start, and you must record your purposes.
- Data minimisation: you must ensure the personal data you are processing is sufficient to fulfil your stated purpose, has a relevant link to that purpose, and is limited to what is necessary for that purpose.
- Accuracy: you should take all reasonable steps to ensure the personal data is not incorrect or misleading. If it is, you must take reasonable steps to correct or erase it as soon as possible. Identity and credit checks and proof of income can therefore have a dual purpose – not only to vet the tenant but also help you to make sure that you only hold accurate personal data.
- Storage limitation: personal data shouldn’t be kept forever. Consider how long you need to keep personal data and make sure you can justify your decision. Have systems in place to erase data you no longer need.
- Integrity and confidentiality (security): you must use appropriate technical and organisational measures to ensure the confidentiality, integrity and availability of your systems and services and the personal data processed with them. Deciding on what measures are appropriate for your lettings business will depend on your circumstances, the data you are processing, and the relative cost of implementing those measures. The Information Commission’s Office has collaborated with the National Cyber Security Centre to develop an approach that can help with this decision making.
- Accountability: you are responsible for complying with the UK GDPR, and you must be able to demonstrate such compliance, reviewing and updating your measures as appropriate. This can be done by adopting and implementing an internal data protection policy, reviewing it annually, training staff and making sure good records are maintained. If you share personal data with third parties, you also need to make sure you have appropriate contracts in place with them.
Terms & Conditions
Clear terms and conditions will help set your landlords’ expectations which should help these relationships to operate smoothly, and thereby assist you retain business. The key issues which terms and conditions should cover:
- What is (and just as importantly isn’t) included within your services and fees.
- The landlord’s obligations and responsibilities, especially around maintenance of the property.
- Tenancy deposits.
- Tenancy agreements, including renewals and termination.
- Safety and compliance issues.
- A reasonable limitation of your liability and possibly an indemnity from the landlord.
- How disputes are to be resolved
By law, all lettings agents in the UK must be part of one of the Government-approved redress schemes, which are impartial organisations where complaints can be referred if a letting agent hasn’t resolved a complaint.
- The Property Ombudsman
- The Property Redress Scheme
Tenancy Deposit Protection Schemes
The Tenancy Deposit Regulations require landlords to register a tenant’s deposit with one of the Government-approved tenancy deposit protection schemes to ensure that the tenant’s deposit isn’t taken illegally:
- The Deposit Protection Service
- The Tenancy Deposit Scheme
Where a landlord has used a letting agent, this responsibility is instead placed on the letting agent.
Consumer Protection from Unfair Trading Regulations
The Consumer Protection from Unfair Trading Regulations 2008 (CPR) covers commercial practices between traders and consumers across a wide range of trading activities.
In the context of a letting agency, the tenant is a consumer and the letting agent is a trader. The landlord may be a trader when dealing with a tenant, and a consumer when dealing with a letting agent. The key takeaway for letting agencies is that they will always be considered to be the trader for the purposes of the CPR, regardless of whether they are dealing with a landlord or tenant.
Under the CPR, traders are prohibited from using unfair commercial practices in their dealings with consumers. It is a criminal offence to breach the CPR prohibitions.
Under the CPR, letting agents are prohibited from contravening the requirements of professional diligence. In the context ensuring that a tenant’s deposit is properly protected, it is not sufficient for a letting agent to simply tell the landlord that the deposit should be protected and to assume that the landlord has registered the deposit. Nor is it sufficient to rely on oral representations from the landlord that the deposit has been registered with a scheme. Instead, the agent should make reasonable checks to ensure that the deposit has actually been registered with an approved tenancy deposit protection scheme, keeping relevant records and documentary evidence.
Letting agents also need to be careful not to breach the prohibition on misleading omissions:
- Omitting material information: for example, the Trading Standards Service considers informing the tenant that their deposit must be protected by an approved tenancy deposit scheme to be material information for the purposes of the CPR and this information must therefore not be omitted.
- Hiding material information: you should avoid hiding material information in small print.
- Providing material information in a manner which, is unclear, untimely, ambiguous, or unintelligible: for example, you must inform the tenant of the tenancy deposit requirements before the agreement is signed and you should avoid using technical language which the tenant is unlikely to understand.
If you have any questions arising from this article, please contact Cathrine Ripley or one of the other members of FSP’s Commercial & Technology team.