The two tenants in this case were told that they each had a licence rather than an assured shorthold tenancy (AST) and their deposits were not protected in a tenancy deposit scheme (TDS).
The tenants complained to their local council Islington when they could not get their deposits back. The council’s Trading Standards team then launched an investigation that led to the prosecution of the letting agency under the Consumer Protection from Unfair Trading Regulations 2008.
The Consumer Protection from Unfair Trading Regulations prohibit unfair commercial practices including false or misleading practices (providing false information of information that gives an overall impression that deceives or is likely to deceive) and misleading omissions (the practice of omitting, hiding, disguising or delaying the provision of material information so as to cause the average consumer to take a transactional decision that they would not otherwise have made).
Breaching the Regulations is a criminal offence.
The Housing Act 2004 makes it mandatory for a landlord to join a TDS on the creation of a new residential AST in England or Wales where a deposit is paid by the tenant to the landlord on commencement of the tenancy. Failure to do so can result in financial penalties, including the return of the deposit to the tenant and the payment of a penalty of up to three times the amount of the deposit.
In this case the tenants were misled by the “licence agreements” into believing that they did not have an AST and the statutory protection afforded to AST tenants and that their rent deposits did not have to be protected.
At a hearing in August before Highbury Magistrates’ Court, the letting agency pleaded guilty to two offences under the Regulations and to a further offence of using a letting agency association logo without authority. The letting agency was fined £11,000 for issuing two sham licences and a further £5,000 for using the logo. The agency was also ordered to pay £3,000 in compensation to the tenants and to pay the council’s costs of £1,500.
This is believed to be first such successful prosecution under consumer protection legislation in relation to granting “sham licences”. It serves as a very powerful warning to landlords and agents of the importance of using the correct tenancy documentation. Green Live Limited are not alone in using ‘licences’ instead of AST agreements and other trading standards departments will now have such practices well and truly in their sightlines.
For further information relating to the points raised in this article, please contact Johanne Spittle or a member of the Property Disputes Team.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.