Renters' rights violations to be investigated

The private rental market will be investigated after the UK's competition authority found a "significant minority" of landlords may be violating tenants' rights.

The Competition and Markets Authority (CMA) will focus on things such as "sham licences", which make evictions easier.

The CMA will also examine possible discrimination, such as landlords who ban benefit claimants.

It said it will take action if needed.

The CMA has been gathering evidence on the private rental market since February as part of its wider annual review of housing in the UK.

"There is currently widespread concern about how well various aspects of the housing market are working," the CMA said in its report, outlining "numerous concerns" it had heard about the private rental market.

It will look in to "sham licences", where unsuitable tenancy contracts were offered to renters. For example, the CMA heard some tenants were given a "licence to occupy" a room, when an assured tenancy was more suitable.

A licence to occupy gives the tenant fewer protections and makes it easier to evict them, and is often used for short term rentals or lodgers. A landlord can terminate the licence to occupy relatively quickly and without needing a court order.

Assured tenancies offer a more stable agreement and longer notices of eviction, and the landlord would have to follow court routes to get possession of the property where necessary.

But the CMA found that long-term tenants were being offered licences to occupy, where they should have been offered assured tenancies.

It said that the practice of offering unsuitable letting agreements was an attempt "to exclude tenants from the rights they ought to enjoy".

"This practice may affect the vulnerable and recent arrivals in the UK such as overseas students," the CMA said.

The CMA said it also heard about activity that "could constitute unlawful discrimination", including advertising rental properties as not available to housing benefit claimants.

In July 2020, a judge ruled that blanket bans on renting properties to benefit claimants are unlawful and discriminatory, breaking the 2010 Equality Act on grounds of sex and disability. Landlords cannot ban people with children from properties as the ban was found to disproportionately affect women.

The CMA also said it found numerous complaints about zero-deposit schemes, which free up tenants from needing to provide a lump sum upfront before renting.

But several organisations reported that landlords did not communicate with tenants the costs associated with being part of a zero-deposit scheme.

The CMA heard that tenants often had to pay an annual or monthly renewal fee, which is non-refundable and often subject to increases - meaning that zero-deposit schemes often end up costing more than a traditional security deposit scheme.

A traditional security deposit means tenants must pay a lump sum upfront before renting, and is refunded at the end of the tenancy, as long as there is no damage to the property and no outstanding rent.

The CMA said the terms of many zero-deposit schemes were not fair.

The watchdog also heard that "onerous" conditions were being imposed on many tenants seeking to rent, including providing "extensive" evidence of assets as security in order to rent. It also found that often, a guarantor was looped into a contract where one was not needed.

A guarantor is a person who can be liable to pay the rent in case the tenant cannot.

It also heard about issues surrounding retirement homes, saying that charges were "imposed on elderly tenants when they leave or sell their retirement homes". It said these charges can be "high and unpredictable, potentially limiting residents' choices and financial outcomes".

Since February, the CMA has been engaging with the government's Levelling Up department, and various consumer rights groups, including Citizens Advice, Disability Action, homeless charity Crisis UK, Justice for Tenants, the Joseph Rowntree Foundation and the Property Ombudsman.

A spokesperson for the Department for Levelling Up said: "We look forward to engaging with the CMA throughout the course of their ongoing work investigating and tackling unfair practices."

After hearing that landlords may not be upholding consumer rights, the CMA will now gather further evidence and decide in which specific cases it can enforce action or advise the government about improvement.

It will now launch a full evidence-gathering process and decide "the best course of action" before the end of the year.

The watchdog also plans a deeper probe into the large amount of land controlled by property developers, after it found evidence showing a significant number of problems in the housing supply sector. Under the Competition Act 1998, the CMA can impose penalties and has powers to enter a business premises with a warrant to aid its investigations.