Probe into zero deposit schemes aims to uncover poor practice

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The Competition and Markets Authority (CMA) is to dig deeper into zero deposit schemes and rental guarantees after its study found that a “significant minority” of landlords and letting agents may not be following consumer protection rules.

It is prepared to amend guidance or take enforcement action following concerns that tenants may be unaware of their liabilities under zero deposit schemes, alongside reports of pressure selling and undisclosed commissions earned by letting agents. These schemes are unregulated and it says concerns include landlords or letting agents failing to provide adequate information about them.

Onerous clauses

Guarantees will also come under the spotlight as the CMA explains it has seen examples of onerous guarantee clauses which impose wide obligations on tenants, such as requiring them to provide extensive evidence of assets. “Concerns have also been expressed that requiring extensive guarantees may disadvantage those who are less well-off or who lack a network of support able to provide a guarantor, as too may an insistence on the payment of several months’ rent upfront,” it reports.

“We were told lengthy and potentially intrusive information…could potentially be used to discriminate against some consumers on the basis of their personal circumstances and specific characteristics.”

Updated guidance

The body will also investigate retirement housing fees and sham licences as well as updating its guidance for letting agents to reflect recent legislative changes. This aims to raise consumer and landlord awareness of their respective rights and responsibilities.

The CMA report adds: “A consistent theme from stakeholders is that there is a lack of understanding on the part of consumers and landlords about their rights and obligations. There is also consensus that tenants find it hard to exert their rights against landlords, despite the existing statutory and contractual protections that are in place.”

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