The UK's consumer protection landscape is set to undergo transformative change following the coming into force of new rules in the Digital Markets, Competition and Consumer Act ("DMCCA") on 6 April 2024. Among other things, businesses can be fined up to 10% of turnover for infringing consumer protection law. In the real estate space, this legislation will be particularly relevant for the residential and elder-care sectors.
Why is this new Act significant?
To date, regulators have had very limited scope to impose meaningful sanctions for past breaches of consumer law – and they also had to go to court to enforce it. From 6 April 2025, the UK Competition and Markets Authority will be able to enforce consumer laws directly, without taking businesses to court. This will affect parts of the real estate sector which deal directly with consumers, such as the living sectors (including student accommodation, BTR and retirement housing), care homes and IRCs.
1 What has changed?
The key changes to be aware of are as follows:
- A much tougher enforcement regime: Customer-facing businesses face a much higher risk of significant financial costs from non-compliance with consumer law, including fines of up to 10% of global turnover and redress orders requiring businesses to compensate consumers. The UK Competition and Markets Authority (the "CMA") is also now able to enforce consumer laws directly, without taking businesses to court – and all regulators benefit from significantly strengthened powers to investigate and obtain information (with additional penalties for failure to comply).
- Renewed focus on pricing: The DMCCA has tightened the law on misleading pricing practices, particularly around headline prices which do not reflect the true cost of products or services and "drip pricing". This is where a lower price is used to attract consumers, only to discover that it doesn't take account of unavoidable further charges.
- New rules on fake or misleading reviews: The DMCCA effectively prohibits the submission or commissioning of fake reviews. It also requires businesses to ensure that they do not publish consumer reviews in a misleading manner and that they take "reasonable and proportionate steps" to prevent fake reviews and avoid misleading presentation of reviews.
What about the new rules on subscription contracts?
The DMCCA also introduces new rules on subscription contracts – in effect requiring businesses to give consumers a fresh right to cancel at least once every 6 months. Rent of residential accommodation is excluded from these new rules. However, where, for example, the package of services offered to consumers alongside the accommodation includes gym or health club membership, it is possible that these particular arrangements could be covered (but not the lease of the accommodation itself). The new rules are not expected to be introduced until 2026 though. Beyond this carve-out from the subscription rules, there is no general exclusion for the real estate sector from the consumer provisions of the DMCCA.
For more detail on all these changes and to better understand your business's risk profile, see our recent briefing.
2 Why should the real estate sector be concerned?
The following factors mean that the risk to the real estate sector from these changes is significant:
- Previous regulatory scrutiny: The sector has already come under scrutiny from consumer regulators – for example, the recent CMA investigation into housebuilding (explored here) and the investigation by its predecessor, the Office of Fair Trading, into retirement home exit fees (discussed here).
- Significant payments: Whether property is being purchased or rented, significant sums of money are typically at stake from the consumer's perspective – as well as increasing the likelihood of enforcement action by regulators, this also makes the area attractive to law firms looking to bring group litigation on behalf of consumers.
- Essential expenditure: Having somewhere to live almost certainly falls within the CMA's concept of consumers' "essential spend", which it has identified as a key area of focus in its 2025 to 2026 Annual Plan (especially in light of current pressures on household budgets).
- Vulnerable consumers: Elder care in particular involves vulnerable consumers, which is also likely to be seen by regulators as a priority – but even the broader residential property sector will have a proportion of consumers who are likely to be regarded as vulnerable based on various criteria (note that these can also include factors such as levels of indebtedness, besides physical or mental vulnerabilities).
What if consumers have independent legal advice?
The mere fact that consumers may in some contexts be advised by solicitors (e.g. on the purchase of a new property) does not mean that there is nothing to worry about; in particular, CMA guidance makes clear its view that receipt of legal advice by consumers does not necessarily put them on an equal footing in terms of bargaining power or level of knowledge as against a business.
3 What should the real estate sector be concerned about?
Historically, much of the focus in relation to consumer protection has been on unfair terms – in part because legislation prohibiting the use of such terms has been in place for longer (since the late 1990s). However, since 2008, legislation has also been in place making it illegal to engage in unfair practices; these cover both pre- and post-contract conduct and require businesses to consider fairness across all material "touch points" with consumers (not just the contract stage).
As well as tightening up some aspects of the unfair practices regime, the DMCCA introduces a new enforcement regime for both unfair terms and unfair practices, which significantly raises the stakes for businesses dealing with consumers. We have set out below some key concerns that real estate businesses may wish to consider at each stage of consumer interaction:
The pre-contract stage
With regard to pre-contract materials, misleading pricing is a major focus of regulators at the moment. Businesses should look at whether the headline price used in their promotional material is genuinely representative of the actual final price to the consumer – if it omits lots of additional, unavoidable charges (for example, service charges) it may be considered misleading. Providers of retirement housing and care homes may face more intense scrutiny due to the vulnerable nature of their consumer base – and as noted above, the mere fact that solicitors are often involved is not necessarily enough to remove alleged unfairness.
How helpful is independent legal advice?
Independent legal advice is likely to be helpful when it comes to consumers understanding what they are signing up to. But if the advice is to seek removal or modification of an unfair term (or the discontinuance of unfair practice) and the business refuses, it is difficult to see how the consumer is in a better position through having been legally advised. Solicitors are also typically only involved towards the end of the process – by which time the consumer may be quite heavily invested in wanting to secure a positive outcome (and may be less receptive to potential disadvantages being pointed out). If regulators consider that initial promotional material was misleading because it omitted or downplayed potential disadvantages, they may argue that an infringement took place well before any independent legal advisers were involved.
The contract stage
Recent property-specific measures such as the leasehold reform legislation or the Renters Rights Bill may address some of the broader concerns about "unfairness" to consumers in the real estate space, at least in relation to leases. That said, we would highlight two areas to which real estate businesses should pay particular attention:
- the requirement for consumer contracts to be in "plain intelligible language" (avoiding legal jargon where possible); and
- terms which may be susceptible to challenge on the basis that they give too much power or discretion to the seller or landlord.
The post-contract stage
Even if contractual terms are fair, these terms must still be exercised and enforced in a fair manner to ensure that post-contractual conduct does not amount to an unfair practice. For example, the enforcement of a breach of lease terms or service charge increases must be justified, communicated clearly and promptly, and conducted reasonably (e.g. giving sufficient advance notice of increases to allow consumers to make appropriate financial arrangements if necessary).
4 Key actions for the real estate sector to consider
- Have you reassessed your risk in light of the much tougher enforcement regime introduced by the DMCCA? In particular, the design of promotional materials may need more careful consideration to avoid practices which are likely to be seen as "red flags" by regulators. Meanwhile, if consumer contracts have not been reviewed for compliance for some years, now would be an opportune moment to check that they do not contain any provisions that could provoke enforcement action from regulators.
- Are relevant staff – particularly those in sales roles – aware of the risks that infringing consumer law poses to the business? Do staff need a refresher on what types of behaviour or practices are likely to be problematic?
- Do you have a plan for how you would respond if investigated by the CMA for breaches of consumer law? As noted above, the DMCCA also significantly strengthens regulators' investigatory powers and fines can be imposed for non-compliance with, for example, information requests.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
