Brusse and another v Jahani BV C488-11 is a case from the European Court of Justice concerning Directive 93/13/EEC, better known to us in this country as the Unfair Terms in Consumer Contracts Regulations 1999. In outline, the Directive (and the Regs) apply to contracts between seller/suppliers and consumers. Terms which are unfair within the meaning of reg.5 are not binding on the consumer (reg.8).
Jahani BV was a landlord and Brusse was its tenant. The tenancy agreement was, to put it mildly, rather one-sided; if the tenant fell into rent arrears there was a penalty of €25 per day, plus additional interest. Lo and behold, the tenant fell into arrears and the landlord issued possession proceedings and sought a money judgment, including several thousand euros in penalty charges. The Alkmaar District Court made a possession order and entered money judgment.
The tenant appealed to the Amsterdam Regional Court of Appeal where it appears that the issue of the unfair terms of the contract was raised (possibly by the court) for the first time. The Court of Appeal referred a number of questions to the ECJ, of which two are particularly interesting for us. Firstly, did the Directive apply to the tenancy agreement and, secondly, was the Court of Appeal entitled to take this issue for itself?
The ECJ found that the Directive did apply to tenancy agreements. The purpose was to provide protection where the consumer was in a weak position vis-a-vis the seller or supplier (at ). That was particularly the case in residential tenancy agreements between residential tenants and property professionals (at ). Housing was an “essential need” of the consumer and one of the “most significant items in his budget”; the rules governing residential lettings were often complex and tenants were poorly informed (at ).
The domestic court was also entitled to take the point for itself, so long as (a) national law permitted such a thing; and, (b) it had sufficient information to make a proper decision.
Case remitted to the domestic court for determination in accordance with the judgment.
Now, we saw this case a few weeks ago, but pressure of work has prevented us writing it up until now. Apologies. I confess to being a bit surprised by how much interest it has generated as I can’t see that it says anything much that is “new”:
(a) in domestic law, this wouldn’t (necessarily) have been a case about the Directive/Regulations at all; a clause like this is so obviously a penalty clause (i.e. not a genuine pre-estimate of loss) that it’d be unenforceable at common law;
(b) there is already plenty of domestic authority for the proposition that the Directive/Regulations apply to tenancy agreements: see, inter alia, R (Khatum) v LB Newham  EWCA Civ 55; Rochdale BC v Dixon  EWCA Civ 1173; Peabody Trust v Reeve  EWHC 1432 (Ch); and,
(c) the OFT has, since 2005, published guidance on how the Regs apply to tenancy agreements (see here).