With lockdown restrictions now starting to be lifted, many businesses across the UK that were forced to close and cease trading due to the outbreak of COVID-19 are now preparing to re-open. In Scotland, many businesses across the holiday accommodation and events industries are making plans to be back up and running by 15 July, in accordance with the government's recent guidance.
As part of their response to the disruption caused by the pandemic, many businesses have been re-evaluating their terms and conditions as well as their cancellation and refunds policies to reflect such significant impact on their business operations. Not only has this been to address cancellation of bookings due to the pandemic, but also to reflect how their business may now operate following their much-anticipated re-opening.
Recently, the Competition and Markets Authority (“CMA”) has identified holiday accommodation businesses as an area of concern, with large holiday lets companies such as Hoseasons and Cottages.com coming under scrutiny with complaints that they had not acted in accordance with what is required under consumer protection law, in particular, in respect of their position on cancellations and refunds.
Businesses which fail to issue refunds for cancelled or prevented services are likely to breach the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008. It is therefore important to consider carefully whether or not a business' current terms and conditions and policies in place are compliant.
What does the law say?
Under UK and EU law, terms and conditions used by businesses for providing goods and/or services to consumers must be fair. Terms and conditions should not create an imbalance between the rights and obligations of the consumer and the rights and obligations of the business providing the goods and/or services. In addition to this general requirement of acting fairly and ensuring balance between the parties, UK and EU legislation contain a list of specific terms that may be deemed as being unfair. If any terms are viewed as unfair, these terms will not be binding on the consumer and may not be relied upon by the business.
So, with that context in mind, a full refund should be offered to a consumer when:
a business cancels the contract and has not provided the relevant services;
a business is prevented from providing the services, e.g. due to government public health measures; and
a consumer cancels because it is prohibited from using/receiving such services due to government measures in place.
Businesses should also bear in mind that, in accordance with CMA guidance, deposits should be refunded, even where, as is common with holiday accommodation, the consumer had been told on contracting that deposits would be non-refundable.
A partial refund may be more appropriate in some circumstances, for example where the consumer has already received part of the services under the contract.
The CMA's view is that businesses may also be able to deduct a contribution to the costs incurred in relation to the contract that cannot be recovered elsewhere, but such instances are rare. No specific examples are provided by the CMA, so it is not clear when it considers deductions could be safely made.
In terms of the refund process, any refunds must be made in a timely manner. The CMA has acknowledged that there may be delays in processing refunds. However, businesses should still take into account any statutory deadlines that may apply (for example, package holidays require be refunded within 14 days) and time frames should be communicated in clear language to consumers.
Vouchers and postponement
Although businesses can offer vouchers and/or postponement of the service by rescheduling to a later date, the option of a refund should also be made easily available to consumers. Businesses should avoid putting pressure on consumers to accept such options rather than being provided with a cash refund.
The CMA has also warned that businesses should not seek payment for any services that they are aware they will be unable to provide due to the impact of COVID-19. For example, a holiday lets company should not insist that a consumer pays for their booking if their holiday is booked to take place on a date that could not be accommodated, for example, due to a second wave of COVID-19, which results in more stringent lockdown measures being enforced by the government.
With this in mind, many businesses are adopting a "no quibble" refunds policy for bookings that are placed on and have arrivals from certain future dates. If the consumer has to cancel their booking during this timeframe for any reason, they will receive a full refund. This approach is not mandatory, but businesses have acknowledged that providing their customers with confidence and assurance around their bookings may result in customers choosing to book with their business rather than with competitors that do not offer such reassurance.
What about events?
In order to re-open, events and holiday accommodation businesses have required to consider implementing a number of changes to their operations, for example:
Limitation on numbers - the number of people permitted at events may be strictly limited to allow social distancing. Many businesses may look to introduce online ticketing, rather than the ability to purchase tickets for events on the day, to ensure that crowding is eliminated. Such tickets may require to have set arrival times and restrictions on length of stay, with no option of extension.
One-way - visitors may require to queue on marked out points, and follow directions regarding where and how they are to walk around, as well as controls over how and where visitors can stop and linger.
Use of facilities – depending on government guidance on social distancing, restrictions being implemented on the number of individuals permitted in each area of the venue, with "one in, one out" becoming common.
Such measures may be required to protect staff and to give confidence to consumers. It is therefore important that the terms and conditions provide the business with flexibility to make any such changes in line with upcoming government recommended measures and that they clearly require the consumers to adhere to such measures as a condition of the services provided.
What if a consumer contracts the virus?
In order to protect both staff and other consumers, businesses may also consider including provisions within their terms and conditions that place an obligation on consumers to notify the business immediately in the unfortunate event that the consumer were to contract the virus or suspect they've contracted it. This will allow the business to take the appropriate necessary actions as soon as possible, in order to mitigate any potential risks that this may pose to staff or other consumers.
If you would like to discuss your approach to updating your organisation's terms and conditions, please get in touch with Grant Campbell or your usual Brodies contact.