The Office of Fair Trading has won what it’s calling a landmark court battle against estate agents Foxtons.
Andrew Penman, Mirror.co.uk – 10 July 2009
The watchdog went to the High Court to fight what it said were unfair terms in Foxtons contracts.
In his judgment given today, Mr Justice Mann accepted that all the terms that the OFT brought before the court were unfair, including Foxtons’ use of terms:
*Requiring a landlord to pay substantial sums in commission, where a tenant continues to occupy the property after the initial fixed period of the tenancy has expired – even if Foxtons plays no part in persuading the tenant to stay, and does not collect the rent or manage the property,
*Requiring a landlord to pay commission to Foxtons even after it had sold the property,
Allowing Foxtons to receive a full estate agents’ commission for sale of the property to a tenant.
*Allowing Foxtons to receive a full estate agents’ commission for sale of the property to a tenant.
The ruling, following a three-day hearing in April, found that the charging of repeat renewal commission by Foxtons represented a “trap” or a “timebomb” for consumers.
The judge held that such important terms must be flagged prominently not just in the contract, but also in any sales literature and processes. He said a typical consumer would be unlikely to read standard terms with a great degree of attention and would not expect important obligations to be tucked away in the small print and not specifically brought to their attention. He also found that Foxtons had used language in its contracts which is not “plain and intelligible”.
On the use of a term providing for sales commission to be payable on the sale of a property to a tenant, the judge said consumers would not merely be surprised but “astonished” by the potentially large financial liability to Foxtons in relation to a transaction in which Foxtons played no material part.
OFT chief executive, John Fingleton, said: “This ruling sends out a clear and unambiguous message that businesses offering services need to ensure unexpected or surprising terms are not hidden away in small print.
“Contracts need to be written in clear and straightforward language with important provisions, particularly those which may disadvantage consumers as in this case, given prominence and actively brought to people’s attention.
“The OFT prefers to work with businesses to agree solutions where concerns are raised but we will not hesitate to take court action where this is not possible and especially where there is serious harm to consumers.”
The watchdog says that it expects the letting industry to comply with this ruling and will take the necessary steps to ensure this where appropriate.
EXPECT LETTING AGENCY FEES TO GO UP
This is all good stuff and I applaud the decision which must leave a lot of letting agents quaking tonight as they can surely expect the claims for repayment to roll in.
But I expect you’ll have to make your claim first – these letting agents ain’t going to rush to send you a cheque – and I’m guessing many letting agents won’t pay up too easily either and many will be pushed over the edge by this.
(I’m no lawyer but I imagine it will help if you have copies of the documents you had when you signed up to the contract)
Of course, hiding fees in the way some letting agents did was a sneaky property industry thing to do that is sadly standard stuff in the whole financial services sector.
Not all agents did it of course. It seemed to be confined to a number of agents in or near the London area.
You could argue that they did it for so long because they could.
And in some cases they also did it because many landlords were too mean to pay a decent up front fee for an agent’s service.
I know this because have on occasion looked after properties for people overseas and I was frequently astounded by some amateur landlords’ meanness.
I frequently found meanness about getting things fixed for their tenants or about spending any money at all.
I imagine that these were the type of people who would argue over paying a decent rate for an agent to find them a tenant. No wonder some letting agents went all sneaky and opted to charge these repeat renewal fees that have now been outlawed.
For some it was the only way they could make a living (though in the case of the bigger London letting agents it was probably just down to sheer desire to squeeze out every buck possible from unsuspecting novice landlords.)
Expect up-front agency fees for finding tenant to go up and more landlords to opt let direct using the various portals.
David Lawrenson – http://www.LettingFocus.com – LandlordZONE Topic Expert
Comment by David Lawrenson — 10/7/2009 #
Great article David – explaining the main points of this important legal case. It just provides further evidence that all agents should be liscened to prevent things like this happening.
Interesting that this case did not come up quicker considering Foxtons is a member of The Property Ombudsman scheme and The National Approved Letting scheme.
Comment by Paul Long — 11/7/2009 #