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Landlords can claim millions back as Foxtons defeated in High Court

July 15th, 2009

London-based estate agent, Foxtons, defeated under its unfair terms imposed on landlords – announced by the High Court on 10th July 2009. Landlords can now reclaim the overpaid charges for the past 14 years.

The Office of Fair Trading (OFT) had finally won over suing Foxtons’ unfair terms imposed on landlords, announced with High Court ruling on 10th July 2009. The small print on Foxtons’ agreement for rental properties was described as a “trap” and “timebombs”, which it required landlords to pay commissions even when the initial lease agreement expired. National Landlords Association (NLA) also hailed the ruling against Foxtons as it has been campaigning on this issue for months.

Landlords were required to pay 11% renewal commissions to the company when the current tenants continue to rent the property after the initial tenancy period (even though Foxtons had not involved in arranging the extended tenancy). Other than that, landlords have to pay full 2.5% commission to Foxtons for selling the property to the tenants.

The terms and conditions written by Foxtons were criticised as hidden and unclear – which Mr Justice Mann stated that consumers were unlikely pay high attention and expect important obligations like this to be written in the small print without bringing to their attention particularly. After the announcement of the defeat, Foxtons have now stopped using certain clauses.

Landlords can now reclaim the overpaid charges for the past 14 years. Reports estimated that if it costs a landlord £15,000 a year to rent out a two-bedroom property – he/she would have to pay £1,650 commissions to Foxtons, which would equal to £23,100 in 14 years.

Foxtons welcomed the High Court ruling and are pleased that “the OFT made clear its case was not that renewal commission is always unfair”.

They have removed certain clauses such as the sales and renewal commission from the terms of agreement and had now introduced a new literature to spell out its commission terms prominently. It is also reported that Foxtons have now voluntarily reduced the renewal commission charges but refused to reveal by how much.

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  1. July 21st, 2009 at 23:05 | #1

    The enforceability of Renewal and Sales Commissions in letting agent’s terms and conditions of business in light of Office of Fair Trading (OFT) -v- Foxtons Ltd
    The recent High Court decision of OFT -v- Foxtons will have wide ranging ramifications for both letting agents and consumer landlords. Whilst Longmore LJ made it clear in this Judgment that he was not making a decision on the enforceability of Renewal Fees and Sales Commissions per se the practices and terms and conditions operated by Foxtons are similar to terms operated by letting agents up and down the country.
    Consumer landlords
    The case was decided on the basis of the Unfair Terms in Consumer Contracts Regulations 1999 which apply to consumer landlords only. The Court did not expressly define consumer landlords although Foxtons accepted the definition offered by the OFT namely that a consumer landlord included those that let out their properties when temporarily travelling abroad, due to relocation, through lifestyle choices, to fund part of their mortgage or individuals for whom property represents part of their pension or long terms savings. The Regulations do not apply to “professional” or “commercial” landlords.
    Renewal Fees and Sales Commissions are not part of the core bargain
    Foxtons failed in their argument that Renewal and Sales Commissions were exempt from scrutiny under the Regulations as the fees formed part of their core charges. The Court decided that in order to form part of the core charges they would have to be seen as such by both Foxtons and the typical consumer landlord at the time the contract was made. The Court also held that Foxtons terms were not in plain and intelligible English which would, in any event, have taken them outside of the exemptions provided for by the Regulations.
    Renewal Fees and Sales Commissions held unfair
    Having established that the Renewal and Sales Commission charges could be scrutinised under the Regulations on the basis of fairness Longmore LJ had no difficulty in finding the terms to be unfair. He said “The consumer would not expect important obligations of this nature with likely and significant impact to be tucked away in the “small print” only, with no prior flagging, notice or discussion.” He added that the real question was whether the consumer landlord knew what he was paying for when he entered into the contract. Renewal and Sales Commissions should not be “camouflaged”, an “ambush” or “time-bomb!”
    As a result of this ruling letting agents will urgently need to review their terms and conditions of business as well as their sales practices.
    • Renewal Fees and/or Sales Commission should ideally be expressed as being part of the core charges in both the terms and sales and marketing literature.
    • Terms should be in plain and intelligible English.
    • Renewal Fees and/or Sales Commission should be expressly flagged and/or brought to the attention of the consumer landlord.
    Where lettings agents’ own terms and practices are similar to Foxtons they may have difficulty in recovering their charges based on those fees and may event face claims by consumer landlords for repayment of Renewal fees and Sales Commissions that they have been paid over the last 6 years. or visit //www.dolegal.co.uk

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