Friday, July 10, 2009

Foxtons ‘unfair’ can this be true?

High Court: Foxtons contracts are 'unfair'

The High Court has upheld an OFT decision that landlord contracts from estate agent Foxtons were unfair. The company, which developed a reputation in the boom years for hard-sell tactics and high fees, was accused of hitting landlords with repeat charges - renewal commission - even when it may have done no extra work to keep a tenant. The case, which has implications for other rental agents employing the same practices, reached the High Court after the Office of Fair Trading (OFT) deemed elements of Foxtons contracts with landlords in breach of the Unfair Terms in Consumer Contracts Regulations.

Posted by gone-to-colombia @ 05:05 PM (1060 views)
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8 thoughts on “Foxtons ‘unfair’ can this be true?

  • “Mr Justice Mann has not ruled against renewal commissions per se, but has said – in no uncertain terms – that they must not be hidden in the small print. This ruling is most definitely a victory for the NLA and for landlords throughout the country”

    hmmmm – ive not looked but the 11% amount sounds a bit unfair to me. To look at a proper version of the judgement see :

    http://www.bailii.org/ew/cases/EWHC/Ch/2009/1681.html

    Will this have implications for tennants too – quite possibly – might it mean a renewal fee charged to the tenants by the agent might also be “unfair”?

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  • I’ve not read it all but this sounds of interest:

    para 95 : Foxtons have sought to argue that a finding against renewal commissions would operate against the interests of tenants or landlords because it would lead to higher initial commissions, which would be passed into higher rents, or would lead to increased pressure on prospective tenants to enter into longer initial tenancies or not to renew shorter tenancies. I do not accept these, or similar, arguments for various reasons. First, I am not ruling against renewal commissions per se. I am not even ruling on renewal commissions at a particular level. I am ruling on the manner in which Foxtons seeks to charge them. Second, the argument requires levels of economic analysis which were not reached in the material before me. Third, some of the arguments are predicated on an unspoken assumption that letting agents would adjust their behaviour and make recommendations to their clients in order to maximise the commission for themselves. In other words, otherwise unfair transactions should be characterised as fair because otherwise letting agents will act in breach of duty to their clients. I do not think that that argument can be described as attractive. ”

    AND

    “Conclusions and consequences

    I therefore find all the relevant provisions to be unfair for the purposes of the Regulations. The parties are agreed that the consequences of that in terms of the relief to be granted should be the subject of further debate when my decision was known. There will be a further hearing for that purpose if the parties cannot agree on the point.”

    I think the whole judgement needs to be read but they seem to be saying that the terms are unfair terms especially if they are not spelt out. I think its inconceivable that a term will be judged unfair if the value were reasonable. So basically Justice Mann is saying go away and sort out a fair value between you and if you cant sort it out come back here and I will sort it out for you. Either way the implication is the costs are inequitable. [will read the full judgement but am sure this will be analysed further in the broadsheet weekend press].

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  • it_is_going_with_a_bang says:

    A renewal fee should cover paperwork costs and nothing more. What other work does it involve? There is no marketing to speak of.

    As with all contracts though – it is up to the person signing the contract what they wish to accept and if they don’t like it take the business elsewhere. Ultimately that is what the landlords need to do – get up and go. What we are really talking about here is people who don’t bother to read terms and conditions and then bleat about it afterwards. So as much as I think Foxtons are a bunch of [email protected] – those who throw their business at them are somewhat stupid.

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  • montesquieu says:

    After 12 months of my current rental contract I got letters from the letting agent wanting to ‘help’ organise a new contract (no fee mentioned but you can bet the’d want the same £300-400 charge (to me) that the got for doing absolutely f-all (for me) first time round.

    The landlady initially went along with it but I persuaded her not to. She’s away in India anyway and in many ways quite vulnerable (just retired and on trip of a lifetime, reluctant landlord after failing to sell for a year mid 2007-8).

    Between us we verbally agreed (and documented by email) a privately contining rolling rental with a two-month break period which is exactly what I wanted (with current job situation I don’t want tied to a 12-month lease anyway). The agent were not involved in negotiating or documenting this. But I’m wondering whether they will try it on with some kind of bill anyway when the contract rolls over in August.

    They don’t manage this property, all they did was market it in the first place over a year ago. They have NO right to take contrinuing revenue from it for doing absolutely nothing except issue an invoice. But I guess we’ll see.

    Letting agents – leeches the lot of them.

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  • it_is_going_with_a_bang said…”What we are really talking about here is people who don’t bother to read terms and conditions and then bleat about it afterwards”. Erm not really otherwise the OFT wouldn’t have brought the action (or won for that matter).

    Suggest you read the judgement. it does have implications for tenants too. A case of watch this space.

    montesquieu – that is a statutory periodic tenancy (spt). 2 month notice on her side , one month on yours. Since they havent renewed the tenancy agreement i would argue that they have literally done nothing i.e. they are not involved in the renegotiation or anything. It may be that they have advised the landlady that the spt does give her security of tenure since its on the bask of an AST – i assume, but that advice is between her and the agent and any charge should be hers alone.

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  • “Buy-to-let landlords can claim millions as Foxtons loses commissions case”

    Much yummier headline from the Times
    http://business.timesonline.co.uk/tol/business/industry_sectors/article6685503.ece

    Might even see a few bankruptcies as landlords claim back their unlawfully collected rental commissions.

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  • Bit of a blast from the past this one. These restrictive and blatantly unfair terms used to be common in the 60’s and 70’s, indeed I was caught out when I had the temerity to find my own buyer for a property, having sent the estate agent away when he failed to do so.
    I had thought that these openly shady practices had been stopped by the ‘unfair terms’ legislation, alas seemingly not.

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  • Debenhams Ottaway says:

    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!”

    Conclusion
    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.

    If you are a landlord wanting to claim back Renewal Fees or Sales Commissions that you have paid over the last 6 years please do not hesitate to contact me.
    Luke Harrison (Solicitor) in the Litigation/Dispute Resolution department. 01727 837161 [email protected]

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