Estate agency fees are judged unfair
The Office of Fair Trading has won a key battle in the High Court with estate agent Foxtons.
The watchdog went to court to fight what it regarded as unfair tems in Foxtons' contracts with landlords.
In a landmark High Court ruling made public on Friday,
Mr Justice Mann agreed with the OFT and found that all of Foxton's terms were unfair.
These included renewal fees, the agency’s requirement of a landlord to pay commission even after it has sold the property, and Foxtons' receipt of full commission for the sale of the property to a tenant.
In particular, he found that renewal fees represented a "trap" and a "timebomb" for consumers. These fees require a landlord to pay the agent substantial sums in commission if 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.
He added that a typical consumer is unlikely to pay attention to standard agency terms, adding that he found language in Foxtons’ contracts that is not 'plain and intelligible'.
However, Mr Justice Mann did not rule out the use of renewal fees. Instead, he stated that Foxtons must prominently disclose the fees in its contracts, sales literature and processes.
The Office of Fair Trading welcomed the ruling, which followed a three-day hearing in April arising from its claim that Foxtons fees were unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
The OFT says it will now ask the High Court to grant injunctions preventing Foxtons’ continued use of its existing terms.
The OFT says it expects the letting industry to comply with this ruling, and will take the necessary steps to ensure this where appropriate. John Fingleton, chief executive of the OFT, says: “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 National Landlords Association also welcomes the ruling. John Socha, vice chairman of the NLA, says: “We have been campaigning on these unfair fees for almost two years. This sends a direct message to letting agents that this lack of transparency must stop.”
He adds: “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.”
July 13, 2009
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