Date 14 July 2009
The recent landmark High Court ruling in Office of Fair Trading v Foxtons Ltd [2009] could see thousands of landlords seeking to recover millions in overpaid charges from estate agents.
The Office of Fair Trading (OFT) sought an injunction against Foxtons, who let some of the most expensive property in Central London, under the Unfair Terms in Consumer Contract Regulations 1999 claiming that certain terms and conditions used by Foxtons in its letting agreements were unfair.
Mr Justice Mann ruled that all of the terms brought before the court, including terms Foxtons uses as its standard terms when acting for landlords, were unfair:
- Terms requiring the landlord to pay renewal commission if a tenant renews or extends his tenancy even where Foxtons have not been involved in negotiating the renewal or extension;
- Terms which entitle Foxtons to charge a sales commission on the sale of a property to a tenant, even where they have played no part in the sale;
- Terms requiring the landlord to pay commission even after it had sold the property
Mr Justice Mann found, that the repeated charging of renewal commission by Foxtons was a “trap” or a “timebomb” for consumers. The Judge ruled that important terms must be prominent, not just in the contract but also in any sales literature and processes. He said that a typical consumer would be unlikely to read the small print in the standard terms and they would not expect such important terms to be hidden away there. He also stated that the language used in Foxtons’ contracts was not “plain and intelligible”.
The National Association of Landlords has hailed the ruling as a victory and the OFT have stated that they will take all necessary steps to ensure the letting industry comply with this ruling.
John Fingleton, Chief Exectutive of the OFT said:
“This ruling sends out a clear and unambiguous message that businesses offering services need to ensure that 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”.
Foxtons, who charged customers 11% commission for renewal of a lease after the initial term, have now said that they will voluntarily reduce their charges although declined to say by how much.
Many of the UK’s letting agencies have similar terms and this landmark ruling means that such terms will not be enforceable and also that historic charges may be recovered.
What this means for Letting Agents:
- Agents should ensure that their standard terms and conditions are properly drafted so that any important terms are clear, intelligible and most importantly highlighted to their customers
- Agents should ensure their sales literature is compliant and that terms are not hidden in the terms and conditions
- The terms of a contract should aim to impose equal obligations and rights for both parties. Contract terms may be deemed unfair where there is a significant benefit to an agent and significant detriment to the customer
- The ruling covers existing and future contracts and agents may wish to review the terms of their existing contracts, analyse where they maybe liable for unfair terms in order to consider liabilities they may face as a result of the ruling
If you require further advice on the Foxtons decision please contact the Property Litigation Department on 01727 798096 or by email at lynsey.newman@salaw.com. Or if you wish to receive a quote to review your terms and conditions please contact our Commercial Department by email at chris.wilks@salaw.com or on 01727 798081.
© SA LAW 2009
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