The Office of Fair Trading (OFT) is seeking an injunction to prevent property agency Foxtons using certain terms in its agreements with landlords.
The OFT is seeking an injunction against Foxtons
The terms state that a landlord must pay commission to Foxtons if a tenant stays in a property, even if Foxtons no longer manages the property.
The OFT says it is acting in response to consumer complaints.
Foxtons welcomed the chance to have a court clarify the situation but said the complaints were "misconceived".
"The terms to which the OFT objects in Foxtons' letting agreements can potentially require landlords to pay substantial sums in commission," the OFT said.
The OFT added that Foxtons' terms also require a landlord to pay it commission if it sells the property to a tenant, regardless of whether Foxtons played any part in the sale.
If successful in this case, the OFT said it intended to stop the same terms being used by other companies in the letting industry.
"As the OFT have pointed out they are treating this as a test case, we welcome the opportunity to have a court clarify the matters raised by the OFT," Foxtons said.
"We are of the opinion that they are fundamentally misconceived," the company said.
Foxtons sells and lets property in London and the south east of England.