Page last updated at 12:09 GMT, Friday, 10 July 2009 13:09 UK

High Court rules against Foxtons

Foxtons noticeboard
Foxtons has lost its second legal case in two years.

High profile estate agency Foxtons has been told by the High Court that some of the charges it imposes on landlords are unfair.

The Office of Fair Trading (OFT) had asked the court to uphold the regulator's decision from 2008 that the charges broke consumer regulations.

The OFT said clauses in the small print of Foxtons' agreements for managing tenanted properties were a "trap".

It said the court ruling sent out a "clear and unambiguous message".

'Not hidden away'

The clauses which Mr Justice Mann agreed were unfair said that Foxtons could:

• continue to demand "renewal" commission from a landlord if a tenant stayed on past the initial tenancy period - even if the agency had played no further part in arranging or managing the extended tenancy

• force the landlord to continue paying commission to the agency, even after Foxtons had sold the property

• be paid full commission for selling the property to the tenant, regardless of whether or not it had had a hand in the sale

"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," said OFT chief executive, John Fingleton.

"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," he added.

Complaints upheld

The OFT started its legal action early last year, after investigating complaints from landlords, to uphold its powers under the 1999 Unfair Terms in Consumer Contract regulations.

The agency's contracts had demanded an 11% renewal commission if a tenant stayed beyond the initial one-year tenancy, and charged 2.5% of the value of the property if the tenant went on to buy it.

During the hearing in April 2009, the regulator described the charging of renewal commission as a "time bomb".

Mr Justice Mann agreed that the terms had been buried in the small print of the estate agency's standard terms and conditions, which were unlikely to be read thoroughly by clients.

They were also not written in "plain and intelligible" language.

The judge said landlords would be "astonished" to find they had to pay Foxtons commission for the sale of a property, even if the agency had played no part in the deal.

Foxtons "pleased"

After the ruling, London-based Foxtons claimed that the ruling was partly a victory for itself because the ruling meant that renewal commission was not always unfair.

But in response to the judgement it has now reduced the level of its renewal commission, and is now changing its literature and contracts, so that the commission is "spelt out prominently, clearly and in straightforward language".

The agency said it had already dropped the other contentious contract terms - its third party renewal commissions, and sales commissions contained in lettings agreements.

"We are extremely pleased that this matter has finally been clarified in a way which is to the benefit of consumers and the industry," said Michael Brown, chief executive of Foxtons.

In a separate case last year, the Court of Appeal ruled that Foxtons was not entitled to commission for selling a house merely for showing the buyer around it.



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SEE ALSO
Estate agent loses out in court
28 May 08 |  Business
OFT acts against 'unfair' Foxtons
26 Feb 08 |  Business

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