Thackray Williams

The Office of Fair Trading (OFT) has welcomed a landmark High Court ruling that certain terms and conditions used by estate and letting agency Foxtons Ltd in its lettings agreements with landlords are unfair.
As a result of this ruling, made in proceedings brought by the OFT under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), the OFT will now look to obtain injunctions preventing the continued use of the terms by Foxtons.

The Court accepted that all the terms the OFT brought before the Court were unfair, including Foxtons' use of the following types of terms:
1. a term providing for Foxtons to receive commission if the tenancy is renewed or extended by the tenant after the initial fixed term;
2. a term providing for Foxtons to continue to receive this commission from the landlord even if he has sold the property, and
3. a term providing for Foxtons to receive full estate agents commission if the property is sold to the tenant although they played no part in arranging the sale.
It was found that the charging of repeat renewal commission by Foxtons represented a 'trap' or a 'timebomb' for consumers. The judge held that such important terms must be flagged prominently not just in the contract, but also in any sales literature and processes. Typical consumers would be unlikely to read standard terms with a great degree of attention and would not expect important obligations to be tucked away in the small print and not specifically brought to their attention

OFT Chief Executive, John Fingleton, said:

'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.’

Summary
• Unless terms providing for commission on renewals are very clearly flagged up to the landlord at the time he signs the letting agreement, and given equal prominence to the fees for the initial letting, they will normally be unfair and therefore void under the UTCCRs.
• Terms relating to commission for sales in a letting agreement are also likely to be void, unless they are made very clear to landlords at the time they sign the agreement and given prominence in the agreement.
Although this is a good decision for landlords, it could be catastrophic for Foxtons and any letting agents who have or are using similar clauses in their letting agreements as they will now be faced with claims by landlords for recovery of charges paid.

The OFT further stated in their press release "The OFT expects the letting industry to comply with this ruling, and will take the necessary steps to ensure this where appropriate.”

If you are an estate or letting agent and would like your terms of business reviewed or advice on any terms relating to commission, please contact Yasmin Hussain on 020 8290 0440 or email: yasmin.hussain@thackraywilliams.com .