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There has been a great deal of media interest in the recent ruling by Mr Justice Mann in the case of OFT v Foxtons.  The decision, in what is being termed a landmark case, against one of the UK’s largest estate agents was handed down last week and the papers claim that it could cost Foxtons millions of pounds in claims and have significant ramifications for other letting agents in the future.

Before Landlords stampede to the door of Foxtons (or any other letting agent) and demand re-payment of their renewal commission fees it is worth looking at the detail of the Judgement.

The case against Foxtons was commenced by the OFT following a number of complaints from landlords who found themselves paying high commission fees at the end of the original term of the tenancy.  It centred around three clauses.

1.    Renewal Commission payable on extension, renewal or holding over.

2.    Commission in the event of a sale of the property to a tenant.

3.    Continuing commission obligations for the original landlord where the property had been sold with a tenant in situ.

Each of these terms relating to important continuing financial obligations was hidden away in the small print of Foxtons terms and conditions.  In addition the language of the clauses was not “plain and intelligible”.

Mr Justice Mann said that when a customer (whether or not they are a professional landlord) is faced with terms which relate to the letting of his property he is unlikely to be considering renewal at some point in the future.  The terms relating to renewal commissions are hidden away “not only is the renewal commission not “at the forefront” of the publicity; it is nowhere even hinted at, much less referred to”. 

The OFT’s claim centred around the contention that no real valuable services had been provided to the landlord for this fee.  Mr Justice Mann rejected the argument advanced by Foxtons that the renewal service offered was a real and valuable service which reduced the possibility of a costly void in the letting; limited as it is to negotiation where necessary and drawing up of new tenancy agreements.  He said that if the consumer looked at the terms “he will say that they do relatively little (and even charge separately again for providing the agreement)”.

Foxtons amended their terms and conditions earlier this year and those new terms were also the subject of Mr Justice Mann’s scrutiny.  He was critical saying that the new terms are “severely camouflaged” and expressed surprise that the need for transparency, one of the OFT’s main criticisms during this long running dispute, had not been reflected in the terms.

It was a logical step from his decision that the renewal commission term was unfair for Mr J Mann to find that the two other terms at issue were also unfair.  These terms had been removed from the new terms and conditions brought out earlier this year.   

The Judge found that the requirement to pay commission to the agent if a landlord sold the property to his tenant, and which fell due even if the sale was not completed, was a transaction in which the agent played no material part.  Further the clause was also hidden away in terms which referred to rental of the property. 

The final clause at issue was the responsibility for the original landlord to make renewal payments even where the property had been sold on.  Again this was hidden in small print along with a warning for landlords to pass the burden on to a new buyer in any sale contract. 

The ramifications of the Judge’s finding will not be known for some time as the question of what terms of relief the Court will grant is to be the subject of a further hearing.  The OFT say that they will apply for an injunction to prevent Foxtons using these terms and conditions.  Thousands of landlords may seek to claim back renewal fees.  It is possible they may be successful and it is also possible that it could lead to claims by current and former clients of Foxtons for re-payment of their renewal fees.  However, it is important to remember that this Judgement relates to very select circumstances and is not a blanket finding that renewal fees are unfair. Indeed Mr Justice Mann made clear that he was not making a finding about renewal commissions per se and as long as there is “real disclosure” and “active flagging” of these clauses so that the requirements are spelled out to the consumer then there appears to be no real issue with them in principle.  His ruling was only about the manner in which the renewal commission had been sought and how it had been brought to the attention of the consumer.  

For further information, please contact Jane Canham of the Property Dispute Resolution Team at Seddons on 020 7725 8055 (janec@seddons.co.uk)
www.seddons.co.uk