New focus on Letting Agents |
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25th February 2010
The Office of Fair Trading is to write to a number of letting agents, warning them not to break the law, following the Foxtons case over renewals. The OFT says it will “take necessary steps” to ensure compliance.
The OFT is also advising landlords that they may have a case for suing Foxtons and other agents who hid their renewal fees in the small print.
Foxtons are also banned from claiming sales commission on properties where the tenant remains in situ, and third-party renewal commissions.
However, any landlord who believes they have a case against Foxtons or any other agent is not automatically entitled to a refund.
The OFT is telling consumers: “This order does not require Foxtons to repay money that consumers have already paid them. If you are thinking about asking Foxtons to repay you money paid as commission, you should seek independent legal advice.”
While Foxtons have to obey the order, it does not directly apply to any other agents. However, the OFT advises that the judgement sets out what the law is and contains key principles that should be applied to other letting agents’ contracts.
It is telling landlords: “Renewal commission terms should be transparent, clearly set out and given appropriate prominence both in the contract and any accompanying promotional literature and sales practices used by the agent. If an agent’s entitlement to renewal commission is not set out clearly, in terminology you can understand, and indeed actively flagged in the contract, the glossy brochures and the sales practices, then in our view the agent ought not to be able to rely on the term.”
The OFT’s latest statement is after a final High Court order, made on December 23, against Foxtons, preventing it from using certain terms in its letting agreements with consumer landlords.
The order followed last July’s tussle in the High Court between Foxtons and the OFT. The High Court did not rule that renewal fees were inherently unfair, but that they were unfair in that Foxtons’ terms were not transparent to consumers.
After the order was made in December, Foxtons had until the end of January to lodge an appeal but did not do so.
Instead, it has made significant changes to its standard contracts with landlords, including making the liability to pay renewal commission more transparent, reducing the actual fee, and limiting it to two renewals.
The landlord will get a pro rata refund where the tenant leaves the property before the date set out in the lease.
However, the OFT says it will continue to monitor Foxtons’ new contracts, saying that they are not necessarily fair.
Jason Freeman, legal director of the OFT's Consumer Group, said: “We welcome the finality brought by this Order. This case, and the changes Foxtons has now made, sends a wider message to letting agents that important terms, particularly those which may disadvantage consumers, must be clear, prominent and actively brought to people’s attention.
“Consumers should not be presented with a surprise bill for services they have not consciously agreed to.”
Landlords who may have cases against Foxtons and other agents which had similar ‘small print’ contracts must be ‘consumer’ landlords, the OFT has advised. This rules out companies and what the OFT describes as ‘professional’ or ‘commercial’ landlords. However, it includes people who let out their property while travelling abroad, those who let out part of their property to fund their mortgage, and those whose property investment represents part of their pension or savings plan.
Eric Walker, Managing Director of Bushells welcomes this clarification. "Simply, this issue refers to hidden terms buried in small print and often requiring the Landlord to cross reference a number of different clauses. We have always flagged up charges in our brochures and sometime felt that this was a disadvantage as some competitors appeared cheaper when in reality, they were not."
