OFT v. Foxtons case costs Foxtons £4.4 million?

Regular readers of this blog will remember the Office of Fair Trading v. Foxtons case a couple of years ago.

Foxtons were sued by the OFT claiming that three of their landlord agency agreement terms were unfair under the Unfair Terms in Consumer Contracts Regulations 1999 (see a summary of my blog posts here).

To remind you, these were the three clauses in issue:

• Renewal commission – where Foxtons were no longer acting as managing agents, but the agreement provided for commission to be paid so long as the tenant lived in the property
• Sales commission – where the property was eventually sold to the tenant found by Foxtons, and
• Third party renewal commission – where Foxtons claimed commission even after the property had been sold to someone else.

The Judge found for the OFT saying finding that the clauses were unfair, alhtough he stopped short of saying that renewal commission (the clause which is in most widespread use) was actually unfair per se.

Evaluation the Foxtons litigation

The Office of Fair Trading has been carrying out an evaluation exercise and has made some interesting findings:

£4.4 million benefit to consumers

This is worked out in various complicated ways (explained in the evaluation report) based on the fact that they are no longer receiving commission in respect of the three offending clauses, which they have now removed from their agreements.

This presumably must mean a similar loss to Foxtons (hence my headline) although no doubt they have made up at least some of the difference by imposing different charges (hopefully though not like this).

Also it seems that Foxtons are now actually telling people about the renewal commission clause (two years only at a lower rate, which the OFT have not objected to) which remains in their agreement, so that is also good. A bit of respect for the regulations.

Other letting agents following suit.

It seems that many have removed  similar clauses from their agreements and are telling customers about the ones which remain.

Empowering consumers

Then those landlords who are aware of the Foxtons litigation have become more savvy and are now asking relevant questions and shopping around more. Good for them!

So a positive outcome for consumers from the Foxtons litigation.

The OFT is now looking to build on this, and pursue agents who are still using these clauses (and apparently many still are).

Advice to landlords

So if you are a landlord, how will this all help you? Here’s my advice:

• First of all, it is essential that you read your agency agreement before you sign it. If you feel uneasy doing this under the beady eye of the agency staff, ask to take a copy home with you to check it over.

• Then, if you find one of these clauses, contact the agents and ask to have it removed. Tell them that such clauses are now considered unfair under the Unfair Terms in Consumer Contracts Regulations 1999. Most reputable agents don’t use them.

• If they refuse, then I suggest that you find another agent. If they are unwilling to change their agreements to comply with the law this does not bode well. What other legal obligations are they ignoring?

• You might also consider reporting the firm to the Office of Fair Trading, or your local Trading Standard office.