The OFT had a High Court hearing against Foxtons Limited on seeking a declaration on the application of the Unfair Terms in Consumer Contract Regulations 1999 (UTCCRs) to certain terms in Foxtons' lettings agreements with landlords. The OFT was also seeking an injunction against Foxtons preventing it from using the terms. The action taken by the OFT is in response to consumer complaints. If successful in this case the OFT intended to enforce compliance with the law, as declared by the Court, throughout the letting industry wherever similar terms are being used.

The terms to which the OFT objects in Foxtons' letting agreements can potentially require landlords to pay Foxtons substantial sums in commission, where a tenant continues to occupy the landlord's property after the initial fixed period of the tenancy has expired - even if Foxtons plays no part in persuading the tenant to stay, and no longer collects the rent or manages the property. Foxtons' terms can also require the landlord to pay these sums after the landlord has sold the property. The terms also demand commission where the landlord sells the property to the tenant, even where Foxtons has played no part in negotiating that sale.

Foxtons contended that its agreements with landlords are not unfair and continues to use these terms, and accordingly, the OFT had issued proceedings so the courts can decide the matter. The OFT brought proceedings against Foxtons alleging that some of the terms in its standard form of contract with landlords for lettings were contrary to the Unfair Terms in Consumer Contracts Regulations 1999. Foxtons succeeded on an application to strike out the claim for an injunction and one of the claims for a declaration. Morgan J held that the injunction sought by the OFT was too wide to be granted in the present proceedings.

So now the update:

OFT welcomes Court of Appeal Judgment in Foxtons case on Unfair terms

The OFT has today welcomed a Court of Appeal Judgment confirming its views on the application of the Unfair Terms in Consumer Contract Regulations 1999 (UTCCRs) ahead of a substantive hearing against Foxtons Limited at the end of this month.

The OFT commenced High Court proceedings against Foxtons in February 2008 seeking an injunction under the UTCCRs preventing the estate agency using terms, considered by the OFT to be unfair, in its lettings agreements with landlords.

During the preliminary stages of these proceedings the OFT appealed against a ruling by Mr Justice Morgan which accepted arguments from Foxtons that any injunction on unfair terms could only apply to future contracts, rather than preventing the use or enforcement of unfair terms in existing ones.

Today, the Court of Appeal overturned this ruling, confirming the OFT's long-held view that it can take enforcement action under the UTCCRs to protect consumers in relation to both existing and future contracts. The Court of Appeal stated that the UTCCRs aim to protect consumers, and were of the view that traders should not have the freedom to pursue existing customers without restriction, in correspondence or by litigation, in order to enforce contractual terms that have been found to be unfair.

The fairness of the terms in any Foxtons' contract themselves have not yet been considered and this will form the substantive case listed in the High Court during the week commencing 27 April.

The Foxtons' terms on which the OFT has sought an injunction can potentially require landlords to pay Foxtons substantial sums in commission, where a tenant continues to occupy the landlord's property after the initial fixed period of the tenancy has expired when Foxtons plays no part in persuading the tenant to stay, and no longer collects the rent or manages the property. The OFT has also objected to Foxtons' terms that require a landlord to pay these sums after they have sold the property. Foxtons contends that such terms with landlords are not unfair.

Notes:

1. The OFT is seeking an enforcement order against Foxtons Limited under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).

2. The OFT issued High Court proceedings against Foxtons in February 2008. The OFT appealed the judgment of Mr Justice Morgan of 17 July 2008.

3. The Court of Appeal panel comprised Lord Justice Waller, Lady Justice Arden and Lord Justice Moore-Bick.

4. The UTCCRs apply to standard contract terms with consumers. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, and certain other qualifying bodies (such as local authority trading standards, national regulatory bodies, and Which?) can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.

The Office of Fair Trading: Court of Appeal ruling on 'sole agency' estate agency contracts

The Office of Fair Trading: OFT welcomes Court of Appeal Judgment in Foxtons case on Unfair terms

Update:

The OFT has today welcomed a landmark High Court ruling that certain terms and conditions used by 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 ask the High Court to go on to grant injunctions preventing the continued use of the terms by Foxtons.

Judgment is here:

The Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch) (10 July 2009)

OFT secures final high court order against Foxtons.

19/10 22 February 2010

The OFT has secured a final High Court order against Foxtons Ltd preventing it from using certain terms concerning sales and commissions in its letting agreements with consumer landlords. More widely, the OFT is also writing to a number of letting agents and key industry bodies drawing their attention to the Order and making clear that letting agents are expected to comply with the law as set out in this ruling. The OFT will take necessary steps to ensure compliance across the wider lettings agent industry where appropriate.

This Order against Foxtons follows a landmark judgment in the High Court in July 2009 in proceedings brought by the OFT under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). By its judgment the court accepted that all the terms the OFT complained of were unfair. Foxtons had until 29 January 2010 to lodge an appeal but did not do so.

The High Court ruled that Foxtons' renewal commission terms were not transparent to consumers, so that they represented a trap and were therefore unfair, and ordered that Foxtons may not rely on these terms except where they remain instructed to manage the property. The Order also declared that the following terms are unfair, not binding, and may not be used or relied upon in contracts with consumer landlords.

• Terms which require landlords to pay renewal commission to Foxtons after the sale of their property to a third party because the original tenant remains in occupation.
  
• Terms which require landlords to pay a sales commission to Foxtons in the event they sell the property to their tenant.
  

Foxtons has made significant changes to its standard contract with landlords as a result of OFT intervention, including making the liability to pay renewal commission more transparent, reducing the commission payable on renewal, and limiting it to two renewals.

Commission is also now only payable where the original tenant remains in occupation, and the landlord will get a pro rata refund where the tenant leaves the property before the date set out in his lease. The OFT will continue to monitor whether this contract operates fairly under the UTCCRs.

Jason Freeman, Legal Director of the OFT's Consumer Group said:

'We welcome the finality brought by this Order, and the court's declaration that the terms we challenged are indeed unfair.

'This case, and the changes Foxtons has now made, sends a wider message to letting agents and businesses in general 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.'

NOTES The OFT commenced High Court proceedings against Foxtons in February 2008. The court's judgment on fairness of terms was given on 10 July 2009. See press release 83-09 and the Foxtons webpage. Following that judgment, the court made a further order on 17 December 2009 setting out the injunctions which should be granted in consequence against Foxtons.

You can also find a copy of the Court of Appeal ruling on another issue which arose during this case on the OFT website here. This held that the OFT is empowered to stop traders from enforcing unfair terms in existing contracts with consumers.

Renewal commission terms typically require a consumer to pay commission to the agent after the initial fixed period of the tenancy has expired and the tenant remains in occupation.

The UTCCRs apply to standard contract terms with consumers. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, and certain other qualifying bodies (such as local authority Trading Standards, national regulatory bodies, and Which?) can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.

The OFT has recently launched a market study looking at Consumer Understanding of Contracts to look into the extent to which consumers understand complex products and pricing. See press release 10-10.

Link:

http://www.oft.gov.uk/news/press/2010/19-10