The enforceability of Renewal and Sales Commissions in letting agent’s terms and conditions of business in light of Office of Fair Trading (OFT) -v- Foxtons Ltd The recent High Court decision of OFT -v- Foxtons will have wide ranging ramifications for both letting agents and consumer landlords. Whilst Longmore LJ made it clear in this Judgment that he was not making a decision on the enforceability of Renewal Fees and Sales Commissions per se the practices and terms and conditions operated by Foxtons are similar to terms operated by letting agents up and down the country. Consumer landlords The case was decided on the basis of the Unfair Terms in Consumer Contracts Regulations 1999 which apply to consumer landlords only. The Court did not expressly define consumer landlords although Foxtons accepted the definition offered by the OFT namely that a consumer landlord included those that let out their properties when temporarily travelling abroad, due to relocation, through lifestyle choices, to fund part of their mortgage or individuals for whom property represents part of their pension or long terms savings. The Regulations do not apply to “professional” or “commercial” landlords. Renewal Fees and Sales Commissions are not part of the core bargain Foxtons failed in their argument that Renewal and Sales Commissions were exempt from scrutiny under the Regulations as the fees formed part of their core charges. The Court decided that in order to form part of the core charges they would have to be seen as such by both Foxtons and the typical consumer landlord at the time the contract was made. The Court also held that Foxtons terms were not in plain and intelligible English which would, in any event, have taken them outside of the exemptions provided for by the Regulations. Renewal Fees and Sales Commissions held unfair Having established that the Renewal and Sales Commission charges could be scrutinised under the Regulations on the basis of fairness Longmore LJ had no difficulty in finding the terms to be unfair. He said “The consumer would not expect important obligations of this nature with likely and significant impact to be tucked away in the “small print” only, with no prior flagging, notice or discussion.” He added that the real question was whether the consumer landlord knew what he was paying for when he entered into the contract. Renewal and Sales Commissions should not be “camouflaged”, an “ambush” or “time-bomb!” Conclusion As a result of this ruling letting agents will urgently need to review their terms and conditions of business as well as their sales practices. • Renewal Fees and/or Sales Commission should ideally be expressed as being part of the core charges in both the terms and sales and marketing literature. • Terms should be in plain and intelligible English. • Renewal Fees and/or Sales Commission should be expressly flagged and/or brought to the attention of the consumer landlord. Where lettings agents’ own terms and practices are similar to Foxtons they may have difficulty in recovering their charges based on those fees and may event face claims by consumer landlords for repayment of Renewal fees and Sales Commissions that they have been paid over the last 6 years. If you are a landlord wanting to claim back Renewal Fees or Sales Commissions that you have paid over the last 6 years please do not hesitate to contact me. Luke Harrison (Solicitor) in the Litigation/Dispute Resolution department. 01727 837161 [email protected]