Landlords no longer out-foxed

A national estate agent, Foxtons, has received a severe reprimand in a High Court ruling that gives some welcome good news to residential landlords.

This ruling may effect many buy to let landlords who are considering selling to their existing tenants, or are simply agreeing to continuations of an initial term with the same tenant.

A residential landlord seeking to use Foxtons’ agency services will have fully appreciated that if Foxtons found them a tenant then there would be commission to pay to Foxtons for putting together that initial deal.  What the landlord would perhaps not expect, is that if, without any further input from Foxtons, the tenant stayed on after the initial period of the tenancy, or the tenant ultimately bought the property from the landlord, Foxtons would be entitled to further commission.  However, this is exactly what Foxtons’ standard terms of business allowed them to do, including charging 2.5% on a sale of the property to the tenant where they had nothing to do with negotiating the sale.

To residential landlords, and I would say to most independent observers, this does not appear fair.  Enter the Office of Fair Trading, who took the matter to the High Court arguing the above provisions flouted the Unfair Terms in Consumer Contracts Regulations 1999. Mr Justice Mann sitting in the High Court ruled that the offending provisions in Foxtons’ terms of business, were not in plain language so they could be readily understood by Foxtons’ customers, they were not adequately brought to the attention of landlords when they signed up with Foxtons, and as years went by, they became more and more unfair, as in theory, Foxtons could get a commission for a transaction, such as the sale of the property in which they had played no part, many years after the first residential tenancy.

Accordingly, the terms referred to above were ruled unfair and the Office of Fair Trading will now seek an injunction against Foxtons to prevent them using them in the future, although I would expect that Foxtons will now change those terms unless they are planning to take the case to the Court of Appeal.

So a bit of good news for residential landlords, and it is good to see the law correcting what, to most people, must seem a grossly unfair attempt to obtain commission that Foxtons had done nothing to earn.