Foxtons' Terms Ruled "Unfair" (July 2009)

The High Court has ruled that a number of the clauses imposed by Foxtons in its contracts with landlords are unfair. If the case is not overturned on appeal, it could have serious ramifications for Foxtons and other letting agents who may have used similar terms as landlords may now be bringing claims to recover charges paid which it may be difficult for them to defend. 

The case was brought by the Office of Fair Trading (OFT). The OFT relied upon the Unfair Contract Terms in Consumer Contracts Regulations 1999 (UCTCCR) claiming that the small print in Foxtons' contracts amounted to a trap.  The case focused on a number of points:

• Foxtons' requirement to receive a renewal commission if a tenant renewed or extended their tenancy even if Foxtons had not negotiated the renewal or extension;
• Foxtons' also required a commission of 2.5% of the value of the property if the landlord sold the property to the tenant even if Foxtons had not acted in any way on the sale; and
• Foxtons' entitlement to a commission from a landlord who had transferred the property to another landlord who had then continued with the letting even where Foxtons had not remained involved at all.

The Judge decided that these terms did not form part of the core bargain between Foxtons and the landlord and were therefore subject to review for fairness under the UCTCCR. An unfair term is one which has not been sufficiently negotiated and which in all the circumstances causes a significant imbalance between the parties in favour of the supplier. If a term is unfair, it will not be binding on the consumer. Overall, the Judge found that these terms were unfair as they were not in plain language, were not brought to the landlord's attention and became increasingly disproportionate as time went on without Foxtons having to provide any commensurate services. 

The Judge described the renewal commission terms as a time bomb saying that these were not clearly drafted and were severely camouflaged. He found the commission due when the property was sold to be even more unfair. As regards the commission due on the sale of the property, he felt that a normal landlord would feel that he had been ambushed and that the terms were clearly unfair. 

The OFT has indicated that it intends to apply to the High Court for an injunction to prevent Foxtons continuing to use these terms and it is not yet known if Foxtons will be appealing against the decision. The fact, however, that Foxtons did not manage to reach any agreement with the OFT to prevent the case going to court indicates the importance to Foxtons of seeking to preserve terms which result in important income by way of commission.

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