SurreyLets - Interested in the outcome of the Foxtons VS OFT case

Following much criticism from Landlords about Unfair Terms in Letting Agents contracts, the Office of Fair Trading this week has welcomed a Court of Appeal judgement (OFT vs Foxtons) which is due to be heard on 27th April 2009

Foxtons, like many Letting Agents charge a renewal fee, normally equivalent to the Tenant Finding Fee, when a contract is renewed by the existing tenants. Landlords for many years have felt that a "Tenant Finding" or "Tenant Introduction Fee" should be a fee charged once for the service of introducing / finding a tenant. Indeed, at the end of that initial period, a Landlord is right to ask " why am I paying this again? I have paid it once". The agents argument is that the fee is calculated on "The gross monthly rental for the duration of the Let" - therefore if a Landlord is enjoying the benefit of that tenant that the agent introduced, they should have the right to the fee "for the duration" from the tenant.

The OFT issued the proceedings under the Unfair Terms in Consumer Contract Regulations 1999 in the early stages it appealed against a ruling by Mr Justice Morgan that any injunction on unfair terms could only apply to future Foxtons’ contracts - opposed to current existing contacts. The Court of Appeal has now overturned this ruling, confirming the OFT’s long-held view that it can take enforcement action in relation to both existing and future contracts.

The OFT issued the proceedings under the Unfair Terms in Consumer Contract Regulations 1999 in the early stages it appealed against a ruling by Mr Justice Morgan that any injunction on unfair terms could only apply to future Foxtons’ contracts - opposed to current existing contacts. The Court of Appeal has now overturned this ruling, confirming the OFT’s long-held view that it can take enforcement action in relation to both existing and future contracts.

However, what is interesting in this is if the OFT is successful in its case against Foxtons, then it will impact contracts issued by every letting agent the length and width of the UK. All contracts will be required to follow the ruling - which could have an overwhelming impact on the letting's industry. One firm of solicitors are already poised to help Landlords wishing to challenge their letting agents over renewal fees paid over the last several years. If the court agree that renewal fees could be paid back to Landlords on exisiting contracts - I question how many agents in the current climate will have the funds to survive this. One can only hope the court are sensible in the judgement to take into consideration the affect on all parties

There is also the question of Rent Collection and Management Fees being placed under scrutiny. Agents "typically" charge 10% for Let Only, 12.5% for Rent Managed and 15%+ for Full Managed. The latter two are normally collected monthly as an ongoing fee. However, it is clear that there is an element of the Let Only fee that is built into this, so it will call to question the ongoing % charging at 12.5 or 15% for the term.

The way I see it, the industy will have to adapt a different fee structure, with a % or Fixed Letting Only Fee payable once the tenants move in and a % taken monthly for ongoing services such as rent collection or management. This is a policy that SurreyLets use as it belives itself to be transparent and fair.