Udate on the OFT vs Foxtons case

ARLA (The Association of Residential letting Agents) have just sent out the text below to its agents. I wanted to circulate this to all my Landlord clients who have been waiting anxiously for over a month for news. Indeed, it was time a ruling was made.

For the reader of this part of my blog, the text content has been written by ARLA / NFOPP and not by SurreyLets

Text from ARLA

As you may have heard, the Judge in the Office of Fair Trading v Foxtons renewals case, today handed down his judgement. Ian Potter, ARLA Operations Manager, was in court to hear the judgement as was one of our Legal Advisors. Although the Judge stated that clauses in the Foxtons agreement were unfair, this was because they did not make the renewal terms clear.

Contrary to misleading information that has already appeared in the press, the ruling has not stated that renewal fees are unfair but that these fees must be explicitly laid out.

Set out below are a Press Release, links to the Judgement and most importantly, a Practice Note which sets out our initial thoughts and help to Members.


ARLA has sent out the following Press Statement.

FRIDAY JULY 10 2009

In response to the High Court judgement on the case of the OFT vs. Foxtons, Ian Potter, Operations Manager, of the Association of Residential Letting Agents (ARLA) states as follows:

“We welcome Mr. Justice Mann’s clarification on the issue of contract transparency in relation to letting agent fees. Contrary to misleading information that has already appeared in the press, the ruling has not stated that renewal fees are unfair but that these fees must be explicitly laid out. ARLA strongly supports the need for transparency and our members adhere to this premise though a strict code of practice, which binds them to ensuring all fees and charges are made clear and are reasonable.

“The lettings market has changed irrevocably in recent times. ARLA’s members have recognised this change by launching the licensing campaign for lettings agents which is founded on the need for improved standards, best practice and redress for consumers. Today’s ruling will serve, therefore, as another building block in our aim to create strong foundations for the lettings market as we re-assess the provision of our services and how we communicate them.

“To quote the clause E.III of the Code of Practice: “ The Terms of Business used by a Member Firm must be clearly presented and written in plain and intelligible language and endeavour, where appropriate, to take account of the Unfair Terms in Consumer Contract Regulations .”

“In effect ARLA members have always been encouraged to follow industry best practice and to provide information on fees and charges in clear and transparent manner.

“The letting of a residential property is, by its nature, a complex transaction centred on the emotive subject of people’s homes. A key element of ARLA’s licensing campaign to professionalise the sector is to increase consumer understanding of this complex process. We once again encourage landlords and tenants to only choose ARLA members. This is because they are advised to make all fees and charges clear and reasonable and are subject to a consumer complaint scheme if they are not.”



2. PRACTICE NOTE

OFT v Foxtons- Practice Note

Prepared by PainSmith Solicitors for NFOPP

This is a short practice note to assist members in dealing with potential changes in the way they seek fees as a result of today's decision in OFT v Foxtons. Agents who wish to understand the background of the case in more detail should await a separate communication from ARLA and NAEA which will deal with this.

Background

The OFT has been involved in legal proceedings against Foxtons Ltd in relation to 3 particular parts of their standard terms of business:

1. The charging of commission on renewal or extension of a tenancy even if Foxtons have no involvement in negotiating or dealing with the renewal;

2. The charging of commission where the landlord has sold the property with the tenant in situ and the tenant renews or extends the tenancy with the new landlord;

3. The charging of a commission where the landlord sells the property to the tenant.

The OFT has contended that the clauses giving effect to these charges are unfair and are also not written in 'plain and intelligible language' contrary to the provisions of the Unfair Terms in Consumer Contract Regulations.


Mann J has today given judgement on this contention. He has made a declaration of unfairness in relation to some aspects of Foxtons terms but has not made any further order.


The Ruling

Mann J has stated that Foxtons' clauses relating to commission on sale of property to a tenant or occupier are unfair. The ruling makes clear that these clauses will generally always be unfair where they are included within a lettings terms of business at the outset of a letting. Any effort to charge commission on sale to tenants would need to be done by way of a sales agreement at the time of sale and would therefore really require the agent to have involvement in the negotiation or arrangement of the sale.

Mann J has stated that Foxtons' clauses which seek to charge commission on renewal where the landlord has already sold the property to another landlord are probably unfair.

Finally, Mann J has stated that renewal commission clauses are unfair where they are not expressed in plain and intelligible language and not brought directly to the landlord's attention at the time they enter into the terms of business. He has stated that Foxtons terms are unfair as they are not expressed in plain and intelligible language.


Mann J has not stated that all renewal commission clauses are unfair and nor has he stated that nobody can rely on them. He has not made any injunction against Foxtons or anyone else stating that these clauses must be withdrawn or that cases based on them cannot be taken. His ruling does mean that County Courts must follow the principles set down in his ruling. Members should take legal advice before seeking to rely on any of these clauses or those of similar type in the Courts.

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