NLA outlines position following Foxtons ruling

Published ¤ 20/07/2009

Bookmark and Share

The National Landlords Association (NLA) has issed advice for landlords following the High Court ruling about letting agent repeat renewal commission fees.

The NLA's advice:

In a case brought by the Office of Fair Trading (OFT) under the Unfair Terms in Consumer Contracts Regulations 1999, the High Court has ruled that certain terms of business used by a major High Street letting agency in its lettings agreements with landlords were unfair. The judge found that the renewal commissions should have been flagged more prominently, not just in the contract but also in any sales literature and processes.
The OFT has said it expects letting agents to change their practices so that the charging of repeat renewal commissions, when no on-going work has taken place, is made clear and transparent to landlords before they sign a contract.
Fundamentally, the ruling is about whether it is right for the terms of these renewal commissions to be buried in the small print. The High Court found that, in the case before it, the terms were not upfront and, therefore, they represented a "trap" or a "timebomb" for consumers and this was unfair.
The judge has specifically said that he has not ruled renewal fees, in themselves, to be unfair. Unfortunately, the practice of charging percentage-based renewal fees on a "let only" basis is likely to continue. The National Landlords Association still maintains that repeat renewal commissions are "money for nothing" fees and should be scrapped.
In one sense, the ruling outlines a general principle. Every contract between a landlord and their letting agent would have to be assessed by the courts on a case-by-case basis. This ruling should not be seen as any type of guarantee to landlords that they can automatically claim back fees already paid.
The exact implications of the ruling are unclear. But the judgment does state that if both parties cannot agree on the consequences of the ruling, then another hearing will be needed for them to be determined. It is also still possible for the ruling to be appealed.
The first point to consider is that the ruling seems to make a distinction between ‘consumer landlords’ (potentially, smaller landlords with a small number of properties for whom being a landlord is not their main source of income) and "business landlords" (potentially, larger or professional landlords with a greater number of properties some of whom operate as a limited (or listed) company). It is unlikely that "business landlords" will be considered "consumers" for the purposes of this ruling and, therefore, may not succeed in claiming back renewal fees.
Secondly, each claim (i.e. each contract) would have to be judged in court on a case-by-case basis. It would depend on the nature of the contract and whether the landlord was aware of the full implications of signing on the dotted line. It is, therefore, important to get legal advice before starting a claim.
There is no guarantee at this stage that a claim for a refund of fees will succeed. The terms of relief following the judgment have not yet been resolved and it may be prudent to await this outcome. However, if a landlord wants to begin the claims process, they should send a Letter of Claim to their letting agent. This letter should give the letting agent 14 days to return the fees and it must be the first step on the claims process. If you do not write to the letting agent, a judge may be unsympathetic in court, especially when dealing with the costs of any action.
If the letting agent does not return the already-paid fees (going back for a maximum of six years), you may issue proceedings against the letting agent either online at www.moneyclaim.gov.uk or directly through your local County Court. There is a risk that the court may suspend any claim if there is an appeal against the High Court decision.

Given the complicated nature of this issue, we strongly advise any landlord who is considering making a claim to seek independent legal advice. At the very least, a landlord would need to determine the chances of success and this would greatly depend on the nature of the contract in question.

PKS is authorised and regulated by the Financial Services Authority in respect of mortgage and general insurance business only.
Registered address: 10 Addison Gardens, Odiham, Nr Basingstoke, Hants RG29 1AS
Your home may be repossessed if you fail to keep up repayments on your mortgage.
Website design © Capital Edge Ltd 2009