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  • Buy-to-Let

    OFT welcomes ruling on Foxtons’ use of unfair terms

    Hi
    I know alot of people were interested in this case:
    The Office of Fair Trading (OFT) has today welcomed a landmark High Court ruling that certain terms and conditions used by Foxtons Ltd in its lettings agreements with landlords are unfair.
    As a result of this ruling, made in proceedings brought by the OFT under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), the OFT will now ask the High Court to go on to grant injunctions preventing the continued use of the terms by Foxtons.
    In his judgment given today, Mr Justice Mann accepted that all the terms the OFT brought before the court were unfair, including Foxtons’ use of terms:
    Requiring a landlord to pay substantial sums in commission, where a tenant continues to occupy the property after the initial fixed period of the tenancy has expired – even if Foxtons plays no part in persuading the tenant to stay, and does not collect the rent or manage the property,
    Requiring a landlord to pay commission to Foxtons even after it had sold the property,
    Allowing Foxtons to receive a full estate agents’ commission for sale of the property to a tenant.
    The ruling, following a three-day hearing in April 2009, found that the charging of repeat renewal commission by Foxtons represented a ‘trap’ or a ‘timebomb’ for consumers. The judge held that such important terms must be flagged prominently not just in the contract, but also in any sales literature and processes. He said a typical consumer would be unlikely to read standard terms with a great degree of attention and would not expect important obligations to be tucked away in the small print and not specifically brought to their attention. He also found that Foxtons had used language in its contracts which is not ‘plain and intelligible’.
    On the use of a term providing for sales commission to be payable on the sale of a property to a tenant, the judge said consumers would not merely be surprised but ‘astonished’ by the potentially large financial liability to Foxtons in relation to a transaction in which Foxtons played no material part.
    The OFT expects the letting industry to comply with this ruling, and will take the necessary steps to ensure this where appropriate.
    OFT Chief Executive, John Fingleton, said: ‘This ruling sends out a clear and unambiguous message that businesses offering services need to ensure unexpected or surprising terms are not hidden away in small print. Contracts need to be written in clear and straightforward language with important provisions, particularly those which may disadvantage consumers as in this case, given prominence and actively brought to people’s attention.
    ‘The OFT prefers to work with businesses to agree solutions where concerns are raised but we will not hesitate to take court action where this is not possible and especially where there is serious harm to consumers.’
    Regards
    Wasim
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    Thanks for the info. This is good news for landlords and reasonable news for reasonable estate or letting agents.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Thank you for posting this important information so promptly Wasim!
    Yes, this is great news for LL's as we have a good case not to be stung now with "extra charges" for a tenancy renewal when the letting agent had no hand in it.
    BTW - DO NOT use Ludlow Thompson in London. They have stiffed me too many times now. They found a tenant for one of our flats in Finsbury Park and, the day before the tenant moved in, mentioned that the tenant did not want the two double beds and that they needed to be removed from the flat. I therefore had to incur a van charge to remove them and bring them down to Guildford where they have been put in storage as our garage could not accommodate them. I did come to a financial settlement with LT after a lot of complaining - but they are just useless and the level of service is ZERO.
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    Hi John and Vanessa
    I find it strange that in the current climate businesses are not bending over backwards to retain clients, its easier to retain a client than it is to go out and find a new one. In all relationships, personal or business, common sense should prevail and the longterm relationship should be the focus or goal.
    If you buy anything in the Midlands (North Birmingham, Lichfield, Derby) then let me know.
    Best regards
    Wasim
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    You are all wrong. This is bad news for Landlords. What do you think is going to happen? Do you believe that this is a great victory for landlords everywhere? Estate agents will get around this legislation and the landlords will end up even more out of pocket.
    1. Agents will concentrate on landlords who take the management service
    2. Or you will be told that "the client insists the property is managed". Tenant or void?
    3. Estate Agents will lever tenants on an intro service out of the property with incentives so as to re-rent the property where the landlord wont pay a renewal fee. Cost the landlord more than the price of a renewal fee.
    This is the tip of the iceberg. If you don't believe me, just wait and see.
    Paul Endacott
    Follow me on Twitter: https://www.twitter.com/1stavenuelondon
    Vanessa said:
    Thank you for posting this important information so promptly Wasim!
    Yes, this is great news for LL's as we have a good case not to be stung now with "extra charges" for a tenancy renewal when the letting agent had no hand in it.
    BTW - DO NOT use Ludlow Thompson in London. They have stiffed me too many times now. They found a tenant for one of our flats in Finsbury Park and, the day before the tenant moved in, mentioned that the tenant did not want the two double beds and that they needed to be removed from the flat. I therefore had to incur a van charge to remove them and bring them down to Guildford where they have been put in storage as our garage could not accommodate them. I did come to a financial settlement with LT after a lot of complaining - but they are just useless and the level of service is ZERO.
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    Paul,
    I disagree.
    I do think that agents need to earn enough so they can stay in business. They will have to re-price their services and be more transparent. If the market does not want to buy the services they will be pulled.
    At the same time the buyers (landlords in this case) may choose to handle lettings differently. upad.co.uk and others might take up the slack.
    Tip of the iceberg? Maybe.
    Maybe it will be the landlords who are the iceberg and the agents who need to watch out for what is below the waterline.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    John,
    Whilst I appreciate your differing point of view, I can tell you that from deep inside this industry, its going to happen. Thinking otherwise is foolish. This is going on all ready, it's just going to get ramped up. Money is money and a fair portion on estate agents will now be thinking about themselves and not their client.
    Just for the avoidance of doubt, I do not employ these methods and never have.
    REI said:
    Paul,
    I disagree.
    I do think that agents need to earn enough so they can stay in business. They will have to re-price their services and be more transparent. If the market does not want to buy the services they will be pulled.
    At the same time the buyers (landlords in this case) may choose to handle lettings differently. upad.co.uk and others might take up the slack.
    Tip of the iceberg? Maybe.
    Maybe it will be the landlords who are the iceberg and the agents who need to watch out for what is below the waterline.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
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    The OFT ruling will send a clear message to agents that underhand and unscrupulous practices will no longer be tolerated. Many landlords and tenants have become disenchanted with agents who charge documentation fees to both landlord and tenant for the same standard document, load commissions on repair bills and who advertise properties which are not really available, amongst other things.
    Nowadays, landlords can obtain fair and equitable AST documents from their landlord association included in their membership fee, do credit checks directly with credit agencies, obtain EPC's and inventories at keen prices, advertise on the big property portals for a nominal charge and use other web sites like gumtree and spareroom for free. So unless you are time poor or live a long way from your property, it is now more than possible for landlords to do it themselves without incurring big fees.
    The type of practices forecast by Paul in his post, should these take place, would simply give further good reasons for landlords not to use agents

    Adrian Standing
    https://www.juniperproperty.com
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    By the way. I dont know if anyone has actually read the court document, but I would recommend you put aside some time to be correctly informed. Not all renewal fees are unfair says the ruling.
    https://www.naea.co.uk/uploads/general/2687_001.pdf
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    You can also read the judgment online here: https://www.bailii.org/ew/cases/EWHC/Ch/2009/1681.html.
    I have written a short report in my blog post here: https://landlordlaw.blogspot.com/2009/07/...tract.html.
    The judgement will have repercussions far beyond the field of letting agents and landlords, as the principles laid out in the judgement (principally not burying clauses with important financial consequences for the consumer in the small print with no prior notification) will apply in all contracts between someone acting in the course of a business and someone who is a consumer.
    The Foxtons decision will be particularly worrying for agents who have used this type of clause in the past, as they now face the prospect of landlords suing them for the return of commission paid. I hope their insurance cover will be sufficient.
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    Tessa Shepperon Landlord Law | Landlord Law Blog |

    Paul,
    Just what do you expect to happen? In fine detail if you do not mind.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
    Paul Endacott said:
    John,
    ...I can tell you that from deep inside this industry, its going to happen. Thinking otherwise is foolish.
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.