The Office of Fair Trading (OFT) has secured a final High Court order against estate agent Foxtons, preventing it from using particular terms with regard to sales and commissions in its letting agreements with landlords.
Its Order follows a ruling made by the High Court last July, which hinged on whether the terms in Foxton's contacts, requiring landlords to pay a renewal commission if a tenant remained in a property after the terms of the initial lease expired, were unfair.
The Court ruled the charges, while not in themselves unfair, should have been flagged more prominently rather than being hidden in the small print of the contracts.
Foxtons charged 11% of the annual rent as renewal commission, regardless of whether or not it carried on managing the property once a tenant had been found.
Jason Freeman, legal director of the OFT's Consumer Group says: "We welcome the finality brought by this Order, and the court's declaration that the terms we challenged are indeed unfair.
"This case, and the changes Foxtons has now made, sends a wider message to letting agents and businesses in general that important terms, particularly those which may disadvantage consumers, must be clear, prominent and actively brought to people's attention. Consumers should not be presented with a surprise bill for services they have not consciously agreed to."
Foxtons has revised the contracts it uses with landlords since the ruling, making the terms of renewal commissions more prominent, reducing the amount of commission payable and limiting it to two renewals.
It now only charges commission when the original tenant continues to live in the property at the end of the original lease term, and the landlord receives a pro-rata refund if they leave before the date set out in the new lease.
Some people in the industry would like to see renewal commissions in themselves made illegal, and are disappointed that the judge did not see fit to rule them unfair.
A spokesperson for the National Landlords Association says: "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."
Data quality is key
Granted leave to appeal the judgement