The high court has ruled in favour of the Office of Fair Trading (OFT) that so-called “money-for-nothing fees” in Foxtons letting contracts are unfair.
This morning, Mr Justice Mann made the ruling in respect of clauses concerned with renewals, third-party renewals and sales which Foxtons no longer uses in its letting contracts and a new version of the renewal fee clause that Foxtons formulated in response to OFT concerns.
The judge said that he was not ruling on whether renewal commissions are always unfair to consumer landlords.
Ruling on the renewal clause the judge said that neither clauses were drafted in plain and intelligible language, and that both formats were unfair.
In fact, the judge said that Foxtons changes had made the position worse and made the unfairness clearer.
“The renewal commission is severely camouflaged. The risk of ambush, or time-bombs, or any other similarly graphic surprise metaphor, is even greater and the term more clearly unfair,” the judge said.
He went on to find that third-party renewals were “a fortiori unfair” and that the sales commission clause led to an “obvious imbalance” between Foxtons and the consumer as it “imposes a potentially large financial liability on the landlord in relation to a transaction in which Foxtons have played no material part”.
Mr Justice Mann will make the decision whether or not to grant injunctions and/or declarations in respect of the terms at a later hearing.
A spokesperson for Foxtons said: “Foxtons welcomes the judgment and is pleased that the OFT has eventually made it clear that it is not its case that Renewal Commission is always unfair in contracts with consumer landlords.
“The judgment is consistent with that position and does not find that Renewal Commissions are always unfair.
“The judge has stressed the importance of consumer landlords being made properly aware of how Renewal Commissions work in order for them to be acceptable.
“Foxtons is currently reviewing its terms and its marketing material to meet the concerns raised by the judge,” she said.
Foxtons chief executive office Michael Brown said: “We are extremely pleased that this matter has finally been clarified in a way which is to the benefit of consumers and the industry.”
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,” he said.
