Thousands of buy to let landlords may have signed leasing agreements with their letting agents which have unenforceable elements, after an important ruling by the High Court last week involving Foxtons estate agency.
Foxtons, which operates in the South East of England, has historically charged landlords commission, sometimes as high as 11 per cent, when they renewed a lease on a property, when they sold a property to an existing tenant, or when the property was sold to another landlord.
Foxtons and the Office of Fair Trading have been involved in a long standing case over the enforceability of these clauses in leasing agreements.
The High Court ruled that Foxtons had unfairly overcharged commission to landlords. It decided that the agency, and as a result all letting agents, cannot rely on these unfair clauses in leasing agreements and they are therefore open to challenge.
Foxtons was also criticised for charging excessive fees in relation to lease renewals, even in situations where they had no involvement in the renewal, or when the landlord has sold the property to another landlord.
They were criticised for not explaining their terms in plain English. The Court decided that Foxtons and any letting agent nationwide must be more up-front about these fees and make them more clearly visible to landlords when they are taking initial instructions. If the terms were not in plain speaking language, again they would be open to challenge.
Tom Bridge, a Partner and Head of Residential Property at North West law firm Stephensons, said: “The ruling sets a precedent and will bring more clarity to the estimated 700,000 buy-to-let landlords.
“With 15,000 letting agents across the UK this decision has far-reaching consequences. Foxtons charged commission in instances which are now deemed to be unfair and although the judgment does not order letting agents to refund any money to landlords, landlords would in future be unlikely to instruct a letting agent who uses these unfair clauses within their terms.
“I would urge letting agents to amend their standard terms and conditions as soon as possible to avoid disputes with landlords and the potential loss of future revenue.”
Stephensons can advise letting agents in reviewing their standard terms as well as landlords who want to challenge charges. To contact Stephensons, call 01942 777777 or visit www.stephensons.co.uk.