OFT v Foxtons- A Clarification

It is not normally the practice of this blog to comment on matters that are still before the Courts but we are becoming frustrated by the large amount of incorrect information about this matter that is floating around.

Currently the OFT has suggested that certain aspects of Foxtons terms of business may be unfair.  They have particularly focused on the practice of seeking a fee on the sale of a property by a landlord to a tenant where the tenant was introduced by Foxtons and on the practice of seeking a fee where a tenancy which was carried out on a let only basis is renewed for a further period without any involvement by Foxtons.

The OFT has not said that all agents fees or even all renewal fees are unfair. They are particularly focused on those issues where the agent has not done any work to secure the renewal.  They have also suggested that charging the same fee on a renenwal as on an initial rental may also be unfair as the amount of work done in the two situations is different.

At the current time (21 May 2009) none of these fees are unfair and they will not be so until the High Court rules on the point (probably mid to late June 2009).  Even then there is a high chance of appeals to the Court of Appeal and possibly further.

In terms of outcomes there is a large range of possibilities.  The Court could decide that the specific clauses used by Foxtons are unfair or that any similar clause used by Foxtons is unfair or that clauses of this type are generically unfair and can also choose whether to impose this view only going forwards or retroactively.

Finally it should be noted that the OFT case is based on a general challenge and is therefore focused on the idea of a ‘typical consumer’.  This leaves open the option in any other case for an agent to show that their landlord was not a ‘typical consumer’ and that they should not be protected by the decision.

In any event there is still a long way to go.

Filed under: Uncategorized , fees, litigation

Agents Fees

In the recent case of Foxtons v Pelkey-Bicknell the Court if Appeal considered the fee provisions in Foxtons terms of business. These were based on the Estate Agents (Provision of Information) Regulations 1991 but are similar to those used across much of the estate and lettings field.

There was extensive discussion regarding the nature of effective cause terms and whether these should be implied into the agency contract but the Court declined to make such an implication. The Court focused instead on the phrase “a purchaser introduced by us” and looked closely at its meaning.

Ultimately, Lord Neuberger, who gave the leading decision, took the view that the proper reading of this phrase was “a person who becomes a purchaser as a result of our introduction” and not “a person who at some time in the future becomes a purchaser” as was put forward by Foxtons.

This is an interesting decision. The Court was keen to point out that users of residential agents should be afforded more protection than those using commercial agents and wherever possible the position should be that a vendor or landlord should not have to pay fees to two agents in respect of work done. However, it is clear that the Court was unwilling to imply terms into the agreement that were not there and so, if a fee clause is correctly expressed it would seem to be the case that an agent can still seek a fee where an individual comes to a property through the seperate efforts of two sole agents.

PainSmith Solicitors have produced a clause which they believe will survive the decision in Pelkey and can supply this on request.

Filed under: Uncategorized , fees, litigation