Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Consumer Rights Act 2015 and lettings agent fees. More duties for lettings agents?

From 27 May 2015 there will be a statutory duty on lettings agents in England  to publicise the fees they charge.

What needs doing?

  1. Agents need to display prominently in each office and on the agent’s website ( if there is one):
    1. A list of fees. The list must give enough information so that a person can work out what exactly they are paying for, and why, and how much it will cost. The list must set out whether the fees are per property or per individual. Where there is a joint tenancy is it one fee for all, or for each individual to pay? The fees must be set out inclusive of VAT ( and any other applicable tax), and where that fee is not determinable in advance, a description of how the fee is calculated, for example Landlord’s commission fees.
    2. If the agent holds client monies, a statement as to whether the agent is a member of a client money protection scheme.
    3. A statement to say that they are member of a redress scheme and giving the name of that scheme.

Who needs to do it?

Lettings agents in the Private Rental sector. Local authorities are excluded. The duty (and therefore any penalty) falls upon the agent and not salaried employees of the agent.

What does “fees” mean in this context?

For the purposes of this legislation “fees” means “ the fees, charges or penalties which a landlord or tenant pays to the agent in relation to letting agency work, property management work or otherwise in connection with an assured tenancy or a dwelling-house let under an assured tenancy”. Some exclusions are set out. Rent and Deposits are excluded ( but not “holding deposits”) and some third party fees e.g. agent paying a contractor on behalf of a landlord.

Penalties for non compliance

Trading Standards can fine an agent up to £5000.00. The first step is that they would serve a “notice of intent” upon the agent setting out the proposed penalty and reasons for it. The agent has 28 days to respond. Trading Standards then decides whether to impose the penalty and if it does, will send a “final notice” requiring payment within 28 days. If the penalty is imposed an agent has a right to appeal through the FTT .

More detail can be found in the explanatory notes to the act.

When does it need doing?

Agents will need to be in compliance by 27th May 2015

In fact, most agents who are already adhering to the requirements of membership of a particular professional body and complying with the rules of their redress scheme, are likely to already be doing the above.   Of course all agents should check that they are compliant with the new legislation, but those who are not already doing the above need to put measures in place to ensure that they are doing so by 27 May 2015.

Filed under: England only, , , , ,

Advertising guidance for letting agents and private landlords

…..is finally with us. Readers will recall the case involving a complaint against Your-move.co.uk Ltd ( Your Move) stating that an advert that had been placed on Rightmove did not contain details of compulsory charges such as administration fees. We blogged on this here.

So six months down the line we have some guidance from the Committee of Advertising Practice Compliance team (CAP). The CAP has written to various organisations in the lettings sector with guidance on how to comply with the advertising code.

See here for the guidance. Readers should look especially at the key points 1-9, and also the helpful examples.

The CAP letter warns that they will be “closely monitoring ads in all media from 1 November 2013 onwards and will consider appropriate follow-up action against non-compliant ads from this date”.

Agents should also take a look at the CAP advice targeted at letting agents here:

Filed under: England & Wales, , ,

Lettings Fees

The Advertising Standards Authority (ASA) has decided that all charges that will be imposed on a proposed Tenant must be made clear in all advertising of the property prior to the letting. In other words, no hidden fees.

This comes after a complaint was made against Your-move.co.uk Ltd ( Your Move) stating that an advert that had been placed on Rightmove did not contain details of compulsory charges such as administration fees. It is worth noting that the advert in question stated that fees would be payable and even then had a link to Your Move’s own website that did specifically detail the charges. The ASA decided that this in itself was insufficient and the exact fees needed to be stated on the advert itself. In addition to this, if there are fees the value of which are not known at the time of advertising then it will need to be explained how those charges would be calculated.

The fact that this issue has been addressed now is not surprising given the report that the OFT ( Office of Fair Trading) has recently published which criticised the disclosure of letting agent’s fees which are payable by Tenants. With these findings coming it would be prudent for Letting Agents to “get their houses in order” to quote Guy Parker, the Chief Executive of the ASA, and ensure that fees are transparent so that they are not the ones that fall foul of latest requirements.

Currently, Rightmove’s own policy is that fees are not included in any of their advertisements. Whether they will be looking to change this in light of the above is unclear but as this case shows the letting agent will not be free of the obligations simply by following Rightmove’s protocol and so it should be requested that the fees are included in any such advert taken out on their site.

It would appear that there will be a tough approach on this and as such until proper guidance has been given (we would expect a number of relevant authorities, Office of Fair Trading included, to be issuing guidance imminently) our advice is that all advertising or publicity material (including window cards, brochures and website posts) contain the non-optional fees payable so that it is reasonable that any proposed Tenant looking in to the letting of a property will know the exact amount that they will be required to pay.

Filed under: England & Wales, , , ,

Cancellation Notice

In a recent case in Watford County Court an agent sought his commission for the successful sale of a property in October 2009.

The Defendant defended the claim on the basis that no Cancellation
Notice in the prescribed form pursuant to the Cancellation of Contracts in a Consumer’s home or Place of Work etc Regulations 2008 had been served.

In response to this defence the agent was relying on schedule 3 of the Regulations which excludes certain contracts from the Regulations. One such contract is for the sale or rental of immovable property.

However, the court held that the contract entered into by the parties was not a contract for the sale or rental of immovable property but one of marketing and as such schedule 3 did not apply.

The court also held that this was a commission contract and therefore caught by the Regulations. Therefore where no Cancellation Notice had been provided then pursuant to clause 7(6) the contract is unenforceable.

The agent’s case was dismissed.

Thank you to Mr Kennedy who brought this case to our attention.

Filed under: England & Wales, FLW Article, , , , ,

OFT v Foxtons- The Final Order

The final sealed order in the OFT v Foxtons case has been made available on the OFT website. A copy can be found here. This order gives effect to the judgement of the High Court and is now the final word on the matter as Foxtons have withdrawn their appeal.
There are some interesting points to note:

  1. Nothing in the order prevents Foxtons from defending claims against them based on monies already paid under clauses that have now been found to be unfair;
  2. Foxtons are entitled to keep using the original renewal commission clauses in full management agreements;
  3. The wording of the offending clauses used by Foxtons is quite extreme in terms of their ability to charge commission on a long-term basis even where the tenant has been changed. The new terms (in the last Schedule) are much less severe
  4. The approved terms are still charging a renewal commission even though Foxtons has no involvement in the negotiation of a renewal but it is limited to 2 years after the initial tenancy and is clearly stated at the start of the terms of business
  5. Fxotns have removed their ability to take a fee where the landlord has sold the property to another landlords with the tenant in place and where the landlord has sold the property to the tenant

The OFT has made clear in its press releases that it intends to use this decision to put pressure on other agents. How far this will go is unclear and whether the OFT will seek to impose a limitation on other agents as to how long they can continue to collect a renewal commission for.

Unfortunately this will probably lead to another raft of ill-informed letters from landlords stating that the renewal fees they have been charged are unfair. However, agents should consider how they wish to move forward and take advice as to their fee structures to avoid a visit from the OFT.

Filed under: England & Wales, Northern Ireland, Scotland, , , ,

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, ,

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, ,

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