Sunday, July 26, 2009

Advice for landlords seeking to recover commission post OFT v. Foxtons

You are a landlord. You are not a 'professional landlord' (i.e. you do not have a large portfolio and landlording is not your main business). You have paid commission to your agent (who may or may not be Foxtons) in the past, even though they were not managing the property. The commission was charged under a clause which was buried in the small print of your agency agreement and not drawn to your attention before you signed. In the light of the Foxtons case decision, you want to reclaim it. What should you do?

Initially, the answer is "not much", as the recent decision is not necessarily the end of the story. First, the Judge states at the end of his judgement that the practical consequences of his decision are yet to be either agreed between the OFT and Foxtons, or will be the subject of a further hearing. So that needs to be sorted out.

Second, this was a High Court decision, and High Court decisions can be overturned on appeal to the Court of Appeal, (and possibly then again on an appeal to the House of Lords). At the present time, we don't know whether Foxtons will appeal or not.

Whether Foxtons appeal will probably depend on the decision in the other big (even bigger) OFT unfair contract terms litigation, which is the case against the banks on bank charges. There is a House of Lords decision due out at some stage on this (the case was heard at the end of June), so we all need to wait and see what happens.

So overall it is tricky to predict the final outcome in the Foxtons case and how it will affect other clauses providing for commission on renewals in non managed agency contracts. My gut feeling is that Mr Justice Mann got it right in his decision in the Foxtons case, so far as it went, and I think it is unlikely a court will want to substantially alter his judgement (other than perhaps to take it further).

However I am not so sure that the House of Lords (or the Supreme Court as we will shortly have to call it) will feel very happy about coming to a similar sort of decision in the banks case, if this will require banks to pay back millions of pounds in charges to customers, at a time when most of the banks are still a bit fragile after the crash. It is not unknown for HL decisions to be influenced by politics (for example Lord Hoffmans judgement in Birmingham City Council v. Oakley [2001]).

So what should landlords do? Well I agree with others posting on this subject (for example the National Landlords Association and the Residential Landlords Association) which is that they should send a letter now to their agents, requesting them to return the commission paid within 14 days, to establish their claim. However once this is done, my advice is then to wait and see what happens. I will keep posting on this topic, and will try to keep you up to date, as will the landlords associations.

If though, your agent was Foxtons under one of their old agreements criticised by the Judge, or if your agent had a very similar clause which was buried in the small print of your agency agreement, and you don't want to wait, you could consider issuing proceedings now to get a place in the queue of similar cases in the County Court that is no doubt building up. However, no-one can be certain of anything at present, and always bear in mind that if you lose your case, you may have to pay your agents' legal costs.

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1 comment:

Clay said...

I am a landlord who rented my property through Foxtons. They provided absolutely appalling service to my tenant who wrote to me directly documenting all of the poor service experiences she had had and advised that unless I changed managing agents she would vacate. She was a great reliable tenant and I didn’t want to lose her so I transferred to another agency.

6 months later I had a legal demand from Foxtons for renewal commission even though they weren’t managing the property. I ended up taking them to small claims court as I said that (a) I hadn’t been made aware of this commission clause and (b) because they failed to meet their obligations outlined in their management contract (including inspections on the property, responding to her complaints of a broken washing machine which ultimately lead to the machine leaking and ruining my floorboards, etc) and therefore I was forced to changed agents. This was 1.5 years ago and the claims court found in Foxtons’ favour. Including their legal costs I ended up paying around £5000.

Given the OFT ruling, am I eligible to submit a claim for a refund of this money? I understand that I may not be able to get their legal costs back, but could I claim back the commission for the period where they weren’t managing the property? Do I write to them with a demand and then lodge with the Court again? And do I risk losing and having to pay their fees again?

I would be so appreciative of any advice you could offer me…