I am sure you will all be aware of the decision in the case of the Office of Fair Trading (OFT) v Foxtons, which was decided on 10 July, two months after the case was heard. Just in case you don’t, here is a simple summary:
What was the decision?
Mr Justice Mann found that:
- the wording of Foxton’s renewal commission clauses were not in plain and intelligible language
- the commissions charged were excessive
- the wider range of charges in respect of renewals by associates of the tenants were excessive
Does that mean the end of renewal commissions?
No. What was made clear in the decision was that Mr Justice Mann was not ruling that renewal commissions are always unfair, just the clauses included in the Foxton’s contracts.
Where the renewal commissions clauses are clear within a contract and the charges are not excessive, there should be no reason why they cannot continue to be charged.
Will landlords seek repayment of previously paid commissions?
They may try, particularly as some of the “popular” press have indicated that landlords should seek repayment. However, the judgement does not include anything which allows for monies already paid to be recovered. Whether this is something that will be ruled on in the future, is another question entirely, but certainly, as of today, there is no obligation to refund monies previously paid.
The future
Clearly, with this decision, all Letting Agents who charge for renewals should revisit their contracts and charges. You should ensure that the commissions are clear and concise, in plain English and at a reasonable cost. Based on the decision in this case, that should be sufficient to enable you to continue to charge, at least for the time being.