In no uncertain terms - what the Foxtons ruling really means

Letting agents should ensure their terms and conditions are fair and reasonable to minimise the risk of legal action, as Eddie Goldsmith, senior partner at Goldsmith Williams, explains.

The recent High Court ruling against Foxtons will have sent a shiver throughout the boardrooms of letting agents across the country. I have no doubt that contracts have been reviewed, terms and conditions checked for clarity and experts consulted to establish if charges are fair and reasonable.

Potential landlord claims aside, I suggest that most letting agents have no need to panic and will probably find, when they do review their contracts, that they have nothing to fear. Common sense and clarity are the two key principles that agents should abide by and as long as contracts are fair, reasonable and written in easily intelligible language then there may be no need to make any changes whatsoever.

The High Court ruling, which was made in response to a case brought by the Office of Fair Trading, stated that certain terms used by Foxtons were unfair. The judge, Mr Justice Mann, said that Foxtons had used language in its contracts which was not ‘plain and intelligible’ and that consumers were unlikely to read standard terms with a great deal of attention and would not expect important obligations to be tucked away in small print.

The judge pointed out that important terms must be flagged prominently not just in contracts but also in any sales literature and all sales processes. However, the judge did not rule against the principal of renewal commissions; as long as they are deemed to be fair and reasonable and are clearly explained in a language consumers can understand, then renewal commissions are fine.

So what should letting agents do, if anything, as a result of this ruling? There are two important points worth considering. Firstly, ensure that terms and conditions are fair and reasonable. Clearly, the judge felt that in Foxtons case charging 11% up front for finding a client and then a further 11% when a client renewed their contract was not fair or reasonable, and he condemned Foxtons terms and conditions as being  ‘a trap’. He also said typical landlords would be astonished to find they had to pay Foxtons commission for the sale of a property to a sitting tenant when it had played no part in negotiating the deal.

Agency terms and conditions will differ hugely between firms, which makes it impossible to say precisely what will be deemed fair and what will be condemned as unreasonable. However, common sense should prevail and if those around you wince when you show them your terms and conditions then a judge probably will too.

Secondly and perhaps most importantly, terms and conditions must be explained clearly in a language that consumers will understand with due prominence given to particularly important factors, such as commissions. Don’t try and hide them away in the small print; it is worth doing just the opposite and highlighting key facts in a consistent way across all sales material, which should include websites.

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