Office of Fair Trading v Foxtons Ltd. [2009]

The Office of Fair Trading (OFT) brought an action challenging the terms and conditions contained in the letting contracts used by an estate agency, Foxtons. The OFT said that the terms were unfair, and sought a declaration to this effect or an injunction in respect of two contracts. Shortly before the hearing, Foxtons stopped using the terms in question (the ‘old terms’) and started to use different terms (the ‘new terms’). Although some of the terms queried by the OFT have been removed, the question of the fairness of the old terms remained. Questions also arose as to the fairness of the new terms.

The clauses in respect of which the OFT took action were:

• a clause charging a sales commission payable to Foxtons if the tenant bought the property,
• where a tenancy was renewed, a clause charging commission even if the landlord sold the property, with the tenant in situ, to a new landlord,
• a clause seeking to charge a renewal commission even if the property was let only and Foxtons was not involved in the renewal at all.

In referring to the tenant, Foxtons also included people ‘associated’ or ‘connected’ with the current tenant. This could mean that if the current tenant left and, through totally unrelated means, the property was let to a person who happened to work in the same company as the first tenant, it could give rise to a claim by Foxtons for commission.

The issue was raised as to whether the clauses were ‘core’ terms, as they related to the price charged for a service. Core terms must be in plain language but they are exempt from the test of fairness.

It was also considered whether all landlords were to be regarded consumers for the purposes of the UTCCR 1999. It was generally agreed that, for example, a person who lets their home while they are temporarily away would be a ‘consumer’ landlord. A professional or commercial landlord would not be a consumer.
However, as the same terms were used regardless of the size of the landlord’s property portfolio, they warranted examination.

Further, the old terms were in what the judge concluded to be about 7 or 8 point type in a non-Seriff font, although the new terms were about 8 or 9 point type with headings that were ever so slightly larger.

HELD:
The High Court judge, Mr Justice Mann, clarified that he was not deciding whether renewal commissions are always unfair.
He considered that both the old or the new terms relating to renewal commissions were unfair. This was because:

• the clauses were not in plain language (he stated that the new wording was less clear than the old wording),
• as Foxtons did not do any work for the renewals, t was harder to claim the renewal fee as fair,
• as the renewal clauses were not clearly pointed out to the consumer, they could also work as a trap for the landlord. Although the judge did not preclude charging, the fee should be much more clearly signposted in both the terms of business and other publicity material,

By the time of the hearing, Foxtons had removed the clauses charging third party renewal commission, but it was considered that if the renewal commissions, as they were worded, were unfair then by definition the third party renewal clauses would also be unfair.
On the issue of the sale commission, the judge held that the terms of a contract for the rental of a property could not include a clause about the sale. Such a clause would be unenforceable, but would not preclude a joint letting/sale agreement possible being enforceable.

The judge concluded that all of the relevant provisions were unfair for the purposes of the UTCCR 1999, and the OFT and Foxtons have been given time to discuss further revisions to Foxtons’ terms of business.

This ruling does not mean that renewal commissions will always be unfair; the judge was very careful to express that his judgment was limited to the particular wording used by Foxtons.
Another process and wording could have a different outcome.

Citation: Office of Fair Trading v Foxtons Ltd. [2009] EWHC 1681 (Ch)