Foxtons: Following industry standards?

Leigh Day is bringing
a court case against Foxtons estate agents
on behalf of landlords who
have used Foxtons to let out their properties.

• Foxtons takes commissions and fees from contractors (such as for repairs, cleaning and inventory, and gas safety checks) without landlords' informed consent. Foxtons now admits that it takes up to a 33 per cent cut of contractors' fees;

• Foxtons takes various fees from tenants without the landlord's informed consent. For example,
  it appears that Foxtons charges both landlords and tenants a fee of £420, including VAT, for arranging a new tenancy agreement to be printed and signed; and

• Foxtons uses contractors who charge much more than the market rates, in breach of its duty to use reasonable care and skill, and to avoid letting its interests conflict with those of the landlord.

The claimants argue the breaches of duty are of such seriousness that the estate agency should have to repay not just the fees it did not disclose, but also its primary agreed fees and commissions for letting and managing landlords' properties.

These kinds of practices appear to be widespread. Many other landlords, agents, and contractors allege that other agents are engaging in similar practices.

There is undoubtedly a relationship of principal and agent between landlords and their letting agents, such that letting agents owe landlords fiduciary duties, including a duty not to make any profit or income from the agency relationship without the landlord's fully informed consent, and a duty not let their interests conflict with the interests of the landlord without the landlord's fully informed consent.

It is not unlawful to take commissions on contractors' work, provided the landlord is fully informed about the arrangement. That way the landlord can assess the extent of the conflict of interest involved and whether the profit being made is fair, and decide whether to object or consent to the arrangement.

Foxtons claims its standard contracts contain a term whereby landlords consent to the commissions. The thing is, no matter how much legal training you have, the contract simply does not contain enough information to enable a consumer landlord to give fully informed consent to the arrangement. The term simply states Foxtons may keep any commissions it happens to earn. It doesn't give any details about the size or frequency.

This is not just our interpretation of the law but an accepted industry standard. The Private Rented Sector Code of Practice, which is endorsed by all the major letting industry groups, provides: '[Letting agents] should disclose any commission [they] might receive from the contractor at the time that estimates are provided to the landlord.'

It is hoped the case will raise awareness among landlords and tenants that many agents charge such fees. The recently enacted Consumer Rights Act 2015 should hopefully go some way to improving fee transparency in the industry by requiring agents to publish a list of their fees on their websites. SJ