The test case between the Office of Fair Trading and Foxtons, on the legality of letting renewal fees, appears to hinge on how much work an agent does.
The suggestion was made in court this week by Nicholas Green QC, appearing for the OFT.
He said the OFT was challenging Foxtons’ right to claim continued commission, regardless of whether Foxtons managed the property and regardless of whether they played a part in persuading the tenant to stay on after the initial tenancy period.
He added: “There is not necessarily any connection between an original introduction and a tenant’s decision to renew their lease.
“Where there is a link and the agent plays a part, we say it is fair for them to earn further commission. But what we object to is an automatic right to commission for forever and a day.”
Mr Green also criticised the confusing terms and conditions in Foxtons’ contracts, saying they were not in plain English and would confuse a consumer, because “nothing tells you what you are letting yourself in for”.
In the Foxtons case, the OFT is using the same consumer protection laws that it is using to challenge the high street banks over unauthorised overdraft fees.
The Unfair Terms and Conditions Consumer Contract Regulations (1999) state that contracts must be clear and also that some agreements are unfair and illegal, even if the consumer knows what they are getting into upfront and does so willingly. However, the OFT says that only a court can decide.
That decision may take some weeks to come through, the OFT said earlier this week.
Foxtons renewals case update
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Comments
Clive is clearly a saboteur and not a genuine agent, just read his comments again!
I would agree that the rate should be slightly less, but it is upto a Landlord to decide if they are happy with the fee structure at the start. If they are not then use another agent or do not use an agent at all, but that is their choice. Do not start bleeting like a child "thats not fair". Finally it is worth pointing out to all these hard done by Landlords that if agents do not charge renewal fees then there will be no money to be made and there will be no agents left. Everyone has a choice and its upto you to exercise that choice, pay a professional fee for a professional service or pay peanuts and get monkeys !
The fees must be proportional to the work put in by the letting agent. For the fixed initial period it depends on the agreement between the parties. For the extension of the same tenancy agreement the agent can charge for the (extended) Supplemental Agreement which is normally not more than a few lines and if any time is spent in persuading the tenant to continue. But demanding the same charge again and again is unfair.
i agree with your Scoobydoo
I am most amazed at how stupid some so called "agents" are. Why is anyone in business - to make money. Landlords are free to use an agent if they wish and provided you are upfront about your fee structure, there should be no problem. Yes people will always complain that something is not fair, but that is life. These are the same Landlords who now have to register deposits because they were unfairly withholding them. Who was being unfair then ? Or the same Landlords who prefer to be paid their rent in cash! Or who consider it unreasonable when they have to repair anything that has broken down in the property. And if the rent is a day late, well that is the most terrible thing in the world ! These are the Landlords who claim it is unfair. One thinks people in glass houses should not throw stones !
Having been at the High Court today, it will all come down to points of law, but it was encouraging as the OFT barister stated" if the agent is the effective cause of bringing about the renewal" then the OFT would not object.
Let all proper business minded agents hope that this clarifies the position once and for all, so we can carry on our business.
I think it all depends on what they are charging. And what their cost is in the first place.And make sure everything is TRANSPARENT....we charge a very small fee and it covers the printing of three contracts.Which is £60. I know two others in town that charge the full £250 for a renewal, at least dick turpin had a mask!!!
...just to point out it is mainly in the sauwf-east that agents get extension fees. Most of the rest of us have to get up in the morning at ten o'clock at night half an hour before I went to bed, drink a cup of sulphuric acid, work twenty-nine hours a day down mill, and pay mill owner for permission to come to work, and when we got home, our Dad and our mother would kill us and dance about on our graves singing Hallelujah.
This is for clever Clive, how can a lettings only business survive on new business alone, your rent must be free for you to do this or your doing it from your bedroom, to make it simple for you there will be no letting agents left for landlrods to use if we didnt charge renewals, FACT ! it cost £30k a month to run office with 6 staff, rent rates, advertising etc and without renewals we would bank only £12-15k so how can we survive as we would run at a loss. Unless landlords pay 20% letting fees which wouldnt help them in the short term as most tenancies are a year, there better of with reduce renewal fees over 2 to 5 years, and they get no viod period, plus all landlords would do 6 months and say thank you, goodbye Im doing it myself now ! Ive had my business for 17 years and mt clients dont have issues, so Clive do us a favour keep your comments to yourself as your comment about good service makes no sense, we all offer it and expect referrals, Thank you.
Clive, your clueless. Im amazed you actually make any money. All landlords are advised up front of renewal fees and sign terms and confitions to agree to this.
Ok. Now read the reality book.
Letting fees are a percentage (to be agreed between the landlord and agent) of the rental income. It has long been the case that if the tenant stays on, then a further fee is paid by way of a percentage of the rent, reflecting the value of that tenant to the Landord - which was originally derived from the agent. Where is this wrong! The Landlord has financially gained from the ability of the agent (and of course the agents resources which are now becoming extremely costly with all the legislation forced upon us)to find a tenant with no initial outlay for the landlord, but usng an agents skill and marketing know how to secure that tenant. Many of our tenants renew their tenancies for up to 5 years, I feel a big part of this is because of the service we provide to both Landlord and Tenant - even where we dont manage the property, very often acting as the voice of reason between landlord and tenant. Any loss of income, should the OFT succeed will have to be recouped in other ways, so no gain at all to landlords or the public and absolutely no incentive for agents to encourage renewals on the existing tenancy. In fact I fear it will have a detrimental affect on Landords, tenants and agents alike. No one HAS to pay 'extortionate' fees, Landlords simply have to negotiate the fees up front, so that both agent and Landord are agreeable. Its called business.
You're right, I should be getting back to work. Enjoy the weekend!! I will. ( :
I rely on new business, referrals and if the service we gave a year earlier was good, then the same customer/landlord will use us again for either new tenants or charge a very small fee for creating a new contract with same tenants. It amazes me still, that people like Mary does not understand. Why is it that landlords object paying renewal fees? Because they know that it does not take that much effort to do a new contract etc..and shouldn't cost a fortune as it clearly does now! Get it??
Clive, you can not be doing it right if you have all this time to comment!!Maybe you should work for Foxtons to see how its done properly!!!
Clieve, how can you afford to rely on NEW business only?
Clive what are you on about?
The industry is changing for the better and if you don't like it, there are other forms of employment to choose from.
CASE CLOSED!
SILENCE means that I am right.
As a small businessman, the way forward, is to seek new customers, give good service and they will use you again. Not put some small print into a contract that confuses them.
Steve, I don't doubt your work ethic for sure and maybe I'm not entirely right either. It's the cost where some agents would be reasonable and others that ruin it when they push a customer into a corner and prey on their ignorance and sometimes bully the customer into paying crazy fees. This to me, ruins it for us who work hard, only to be tarnished with the same brush as them.
I have my own agency and charging renewal fees drives landlords away and go privately. By not charging them will mean they will be more inclined to go with estate agents and use them more. Therefore, more business in the long term for our industry. This makes better sense and it means to the customer that we actually do earn our money.
Clive it sounds like you don't get involved with persuading the tenant to renew, advise and update landlords, negotiate rent increases, prepare extension of tenancy agreements, renew tenancy deposits etc., because if you did all this then surely you should be paid! The OFT are trying to tarnish agents with the same brush and that's ridiculous. Some of us actually work for our fees!
JHS, let me just tell you that I actually am a lettings agent with a Sales background. Explain this one for me and I will stand corrected if you can; My agency lets a property for a year and we take our fee up front. After a year, assuming we have provided a good service, they will use us again. If the same tenants want to stay on, then the customer (landlord) has a choice whether to use us again or do it himself. We took a fee for a year and that is what he/she paid for. Why, in heaven's name should someone like Foxtons charge thousands of pounds just for a new tenancy agreement?
Clive, you are clearly NOT a letting agent otherwise you'd have a broader understanding of what happens when an AST runs out and the implications, organising rent increases etc.
Whilst I can not stand Foxtons I can not believe that the OFT's QC can come out with such rubbish. Does he get paid if he is asked to act for someone and the case does not come to court! Of course he does. Without the agent the landlord may not have any tenant or may be under letting the property. If the OFT is liking this to bank charges maybe we can agree to handle this like the banks (i.e. we should not care what the court ruling is and carry on the same) the main difference being we will not get any money from Gordon Brown so that we can pay big bonuses to our staff and nothing to business or the public! We are told to give 28 days paid holiday to our staff, we can not sack someone if they are useless without going down this governments stupid rules of meetings and warnings and then it is still difficult. We can not market properties without a full HIP, we get no stamp duty help but the motor industry gets £2,000 per car from the Government. We have to send a 7 day contract cancellation notice to clients once they sign (I could go on but it boars me). Please please please do not vote for these cowboys next year, let get a proper government in
I don't see the point in charging renewal fees anyway. Those days when estate agents could sit on their arse and wait for the business to come in are over.