Letting agents must ensure their contracts with landlords are perfectly clear and fair, if they wish to avoid facing action from the Office of Fair Trading.
A High Court ruling found that London letting agency Foxtons was issuing unfair tenancy renewal terms in its contracts with landlords. Now the Office of Fair Trading (OFT), the government’s consumer body, is concerned that other letting agents are failing to follow the court’s decision.
In the case of Foxtons, the OFT obtained an enforcement order which resulted in the amendment of letting agreements with clearer terms relating to the renewal of existing tenancy agreements and the agent’s commissions.
The OFT estimates that since the ruling came into force 18 months ago, landlords have saved a total of £4.4 million in unlawful fees.
In the wake of the Foxtons case, the OFT has continued investigations into other letting agents and has informed many that they are issuing unfair contracts.
Agents and other major players in the property industry have been invited to attend an OFT summit in the autumn, to obtain further clarity on the changes required of them.
Amelia Fletcher, OFT chief economist believes that the consumer body’s actions have been clearly beneficial for consumers, with evidence of immediate financial benefit in their report. However, in spite of the positive change, she also warns that there are many more who will be coming under fire.
“There is evidence of continuing poor practice by some letting agents, which need to go further to make their contracts transparent and fair. We will be engaging with businesses over the coming months to raise awareness and compliance with the law,” she said.
“This evaluation report complements some of the work already identified in the OFT’s market study into consumer contracts which warned businesses that consumer contracts must be clear and contain no unwelcome surprises buried in the small print,” she added.
The two specific contract terms in the Foxtons enforcement order which were deemed unfair, were:
- Terms which require landlords to pay renewal commission after the sale of their property to a third party if a remains in occupation.
- Terms which require landlords to pay sales commission if they sell a property to their tenant.