Letting agents warned on contracts

Letting agents are still using unfair terms and conditions for landlords despite a landmark ruling which prompted Foxtons to change its contracts, the Office of Fair Trading (OFT) warned today.

It urged operators to check that their terms and conditions are fair and transparent and has written to a number of agents and industry associations to point out the results of the legal case.

The OFT secured a High Court order against Foxtons last year after a judge said that some of its fees were like a "trap" for landlords - many of whom were buy-to-let investors.

Mr Justice Mann also said a number of terms and conditions were unfair and were not flagged up prominently enough.

These included requiring landlords to pay commission of 11% of the annual rent if a tenant remained in a property beyond the initial term, even if Foxtons played no part in persuading them to stay, or was no longer collecting rent or managing the property.

The company also demanded commission of 2.5% of the property's price if the landlord sold it to the tenant, even if they had not helped to broker the deal, while in some cases landlords had to go on paying commission even once the property had been sold.

The judge added that such important terms should be flagged up prominently not just in the contract, but also in any sales literature, as consumers would not expect important obligations to be tucked away in the small print and not be specifically brought to their attention.

The OFT said it had carried out research that showed that the order had saved landlords at least £4.4 million a year, but many landlords and lettings agents were unaware of the ruling and potentially unfair terms were still appearing on contracts.

Amelia Fletcher, OFT chief economist, said: "This research clearly demonstrates that there has been an immediate financial benefit for consumers from our intervention, and also evidence of knock-on benefits from making this market more competitive.

"However, there is evidence of continuing poor practice by some letting agents, which need to go further to make their contracts transparent and fair."