Legal Challenge To Foxtons Could See Multi-Million Payout To Landlords

A group claim is being taken over alleged hidden commissions

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A London law firm is bringing a group claim against Foxtons, the estate agents whose head office is in Chiswick Park, on behalf of landlords who claim they have been charged hidden commissions.

Leigh Day lawyers said the legal case could see the estate agent facing a multimillion pound payment. The case is being taken on behalf of private individual landlords who have used Foxtons either to let or to let and manage their property.

Foxtons says that its fees are clearly laid out within their terms and conditions and that approvals are obtained from their landlords before works commence on their property.

The claim is that Foxtons has been charging landlords hidden commissions of as much as 33% of a contractor's fee for work done on their properties such as repairs, maintenance, electrical safety checks, inventory checks etc without obtaining the fully informed consent of landlords.

The case was highlighted in the media last week of lecturer Dr Chris Townley who let out his property in London for the first time in 2011. Foxtons let and managed the property for Dr Townley from April 2011 until August 2013 (about 28 months). He was sent a bill for £550 plus £66 ~VAT for work on a security light replacement carried out by a subcontractor employed by the estate agents. He later found out that the contractor had charged £412.50.

Dr Townley said “I was incredulous when I found out that Foxtons took commissions from anyone working on my property without my consent. I felt betrayed.”

When challenged on the difference, Foxtons admitted it had added a £137.50 commission – 33 per cent of the subcontractor’s fee. Dr Townley also discovered that Maintenance1st had paid Foxtons an undisclosed commission for undertaking the work.

Chris Haan, a solicitor at law firm Leigh Day, said: “We consider that Foxtons has a potential conflict of interest in that the more expensive the contractor is, the more Foxtons makes in hidden commissions.

“We believe these charges to landlords are unlawful as they are not sufficiently disclosed, so the landlords cannot give fully informed consent to them. This is against industry codes of practice. ”

“These kinds of practices may be widespread in the lettings industry and it needs to stop. We are taking this case on no win no fee with the aim of securing a refund from Foxtons for all affected landlords.”

Foxtons are also accused of charging tenants various fees that it does not tell landlords about.

According to the lawyers the potential claims could total as much as £15,000 for landlords whose properties were managed by the company, but that the amount would vary from individual to individual.

When Dr Townley started asking Foxtons questions about the commissions and after initially refusing to give details, Foxtons eventually admitted that they had taken a substantial commission on virtually every contractor’s work, totalling 38 commissions and about £1,900.

In many cases the commission was as much as 33% of the contractor’s bill. None of this was identified in any of the invoices or in the accounts that Foxtons gave Dr Townley.

Foxtons refused to repay the commissions, denied any wrongdoing and relied on a clause in their contract that says they may retain commissions taken from third parties.

In a statement, Foxtons said: "We are incredibly disappointed to hear when any customer is dissatisfied with the service they have received, however, as a legal dispute we are not in a position to comment on the specifics of this case. We are satisfied though that our fees are clearly laid out within our terms and conditions and that approvals are obtained from our landlords before works commence on their property.

"As part of our managed service to our landlords we arrange for maintenance works to be carried out on their behalf from a panel of carefully vetted and trusted contractors. Due to the volume of work we provide we are able to achieve discounted rates offering competitive value with the benefit of efficiency, availability and quality of work that many landlords would not be able to achieve on their own."

June 12, 2015

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