If successful could force the giant estate agency to pay back hundreds of pounds in fees and charges to every tenant who has rented a property from them
Michael Green, whose law firm CaseHub is behind the group action, has obtained legal opinions from senior barristers that Foxtons’ fees – such as a £420 adminstration charge, £300 for name changes and £165 for checking out a property – could be illegal under the Unfair Terms in Consumer Contracts Regulations 1999, and its successor the 2015 Consumer Rights Act.
Green estimates that the real cost for administration and references should be around £55, and a renewal fee should be no more than £10.
Foxtons dismisses the claim, saying its fees are “open and transparent” and that tenants have full visibility of charges before they rent a property.
But if the claim is successful, Green says it will not just be tenants of Foxtons that will benefit, but millions more people as all letting agency fees charged to tenants could be challenged. In total, he estimates that tenants in England and Wales pay moe than £300m a year in fees to letting agents and could potentially claw back £2bn paid over the previous six years.
Letting agency fees to tenants are hugely controversial. In Scotland, any fees to tenants beyond rent and a refundable deposit have been illegal since 2012. In England, agents are free to hit tenants with a variety of charges – the average is around £300 – although since May 2015 they have been required to publish them prominently.
Green alleges that most letting agents avoid mentioning fees until the last minute, quote prices without VAT to make them seem lower, charge for things the tenant should not and cannot be charged for, and are profiting from the fees even though the term “fee” suggests they are just covering their costs.
“I feel very strongly on the issue,” says Green, talking about letting agents in general rather than Foxtons in particular. “Letting agents are the gatekeepers to properties – especially in London – but are abusing their position. We have ended up with the ridiculous situation whereby tenants are paying hundreds of pounds for a five-minute template contract, or for a credit check which is available on the market for £20.”
So why is his action against Foxtons and not the many other letting agents that charge fees to tenants? “We have chosen Foxtons because its practices are nicely illustrative of the market: if we win a case against Foxtons it opens up liability against most other agents. They won’t like that. Foxtons historically quoted all its prices ex-VAT; has kept fees ambiguous and unclear; and is charging for things such as check-out which is only really for the landlord’s benefit.”
But Foxtons says its fees are transparent and quoted including VAT. It adds that its all-in initial administration fee covers multiple costs such as viewings, references and contracts. In a statement it said: “Foxtons employs an open and transparent approach when it comes to fees. Our tenancy administration fees are fixed and charged per tenancy (not per individual tenant) and include the cost of chauffeured viewings, negotiating the tenancy, verifying identification, obtaining references and drawing up the tenancy agreement.