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2009 - Practice Area: Commercial Litigation and Dispute Resolution
Chancery Division Office of Fair Trading vs Foxtons Ltd
Before Mr Justice Mann
Judgment July 10, 2009
Provisions in an estate agent’s standard terms and conditions of its letting contracts with landlords relating to renewal commission, third party renewal commission and sales commission were unfair.
Mr Justice Mann so held in the Chancery Division when allowing an application by the claimant, the Office of Fair Trading, for orders against the defendant, Foxtons Ltd, in respect of what was said to be the operation of unfair terms in contracts made between Foxtons, as letting agents, and various landlords.
Mr Nicholas Green, QC, Miss Helen Davies, QC and Miss Sarah Love for the claimant; Mr Michael Kent, QC and Mr Andrew Davis for Foxtons.
MR JUSTICE MANN highlighted the following legal issues:
First, were the renewal commission provisions in both the defendant’s old and new terms unfair? Further, were they of a nature that exempted them from a fairness scrutiny due to regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations (SI 1999 No 2083)?; if so, did that exemption not apply because the provisions were not in plain intelligible language, with the effect that they were subject to fairness scrutiny?
Second, if the renewal commission provisions were subject to fairness scrutiny, were they unfair?
Third, were the third party renewal commission provisions unfair?
Fourth, were the sales commission provisions unfair?
His Lordship made it clear that he had not been asked to decide whether renewal commissions were always unfair. The Court of Appeal considered the purpose of regulation 6 and how it was intended to operate in Abbey National plc v Office of Fair Trading ( WLR (D) 69;  EWCA Civ 116).
It was emphasised that the exclusion from consideration of fairness which was effected by regulation 6 applied to that part of the bargain between the supplier and the consumer which could be described as “core” and not “ancillary or incidental”.
Having weighed up the evidence and submissions, his Lordship concluded on the facts that the obligation within the old and new versions of the defendant’s standard terms and conditions to pay renewal commission was not part of the core bargain between the defendant and its client landlords.
For it to be so, the customer would have had to be taken to acknowledge, if not share the view that the commission was part of an overall price for the overall benefit of introducing a tenant to a property. A customer would not have taken such a view, in the opinion of his Lordship.
Therefore, the renewal considerations under both versions of the standard terms and conditions were not exempted from a consideration of fairness by regulation 6 of the 1999 Regulations.
The relevant terms for renewal commission within the old version had not been drafted in plain and intelligible language and the obligation to pay renewal commission under the new terms did not escape a fairness inquiry.
His Lordship applied the relevant analysis of a fairness inquiry in Director-
His Lordship also rejected a submission from the claimant relying on an explicit or implicit analysis of the renewal commission as being an almost legally severable separate commission in the sense that it was an identifiable commission payable for virtually no service and which was divorced almost entirely from the initial commission.
As far as fairness was concerned, his Lordship thought it unlikely that the typical consumer would expect a repeat bill in year two and beyond unless the point was spelled out to the consumer in some way.
Bearing in mind the usual expectation of the typical landlord, the defendant had not used a fair and adequate method of bringing the renewal commission clause to the attention of the landlords.
In all the circumstances, the renewal commission element of both versions of the defendant’s standard terms and conditions were unfair for the purposes of the 1999 Regulations.
In the light of the conclusions reached about renewal commissions generally, third-
As to sales commission, it was a clause that imposed potentially large financial liability on a landlord regarding a transaction in which the defendant had played no material part.
A consumer landlord would not expect that sort of clause when engaging a letting agent to secure a tenant. Consequently, the sales commission clause was plainly unfair for the purposes of the 1999 Regulations.
Solicitors: Treasury Solicitor; Mischon de Reya