OFT warns letting agents about unfair contractsMake Text Bigger
Letting agents have been warned that they must offer landlords clear and fair contracts or face action from government consumer champion the Office of Fair Trading.
The OFT is concerned that some letting agents are not abiding by a High Court ruling that found tenancy renewal terms in contracts between London letting agency Foxtons and landlords were unfair.
As a result of the case, the OFT obtained an enforcement order that made Foxtons amend letting agreements with clearer terms relating to renewal commissions when an existing tenancy was renewed.
The OFT reckons the court intervention against Foxtons has saved landlords around £4.4 million in unfair fees since February 2010.
Following the case, the OFT has investigated other firms and written to letting agents and industry associations pointing out that many were still issuing unfair contracts.
Many letting agents and industry figures are also invited to attend an OFT summit in the autumn to discuss the changes they need to make.
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. We will be engaging with business over the coming months to raise awareness and compliance with the law.
“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.”
The Foxtons enforcement order found two specific contract commission terms were unfair and not binding, and may not be used or relied upon in contracts with consumer landlords:
- 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.
“Transparent business practices build trust in markets, allowing people to shop around to find the best deal, thereby stimulating effective competition and strengthening innovation and growth,” said Fletcher.
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