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TODAY'S OTHER NEWS

Foxtons faces class action over alleged hidden payments

London based law firm Leigh Day has announced that it is bringing a group claim against estate agent Foxtons on behalf of landlords, in a legal case which could see the London estate agent facing a multi-million pound payout.

The case is being taken on behalf of private individual landlords who have used Foxtons either just to let, or to both let and manage, 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.

It is also alleged that the London based estate agent has engaged contractors who charge as much as two or three times the market rate in breach of their duty to try to get a good deal for landlords.

According to 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.

Landlords who think they have been affected can fill in a form on Leigh Day’s website here.

One of the claimants is Dr Chris Townley, a lecturer in competition law at King’s College London, who previously worked for the Office of Fair Trading.

Foxtons let and managed a property for Dr Townley from April 2011 until August 2013.

At no stage during the engagement process, or subsequently while they were managing his property, did Foxtons suggest that it would receive commissions from any contractors they engaged to maintain the property, nor fees from the tenants.

In 2013, Dr Townley became increasingly dissatisfied with Foxtons’ service and complained. One of the issues he  was dissatisfied with was the quality of work done by a contractor who had installed a security light at the front of the property following a request by the tenant.

Dr Townley contacted the contractor to complain, and was told that if his complaint was established they would refund him for the work. However, they were only prepared to refund him the money that they had actually received for the work.

Dr Townley had been invoiced £550 for the work, but the contractor explained that they had a contract with Foxtons to pay Foxtons a commission for any work that they received through the agent.

The contractors charged £412.50 for the work, but they had added an additional commission onto their fee for Foxtons (as they were obliged to do in their Foxtons contract). This was not set out in the invoice.

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.

Dr Townley was very surprised to learn about the commissions, particularly given Foxtons had also charged him an additional contractual fee of 10% + VAT (12% inc VAT) for any invoice that was over £500.

For example, Foxtons had charged the additional fee on the £550 invoice for the security light (£55 exc vat; £66 inc vat). But it was only over £500 because of Foxtons’ 33% mark up.

This meant that instead of just paying the contractor about £412.50 for the work, Dr Townley had to pay Foxtons’ additional fees of about £203.50 inc vat – a just under 50% mark-up – with a grand total of about £616 inc vat.

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.”

  • Glenn Ackroyd

    Not wanting to dampen the mood, but the ramifications for the whole lettings industry could be seismic.

    Under contract and tort laws, agencies have duty to act in the best interests of client's, and it is long been established in the legal world, that you cannot act if their is a conflict of interest, unless this is disclosed and accepted.

    Taking fees which are not contracted, and not disclosing 'hidden' fees (kickbacks), or whatever term you'd like to call them puts a Letting Agency on a very dodgy footing. If this case goes against Foxtons, it could open up an industry'PPI' type claim scenario against all letting agents that practice this. Claims will be able to go back 6 years.... Given my legal background, this is one reason why we've never adopted this particular practice. Maybe this is a tad over dramatic, time will tell.

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    As a contractor the subterfuge goes much deeper than this.Advised to up your estimates from agents and altering of submitted invoices to increase contractors commission.The industry is parasitic by nature with tenants treat appallingly and landlords given very little respect. I hope this action is successful as I for one will help the landlords recoup what I believe has been fraudulently taken from them

  • Paul Barrett

    The actions of Foxtons is one of the main reasons for the LA fee ban.
    Next major issue is LA taking kickbacks and charging the LL for them for contractors.
    How LL are meant to be able to detect these contractor kickbacks beats me.
    But many of the disreputable LA will be attempting to use contractor kickbacks to make up for now banned tenant fee income from June.
    LL face very difficult times to prevent being ripped of by their LA now they cannot rip off tenants anymore!

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    Great and about time. I certainly will join or might even set up similar action.
    Portsmouth has a few agents who mark 10% or much more. I know of one local established agent that charged a landlord £150 to Up the water pressure on a boiler, a job that should take say 20 seconds for water to be released and pressure to increase to say 2 bar..
    And how about Freeholders that requested their brokers to mark up Block Insurance? We had situation where block insurance was about £5k via Freeholders policy, we established a RTM ( right to manager) and reduced Insurance down to £1300 with a triple A rated insurance company. So far we now have over £4k in sinking fund a far better managed block and No maintenance issues and yearly Service Charge reduced by over £600 per leaseholders.

    Paul Barrett

    As a LL in a similar situation as you but without the ability to RTM we leaseholders face the high block insurance etc that you have suffefed from.
    Investing in flats is something I would NEVER do again.
    Unless of course there was RTM at the outset.
    I have to pay £1800 per year for service charges.
    Then there is ground rent at £360 per flat every year.
    Flats are a rip off.
    On my development the Housing Association holds more voting rights than the remaining leaseholders and so they block any attenpt to RTM.
    Alright for them as they don't care as Govt gives them money.
    All in all flats are a nightmare

     
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    You can contest the insurance by obtaining 3 quotes on a like for like basis, not difficult.
    You can take the Freeholder/management company to the LVT (?).
    We have in the past and won.
    Stir it up don't take their word, ask to see all invoices. Nothing wrong with leasehold, if you manage and contest and query everything.

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    You can contest the insurance by obtaining 3 quotes on a like for like basis, not difficult.
    You can take the Freeholder/management company to the LVT (?).
    We have in the past and won.
    Stir it up don't take their word, ask to see all invoices. Nothing wrong with leasehold, if you manage and contest and query everything.

    Paul Barrett

    Life is too short!!
    I intend to sell up.
    I can't be arsed to deal with MA to sort out stuff.
    Never again will I buy leasehold property.
    Just in Service charges I pay over £7200 per year for 4 flats.
    Insurance no use.
    Had a fire in one and they refused to pay out.
    After I have sold up I might invest in one FREEHOLD house.
    Far easier to manage.

     
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    Lease hold is a rip off and management companies are taking the Mick no money in new build flats I have a few abd regret ever buying them odd loading once I can get my money back

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    Is there any updates on this action taken.For me it should be investigated by the FSC or FSA, maybe even the OFT!! If it can be proven against LA they should have their licenses revoked. I believe that LA plays on landlords naivety and the fact they know he or she does not want to be involved in day to day running.Its no excuse to rip them off!!

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