But letting agents industry warned to check their small print or risk enforcement action

82/11    19 July 2011

The OFT is today warning the letting agents sector to check that their terms and conditions are fair and transparent as it publishes an evaluation of its consumer enforcement case against Foxtons for breaching the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).

In February 2010, the OFT secured an enforcement order from the High Court when it ruled that Foxtons' renewal commission terms were not transparent, which led to Foxtons amending some of their letting agreement terms. The evaluation finds that the OFT intervention has resulted in positive benefits for consumer landlords that use Foxtons with an estimated annual benefit of at least £4.4 million.

However the OFT is embarking on further engagement and awareness-raising as the evaluation report found that some consumer landlords and letting agents remain unaware of the High Court ruling and its implications for the sector, with similar potentially unfair terms still appearing in some contracts. The OFT has written to a number of letting agents and their industry associations pointing this out and has also invited a number of agents to an event this autumn that will focus on the need for transparency of terms in contracts, including the need to highlight terms which relate to charges.

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. 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.'

The evaluation was conducted in house by the OFT's evaluation team as part of the OFT's commitment to evaluate the impact of its work for external accountability and internal management purposes. The report draws upon independent surveys of letting agents and consumer landlords undertaken by IFF Research. It has been independently reviewed by Professor Stephen Davies of the University of East Anglia.

The evaluation report can be downloaded from the Foxtons' case page.

NOTES

1. The enforcement order relating to Foxtons declared that the terms listed below are unfair, not binding, and may not be used or relied upon in contracts with consumer landlords:
   
   a. Terms which require landlords to pay renewal commission to Foxtons after the sale of their property to a third party because the original tenant remains in occupation.
   
   b. Terms which require landlords to pay a sales commission to Foxtons in the event they sell the property to their tenant.
   
2. Further details about the OFT's case against Foxtons. See press release of 22 February 2010: OFT secures final high court order against Foxtons.
   
3. Further information on the OFT's Consumer Contracts Market Study. See press release of 24 February 2011: OFT urges businesses to review their small print or face enforcement action.
   
4. OFT's evaluation programme aims to evaluate whether the OFT delivers its objectives cost-effectively, and to help the OFT prioritise, conduct, and follow up its work to maximise its impact.
   
5. Letting agents interested in the OFT event should send an e-mail to lettingagents@oft.gsi.gov.uk to find out more information.
   
6. The UTCCRs apply to standard contract terms in contracts entered into with consumers. The OFT, and certain other qualifying bodies (such as local authority Trading Standards, national regulatory bodies, and Which?) can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.