Litigation Looms For Greedy Letting Agents

Many blame Foxtons for the Chancellors decision to ban letting agents charging fees to tenants. Unsurprisingly, Foxtons have seen their share price plummet, but that’s far from the end of their troubles. Litigation also looms!

Lawyers acting for landlord clients of Foxtons are planning to bring claims to force the company to pay all undisclosed fees to landlords. The lawyers argue that under agency law, undisclosed fees charged to tenants belong to the landlord.

The legal fraternity has been picking through the law to establish whether or not some agents have been acting illegally all along. The case against Foxtons is based on the following:-

Agency law is that an agent is in a ‘fiduciary position’ and therefore cannot make a profit out of his agency work unless this is known of and approved by their principal – in this case, the landlord. If the agent makes a ‘secret profit’, which the principal has not authorised, the principal can claim it back through the courts. Case law HERE

Just to be clear, any claims awarded by the Courts, in respect of fees paid by tenants to agents, would result in the money going to the landlord, not the tenant who paid the fees. Some letting agents are known to have charged over £500 for each property to tenants every year. On this basis, a landlord with 10 properties could have a claim upwards of £30,000 on the basis that claims can be made for up to six years.

How many landlords were made aware by their agents they were charging hundreds of pounds to their tenants as well as to them?

Agents who have acted ethically, by being completely transparent with their landlord clients about charging fees to tenants, have absolutely nothing to fear. For example LettingSupermarket.com made full disclosure in their T&C’s. However, many of the UK’s largest agents have been far from transparent about their pricing structures. For them, they might be in for some very nasty shocks, much like those suffered by the banking industry over the mis-selling of PPI.

The Landlords Union are recommending members who have used other agents to wait and see what happens in the Foxtons case. It the Courts rule against Foxtons the payouts could run into millions and case law will be created. If/when this comes to pass, The Landlords Union will organise a series of no-win-no-fee group action claims against other letting agents on behalf of it’s members. The criteria will be that at least 15 members of The Landlords Union will be needed to commence each claim. The larger agents are expected to be the hardest hit.

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