15th January 2018

Let there be light on lettings fees

Camden took on Foxtons estate agency over its unclear administration fees and secured a binding ruling that should bring consistency on the issue.

By David Scott

Camden Trading Standards’ landmark victory in a recent test appeal case should make enforcing the rules on letting agents’ fees much easier in future. In its first major enforcement action under section 83 of the Consumer Rights Act 2015, the local authority was successful at an Upper Tribunal hearing against Foxtons’ use of the term ‘administration fees’ in its lettings agency work. The ruling has national significance because it creates a binding precedent. It means letting agents should now make it clear to customers exactly what they are paying for, so they can make proper comparisons with other agents and come to an informed choice.

First steps
Camden took action after running a pro-active campaign in the wake of the law change on letting agency fees in 2015. The team was tasked by the council’s housing department to look into the issue and secured some funding to do so. Around 50 letting agencies were listed as operating in the borough, but – after the investigation began – more than 300 were discovered. Camden wrote to them all in June 2015 about the imminent law change, which came into effect in October 2015.

It followed this up in December and began enforcement action against non-compliant agencies in spring 2016. National estate agency Foxtons – with four branches in the borough, plus websites – fell into this non-compliant category. It was charging an administration fee of £420 for tenants and landlords and Camden TS advised it to supply a breakdown of any fees, to enable customers to see clearly the services being offered.

Martin Harland, Camden’s principal trading standards officer, says the council also cited the Department for Communities and Local Government guidance, Improving the Private Rented Sector and Tackling Bad Practice – A Guide for Local Authorities. In particular, it told Foxtons: ‘The list of fees must be comprehensive and clearly defined; there is no scope for surcharges or hidden fees. Ill-defined terms, such as administration cost, must not be used.’ However, Foxtons continued to use ‘administration fees’ without clarification, so – in February 2016 – Camden TS issued four Notices of Intent, each for the maximum penalty of £5,000. These covered each branch in the borough and Foxtons’ website.

The response
Foxtons responded, saying its administration fee covered a range of activities. ‘It is not possible to break these down to specific elements,’ it added, ‘as each property and tenancy is unique – as is each tenant or tenants. In addition, the scope of our administrative work is subject to considerable change at the current time.’

Foxtons said it had modified its literature to explain that administration fees ‘can cover a variety of works’. It cited examples, but still failed to state explicitly the full fee breakdown. Feeling this offered insufficient clarity for consumers, in April 2016 Camden TS issued four Final Penalty Charge Notices.

To tribunal
In October 2016, Foxtons appealed to the First-tier Tribunal of the General Regulatory Chamber. ‘While Judge Lane said Foxtons was wrong to state “administration fees £420” when enforcement action began, he decided that – when we served our Final Notices – Foxtons had revised its literature sufficiently to explain that the fee included a number of the services provided,’ says Harland.

‘This meant the fees no longer breached the law and the judge consequently reduced each Final Notice to £3,000.’ In a crowded and fast-moving marketplace such as property lettings, Camden TS felt the First-tier Tribunal’s decision failed to offer the clarity required by law. In June 2017, it appealed against the decision to the Upper Tribunal. In September 2017, Judge Levenson – at the Upper Tribunal – agreed with Camden TS, stating that the First-tier Tribunal had failed to consider which services the administration fee ‘might not cover’.

He set aside the decision ‘as it involved the making of an error of law’. Judge Levenson determined that the revised wording also breached the statutory requirements, but gave Foxtons a £500 reduction on each penalty in recognition of its ‘attempt to design a compliant revised wording’. This meant a final penalty of £4,500 for each breach, totalling £18,000. ‘If the Upper Tribunal had ruled the other way, it would have made a mockery of the law. I would say it would have been unenforceable, and the government would have had to rewrite the law,’ says Harland. ‘But this is a binding decision, which can be cited in lower-tier cases – that was the idea; to get some consistency on the fees side.’

Lessons learned
Pursuing the case against Foxtons was, says Harland, a matter of fairness – not only for consumers, but also for the many smaller companies in the borough that were trying to comply with the new rules. No other authority had taken an enforcement to the Upper Tribunal, so Camden knew it would be a test case – but Harland says it was a relatively straightforward process.

‘It’s a civil system, not criminal, so it’s much less formal and the costs don’t escalate so quickly,’ he says. ‘The tribunal system isn’t that expensive, and you don’t have to pay the other side’s costs.’ Harland adds that it’s not a resourceintensive process, either; Camden had one officer doing the enforcement side and appointed a barrister from the start, because the case involved a large company. Usually, however, the council’s own lawyers would be used.

The most difficult thing, according to Harland, was keeping on top of the in-house finances – making sure he tied in with Camden’s finance mechanisms. ‘You have to withdraw a penalty notice until it has been challenged, so it’s vital to keep an eye on the mechanisms – to know if a notice has been discharged, or to reissue invoices. You have to liaise with the correct departments to make sure people aren’t chasing debts if penalties have been appealed.’

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