Landlords may be due thousands of pounds of compensation from property agent Foxtons after commission fees were deemed unfair by the High Court.

Many individual landlords with a letting agreement before 23 December 2009 won't need to pay commission after selling their property when the tenant renews their contract. In addition, they won't have to pay a sales commission if they sell their property to the tenant.

Anyone charged these fees on a contract pre-23 December 2009 could get a refund (see the House Selling Tips guide).

The Office of Fair Trading (OFT), which brought the original complaint, has warned other agents it will take similar action where appropriate.

Refund hope

The OFT says landlords were often charged 11% of the annual rental income by Foxtons as the renewal commission. On a typical £6,000 private sector annual rent, the fee is £660 a year. Yet many would have been charged over numerous years.

Foxtons says it will handle refund claims on a "case-by-case" basis, though the OFT advises landlords seek legal advice.

The charging of commission was not deemed unfair. The problem was that the fee was often hidden from landlords. Only where Foxtons manages the property can these commission payments be enforced.

'A trap'

The High Court ruled in July last year that a number of Foxtons's renewal commission terms were not transparent and therefore "represented a trap and were unfair". Today, the OFT has secured a final, binding High Court order against the agent.

Jason Freeman, from the OFT, says: "This case sends a wider message to letting agents and businesses in general that important terms, particularly those which may disadvantage consumers, must be clear, prominent and actively brought to people's attention.

"Consumers should not be presented with a surprise bill for services they have not consciously agreed to."

A Foxtons spokeswoman says: "During the final stages of the renewals legal case last year, Foxtons amended its renewal terms and conditions so they were acceptable to the OFT and the High Court.

"These new terms have now been formalised and we therefore no longer feel it necessary to appeal the High Court decision. 

"The new terms are more user-friendly and provide for renewal commission to be charged at a reduced level and for a maximum of two years, making them very attractive to landlords."

Further reading/Key links

Homes and mortgages: House Selling Tips, The Remortgage guide, Mortgage haggling, Cheap mortgage finding, Ditch my fix?