A recent case has served as a useful reminder of the importance of ensuring consumer contracts are fair and in plain English. In Office of Fair Trading v Foxtons Ltd  EWHC 1681 (Ch), the High Court has ruled in favour of the Office of Fair Trading (OFT) that certain clauses in Foxtons' letting contracts are unfair and therefore unenforceable.
The OFT has the power under the Unfair Terms in Consumer Contracts Regulations 1999 to challenge consumer terms if it considers unfair terms exist in consumer contracts which disadvantage a consumer. In this case, the OFT considered that terms relating to the payment of various types of commission where Foxtons played no active part in the transaction were unfair not just because of the potential size of the financial liability but also because they were tucked away in the small print and not immediately obvious to the consumer.
Mr Justice Mann examined terms concerned with commission payable by landlords on the introduction of a tenant, whether or not the tenancy was negotiated and finalised by Foxtons. The terms also stipulated that commission would continue to be payable where tenants renewed or extended their tenancy or where a new tenant took over who was connected in some way with the previous tenant. Furthermore, the terms stated that commission would be payable where tenants subsequently purchased the property from the landlord (sales commission) and where the landlord assigned their rights to a third party (third party renewal commission).
Foxtons had re-issued some of these terms, in response to OFT concerns, but the original terms were examined in court as old versions of Foxton's terms were still in circulation.
The judge said that neither the original nor the new terms were drafted in plain and intelligible language and that both formats were unfair as the small print did not highlight the onerous clauses. Foxtons' changes had in fact made the position worse and its new version of the renewal commission term in particular was more obviously unfair than before. In some instances Foxtons would clearly not provide any service in relation to the tenancy or sale which gave rise to the commission and this was unfair.
For further information on when a commission is payable, please see the previous Wragge & Co alert dealing with the issue.
This case emphasised the importance of ensuring that onerous or unusual terms are drafted in plain or intelligible language and do not lead to an obvious imbalance between supplier and consumer. Suppliers of goods or services to consumers should ensure their standard terms are kept under review so they remain enforceable and do not attract the negative publicity and fines which could arise from an OFT investigation.
Property consultants and estate agents should review and if necessary amend their standard terms and conditions, particularly in relation to when commission becomes payable, to avoid complaints from consumer clients.