In The Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch), Mr Justice Mann ruled that the ongoing commission clauses in Foxtons’ standard lettings contract with consumer landlords breached the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations).

The High Court of England and Wales considered terms requiring landlords to pay an 11 per cent renewal commission when the tenant continued to occupy the property after the initial tenancy period expired. This was applicable even if Foxtons played no part in persuading the tenant to stay and did not collect rent or manage the property.

The Court considered whether the terms were expressed in plain and intelligible language and whether they were core terms. Subject to those considerations, it considered whether they satisfied requirement of fairness as set out in the Regulations.

The Court found that, at the stage when the agreement would be signed, the focus would be on getting a tenant found, checked and engaged and it was likely that the consumer would be focusing on that initial term of the engagement. The judge doubted whether the consumer would look to renewal at that stage. Foxtons’ publicity material focused almost exclusively on that initial stage of the business relationship. In the Court’s view, this was unlikely to engender realisation or acceptance that the renewal commission was part of the core bargain.

In any event, even if the renewal commission might otherwise have been part of the core bargain, in the Court’s view it did not escape the fairness consideration because the terms were not written in plain and intelligible language. In particular, Clause 2.14.3 of Foxtons’ original terms provided that:

Renewal commission…will also become due where the incoming tenant is a person, company or other entity associated or connected with the original tenant…

In the Court’s view, the words “associated” and “connected” would “puzzle even lawyers”.

In its revised terms, Foxtons had replaced those words with the expression “nominee”, which the Court also considered insufficiently plain or intelligible.

The commission amounts in question were held to be significant and operated adversely to the client the more time went on. Commensurate services were not provided and that, in the Court’s view, combined with other factors, gave rise to a significant imbalance.

While a consumer would expect a lot of detail in the “small print”, in the Court’s view the whole point of “small print” is that it contains things which are not of every day concern to the consumer. The consumer would not expect important obligations of this nature to be buried in small print, with no prior flagging, notice or discussion. This, in the judge’s view, was not a fair way to bring the point to the attention of the consumer.