Council wins test appeal case against lettings agency ‘administration fees’

Camden Council has successfully appealed to the Upper Tribunal against a leading estate agency, Foxtons, using the term ‘administration fees’ in their lettings agency work.

In 2015 the local authority wrote to all letting agents in the borough and drew their attention to provisions in the Consumer Credit Act 2015. A letter set out that an agent could not simply put up a notice stipulating a total ‘administration fee’, but rather that the costs needed to be specified and broken down as to exactly which costs were for which service.

A Camden officer then visited a Foxtons branch to carry out a routine inspection. They handed the agency a ‘non-compliance notice’.

There then followed a series of discussions between the local authority and the company. The main objection was that Foxtons was still displaying a one-off ‘administration charge’ of £420 without a sufficient description of what services were included for this fee.

In February 2016 the council issued a notice of intent to the three Foxtons branches in its area and also one in relation to the company’s website. This notice indicated an intention to impose a monetary penalty in respect of each of them.

Foxtons made representations but Camden rejected them. The authority issued final notices confirming the imposition of penalties totalling £20,000.

The estate agency changed its wording from March 2016 to state that the administration fee of £420 per tenancy was “a fixed cost fee that can cover a variety of works depending on the individual circumstances of each tenancy, including but not limited to conducting viewings, negotiating the tenancy, verifying references and drawing up contracts. This charge is applicable per tenancy, and not per individual tenant.”

However, Camden took the view that the company was still in breach of the requirements.

Foxtons appealed to the First Tier Tribunal (FTT) against each penalty. In October 2016 the FTT concluded that the revised wording complied with the statutory requirements but noted that the company had been in breach from 27 May 2015 to 28 March 2016, something that could not be downplayed or ignored.

The FTT therefore allowed the appeal to the extent of reducing each penalty to £3,000, making the total £12,000 rather than £20,000.

Camden then appealed to the Upper Tribunal, having considered that the estate agency’s ‘administration fees’ still did not give an adequate description for the services provided.

The main area of dispute before the Upper Tribunal was whether the FTT was correct in law to find that the revised wording of the fees and terms adopted by Foxtons from 28 March 2016 complied with the statutory requirements.

In London Borough of Camden v Foxtons Ltd [2017] UKUT 349 (AAC) Judge Levenson said: “It is the use of the phrase “can cover” that bothers me. It encompasses the idea of “might not cover” and therefore the wording is not clear that there will be no services (not listed under “Other fees”) which incur or might incur a further charge.

“The failure of the First-tier Tribunal to appreciate this implication of the wording goes beyond a finding of fact and amounts to an error of law. As I have explained it, the revised wording does not provide “a description of each fee that is sufficient to enable a person who is liable to pay it to understand the service or cost that is covered by the fee or the purpose for which it is imposed” and accordingly does not meet the requirements of section 83(4)(c) of the Consumer Rights Act 2015.”

He said Foxtons “was and remained in breach of the requirements of the Consumer Credit Act 2015 in relation to published details of its relevant fees in each of three branches and on its website”.

However, the judge also said that credit should be given for the company’s attempt to design a compliant revised wording, although it was unsuccessful in this attempt.

He assessed this credit as meriting a 25% discount (£500 in respect of each breach) from the maximum penalty (a further £2000 for each breach) to which the company would otherwise be liable in respect of the period after the issue of the revised wording.

A penalty of £4,500 was therefore imposed in respect of each breach, leading to a total charge of £18,000.

Cllr Pat Callaghan, Camden’s Cabinet Member for Housing, said: “We are delighted with this judgment as it has clarified what letting agents must do when publicising their fees. Because of our successful appeal, customers can now fully understand what they are liable for and make informed choices and proper comparisons with other letting agents about the fees charged.

“This judgment also gives clarity to Trading Standards officers nationally when enforcing fees and by assisting to ensure the market place is consistent for all letting agents and their prospective clients.

“I would personally like to thank the work undertaken by our Trading Standards and Legal Services in obtaining a successful outcome following a long, and at times complex, process.”

A Foxtons spokesperson said: “Foxtons employs an open and transparent approach when it comes to fees and we respect the Court’s decision. We are happy to work with local councils to ensure we comply with their guidelines and are pleased to finally be provided with these.”