How estate agents charge commission on lettings property could alter drastically after an examination of their procedures by the Office of Fair Trading.
The OFT has requested the High Court determine whether the way estate agent Foxtons carries on charging some landlords commission after a tenancy agreement has finished breaches the Unfair Terms and Consumer Contract Regulations of 1999.
The regulator wants the court to issue an injunction, effectively ordering Foxtons to change its terms and conditions.
The OFT believes practices like those used by Foxtons are widespread on the lettings side of the property industry. If the case succeeds, the OFT could pursue other estate agents that use the same wording in contracts and methods.
Foxtons has been chosen because it continues to charge commissions on a rentals property after a tenancy period has ended, despite whether it helped persuade the tenants to remain or is still actively involved with the property.
If a landlord holds onto the same tenants but moves to another estate agent to manage the property, or chooses not to have an agent at all, the landlord would still pay a commission to Foxtons.
The OFT says the basic principle is not fair, even if landlords are informed about the terms and agree to them. It is also challenging agents making landlords pay commission if they sell a property to tenants after the tenancy is completed, if originally introduced by Foxtons, even if the agent wasnt involved in negotiating the sale.
A statement issued by Foxtons says: These issues are of great relevance to the estate agency industry as a whole. As the OFT has pointed out they are treating this as a test case; we welcome the opportunity to have a court clarify the matters raised by the OFT as we are of the opinion that they are fundamentally misconceived.