Renewal Fees to Be Challenged in High Court

A test case which will decide the legality of renewal fees, charged by letting agents to landlords in case tenants stay after their AST expires, has been heard in the High Court yesterday (April 28th 2009). The outcome of the hearing by the OFT against London Foxtons agents will not only affect the way agency agreements will be drawn up in future, but also it will decide whether letting agents will be able to enforce renewal fees in contracts that are currently signed by landlords. The case might even have historic implications. If the High Court rules renewal fees illegal, landlords who have paid them over the course of the last 6 months might proceed to demand them back. Some letting agents have already brought cases to county courts in an effort to demand payment of renewal fees by landlords, who refused to pay them. However, the claims of the agents were put on hold until the results of the Foxtons case are in place. Foxtons agents claimed earlier that whatever the High Court rules on the case, it should not affect current contracts with landlords as they include a clause, which allows to charge renewal fees. Initially, the High Court accepted Foxtons argument, but it was later overturned by the Court of Appeal. The Court of Appeal claimed that the Unfair Terms in Consumer Contract Regulations is intended to protect consumers and OFT should base its judgment on the above-mentioned regulations. The full High Court hearing of the Foxtons case will be held later this month. The OFT also objected to Foxtons practice of requiring landlords to pay these sums after the property has been sold. The OFT has originally launched the case in February 2008. At that time, Foxtons claimed that the court had no right to take issue with the contracts, which were concluded between two parties upon their mutual agreement. However, the claim was declined as the Unfair Terms in Consumer Contract Regulations stipulate that the term is not bounding if it appears to be unfair. Since February 2008, the Foxtons case has been the major talk among landlords who believe renewal fees are unfair.