Landlords may expect letting agent commission refunds
The Office of Fair Trading (OFT) has reportedly followed up on concerns raised last year regarding unfair commissions that some letting agents charged landlords by sending firms written warnings. Concerns over unfairly high commissions that thousands of residential landlords had to pay to letting agents made headlines last summer, when the OFT determined that Foxtons, one of the largest of these agencies, could not justify charging its clients 11 percent for lease renewals. Additionally, there were concerns that Foxtons had expected some landlords to pay a 2.5 percent fee, even if they sold the given rental unit to the tenant. A High Court ruling issued earlier today confirmed that OFT’s concerns over these commissions were entirely justified.
This ruling may have a substantial impact on the buy-to-let sector, as a large number of residential landlords might be able to claim a refund for the commissions they paid. Many London landlords, for example, paid as much as 16 percent whenever their tenant renewed their lease. A report in The Times estimates that landlords across the UK may be eligible to claim as much as £26 million in refunds, following the High Court ruling and the OFT’s letter.
The OFT’s action against unfair commissions has already led to important changes at Foxtons. The firm has agreed to lower its fees, it has limited the collection of commissions to two lease renewals and also aims to ensure that the firm gathers these payments from landlords in a more transparent manner.