Foxtons faces £80m lawsuit over tenant charges

Estate agency Foxtons may have to reimburse tenants hundreds of pounds each if an £80m class action lawsuit is successful. Law firm CaseHub has obtained legal opinions that Foxton’s charges may be illegal under consumer rights law. If the case succeeds, all letting agency fees could be challenged, costing firms up to £2bn.  Michael Green, who is co-ordinating the case, is also pursuing a £400m suit challenging Ryanair’s fees with the support of over 5,000 people.

Foxtons is facing an £80m “class action” lawsuit that if successful could force the giant estate agency to pay back hundreds of pounds in fees and charges to every tenant who has rented a property from them.

Michael Green, whose law firm CaseHub is behind the group action, has obtained legal opinions from senior barristers that Foxtons’ fees – such as a £420 adminstration charge, £300 for name changes and £165 for checking out a property – could be illegal under the Unfair Terms in Consumer Contracts Regulations 1999, and its successor the 2015 Consumer Rights Act.

Green estimates that the real cost for administration and references should be around £55, and a renewal fee should be no more than £10.

Foxtons dismisses the claim, saying its fees are “open and transparent” and that tenants have full visibility of charges before they rent a property.

But if the claim is successful, Green says it will not just be tenants of Foxtons that will benefit, but millions more people as all letting agency fees charged to tenants could be challenged. In total, he estimates that tenants in England and Wales pay moe than £300m a year in fees to letting agents and could potentially claw back £2bn paid over the previous six years.

Letting agency fees to tenants are hugely controversial. In Scotland, any fees to tenants beyond rent and a refundable deposit have been illegal since 2012. In England, agents are free to hit tenants with a variety of charges – the average is around £300 – although since May 2015 they have been required to publish them prominently.

Green alleges that most letting agents avoid mentioning fees until the last minute, quote prices without VAT to make them seem lower, charge for things the tenant should not and cannot be charged for, and are profiting from the fees even though the term “fee” suggests they are just covering their costs.

“I feel very strongly on the issue,” says Green, talking about letting agents in general rather than Foxtons in particular. “Letting agents are the gatekeepers to properties – especially in London – but are abusing their position. We have ended up with the ridiculous situation whereby tenants are paying hundreds of pounds for a five-minute template contract, or for a credit check which is available on the market for £20.”

So why is his action against Foxtons and not the many other letting agents that charge fees to tenants? “We have chosen Foxtons because its practices are nicely illustrative of the market: if we win a case against Foxtons it opens up liability against most other agents. They won’t like that. Foxtons historically quoted all its prices ex-VAT; has kept fees ambiguous and unclear; and is charging for things such as check-out which is only really for the landlord’s benefit.”

But Foxtons says its fees are transparent and quoted including VAT. It adds that its all-in initial administration fee covers multiple costs such as viewings, references and contracts. In a statement it said: “Foxtons employs an open and transparent approach when it comes to fees. Our tenancy administration fees are fixed and charged per tenancy (not per individual tenant) and include the cost of chauffeured viewings, negotiating the tenancy, verifying identification, obtaining references and drawing up the tenancy agreement.

“We ensure tenants have full visibility of fees upfront before making any important decisions, by displaying our fees on our website, on print and digital advertising, within branches and on all the pre-tenancy paperwork. Unfortunately this practice is not always replicated by other agents, and we welcome more regulations to improve transparency in the industry.”

We’re only picking cases where a lot of people have been affected by an ongoing issue or deliberate practice Michael Green, CaseHub

The legal challenge against Foxtons is likely to argue that tenants suffer from a “substantial imbalance” when dealing with the letting agency contract, and would not have agreed to the terms on offer for “mere adminstrative services” if they were in a better position to individually negotiate. It is also likely to argue that as Foxtons imposes a significant administration fee on the landlord as well, it is arguably not acting in good faith. Additionally, it will argue that check-out fees are for the landlord’s benefit, not the tenant’s, and that when it comes to name-change fees there is no reason to charge an outgoing tenant who provides a replacement tenant hundreds of pounds.

Green is an interesting character, a sort of British Erin Brockovich standing up for consumer rights with a website, Casehub.com, that opens with the statement: “Fight bad guys online. Justice can be fun*”. The asterisk qualifies that with “sometimes”. And like Brockovich, Green is also in line for a huge personal payout if the court action is successful. He expects to pick up as much as a third of the payouts he wins for clients who sign up to his class actions.

Unlike Brockovich he’s no humble clerk without formal legal education. After finishing a law degree at the University of Cambridge he went on to study a masters in EU law, focusing on consumer matters. He’s young – just 25 – which he says gives him a better insight into how young adults are affected by corporate behaviour.

“In early 2015 I approached some technology investors and said, ‘Look, regulators in the UK, such as the Competition and Markets Authority, Which? and so on, aren’t doing their job and enforcing the law against large companies – they don’t have the money or the appetite. They are too conciliatory – and heavyweight companies know how to throw a punch in court. This lack of enforcement from regulators is doing a lot of people a lot of damage, but maybe this can be fixed.

“I asked these investors for some money to try to set up a ‘private regulator’ – we would only run lawsuits where lots of people are upset and where the law could put an end to the problem. We would aggregate people into something similar to a class action, which would mean we could raise finance for these cases and run them for ‘free’, and take a commission if the case won. It was and is about access to justice against large companies who cause widespread harm.”

Since getting that money last year, Green has been putting together a handful of big cases, hoping to sign up thousands of possible clients. “We’re only picking cases where a lot of people have been affected by an ongoing issue or deliberate practice of a large company. Accidents and ambulance chasing isn’t what this is about.”

So far he has signed up more than 5,000 people to a £400m suit against Ryanair, where Green is challenging the airline’s airport check-in fees, fees to reprint boarding passes, and fees for correcting a spelling mistake on a boarding pass. “We intend to begin formal action in a few months. Lots of people seem to think these fees are what keeps its fares so low, which is incorrect. Lots of people seem to think that someone is ‘stupid’ if they do not follow the rules. I think this just shows how conditioned they are to this kind of behaviour warping: why should the fee exist in the first place? It is wholly gratuitous.”

We put Green’s comments to Ryanair. With perhaps typical gusto it said: “We don’t comment on nonsense.”

Green will need 1,000 people to sign up to make the case against Foxtons commercially viable. To convince them to join his case his website also highlights what he reckons are outrageous prices tenants have to pay for tiny flats in London, some of them marketed by Foxtons. “This very average studio flat, in a building in construction, with suspicious wall colour, would cost you £1,626 pcm [per calendar month] and £2,670 to move in.” He describes another studio flat as like a “creepy old motel from Psycho”, though it will cost £1,950 pcm and £3,120 to move in.

He also posts “the funniest tweets about Foxtons” and “scary stats” about tenancy in England. “If, like us, you think tenants deserve more respect from letting agents, join our class action lawsuit,” he says.