Michael Grant discusses the recent Court of Appeal decision of Aster Communities v Kerry Chapman (and Ors)  EWCA Civ 660, concerning the attachment of conditions to an award of dispensation from the consultation requirements under S.20 of the Landlord and Tenant Act 1985. Read more >
Letting Agents, Administration Fees and the Consumer Rights Act 2015
London Borough of Camden v Foxtons Limited  UKUT 349 (AAC)
In this case, the Upper Tribunal (Administrative Appeals Chamber) found that Foxtons Limited (‘Foxtons’) were in breach of the requirements of the Consumer Rights Act 2015 (‘the Act’) in connection with published details of its relevant fees in three branches and on its website, and imposed a penalty of £4,500 in respect of each breach, amounting to £18,000.
In February 2015, the London Borough of Camden (‘Camden’) wrote to all the letting agents in the borough about its Fair Lettings Project which concerned raising the standards of letting agents in the borough. On 27 May 2015, s83 of the Act came into force requiring all letting agents in England and Wales to publicise details of their relevant fees. On 30 June 2015, Camden wrote to all the letting agents in the borough again to draw to their attention, in particular, sections 83 and 87 of the Act which had by then come into force.
On 15 July 2016, Camden’s consumer protection officer visited the Camden branch of Foxtons to carry out a routine inspection, and explained that describing their fees as an ‘Administration fee or charge’ was contrary to the Act, and handed them a ‘Non Compliance Notice’ which identified a number of issues to be addressed, namely (i) that there were no clear prices or charges on display, (ii) they were advertising the rent payable in weekly amounts when it could only be paid monthly, and (iii) no information was displayed to tenants about any security deposit scheme. There followed a series of discussions and disagreements between the parties over the legal requirements, but Camden’s main objection was that Foxtons were still displaying a one-off ‘Administration Charge’ of £420 without a sufficient description of what services were included for this fee.
On 11 February 2016, Camden issued a Notice of Intent to each of the branches and one in respect of the website, indicating an intention to impose a monetary penalty, subject to written representations and objections, to be made within 28 days. Representations were made by Foxtons, but they were rejected by Camden, which issued Final Notices of Intent confirming the imposition of the monetary penalties totalling £20,000. With effect from 28 March 2016, Foxtons had changed the wording of its scale of charges but Camden considered that they were still in breach of the requirements under the Act.
Foxtons appealed to the First-tier Tribunal (‘the Tribunal’) against each penalty, and that appeal was heard on 10 October 2016, with its decision issued on 26 October 2016. The Tribunal decided that the revised wording of the fees and terms adopted from 28 March 2016 complied with the statutory requirements, and allowed the appeal to the extent of reducing each penalty to £3000. Camden appealed and was granted permission to appeal to the Upper Tribunal on 24 January 2017. The main issue of dispute before the Upper Tribunal was whether the Tribunal was correct in law to find that Foxtons’ revised wording from 28 March 2016 did so comply with the statutory requirements.
The Judge of the Upper Tribunal was troubled by the fact that the wording relating to the ‘Administration Fee’ did not indicate that such a fee could and would never exceed £420; and that the wording did not state that any further services under the heading ‘Other fees’ would ever increase the Administration Fee. Rather, the relevant part of the wording made reference to 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’. The Judge held that it was not clear that there would be no services not listed under ‘Other fees’ which incurred or might incur a further charge, and that the revised wording did not meet the requirements of s83(4)(c) of the Act. The Judge set aside the Tribunal decision and substituted his own decision.
The Judge considered that credit should be given for Foxtons’ attempt to design a compliant revised wording, even though it was unsuccessful, and gave credit to the extent of a 25% discount, substituting an overall penalty of £4,500 for each of the four breaches.
The Act makes it clear that letting agents must now display or publish a description of each fee that is sufficient for the person liable to pay it to understand the service or cost that is covered by the fee or the purpose for which it is imposed; to indicate whether the fee relates to each dwelling-house or each tenant under a tenancy; and the amount of each fee inclusive of any tax, if applicable, or a description of how the fee is calculated if it cannot reasonably be determined in advance, so that the maximum liability can be determined. Under s87 of the Act, a breach of these requirements will attract a financial penalty of up to £5,000 per breach.
DISCLAIMER: This bulletin is no more than a summary of the case, chosen selectively for the purposes of discussion only. It is not legal advice and should not be treated as such. It should not be relied upon in any respect. Recipients should always seek legal advice if proposing to take action following this commentary.