Foxtons faces massive payout over 'hidden' commission charges

Landlord fights back over huge commission charges.

If you’re a landlord who employs Foxtons to manage your property then you could be in for a slice of a multi-million pound pay out.

The high-end London agent is facing a class action led by solicitors hired by a disgruntled landlord.

Foxtons has been accused of charging landlords hidden commission fees each time it hires a contractor to do maintenance work on a rental property. In some cases the hidden charges bump up the cost of the work to the landlord by as much as 33%.

Bumping up the cost

The case has come about after Foxtons allegedly overcharged, ironically, an expert in competition law and former employee of the Office of Fair Trading.

Dr Chris Townley used Foxtons to let out his London property from April 2011 until August 2013.

He claims Foxtons didn’t tell him, either during the sign-up process or while it was managing his property, that the estate agent would receive commission from any contractors it hired to do repairs.

During the course of managing the property, Foxtons arranged for various contractors to undertake repairs, maintenance and improvements and sent the bills on to Dr Townley.

He wasn’t happy with the quality of work done by one contractor who had installed a security light at the front of the property. When he complained directly to the contractor he was told that if his complaint was established it would refund him for the work – but only the money the firm actually received, not the commission paid to Foxtons.

This was the first Dr Townley had heard about commission payments. He had paid £550 for the work, but the contractor had only charged £412.50 – the rest of the money was retained by Foxtons and the arrangement not made clear in the invoice.

On top of the £550, Foxtons had also charged an additional “contractual” fee of 10% + VAT which it does for any invoice over £500. It was the last straw for Dr Townley – his bill had only been over £500 because of Foxtons’ £137.50 commission charge.

In total Dr Townley paid Foxtons additional fees of £203.50 for the security light job, an additional 50% of the cost.

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Commission on contractors’ work

Dr Townley started asking Foxtons questions about the commissions. Initially reluctant to give details, Foxtons eventually admitted that it had taken a substantial commission on virtually every contractor’s work done at the property, totaling 38 commissions and about £1,900.

In many cases the commission was as much as 33% of the contractor’s bill. None of this was identified in any of the invoices or in the accounts that Foxtons gave Dr Townley.

Foxtons refused to give Dr Townley his money back, denied it had done anything wrong and pointed to contract small print that said it may retain commissions taken from third parties.

Understandably Dr Townley wasn’t happy – he was already paying a monthly fee for Foxtons to manage his property which begs the question of what the agent was doing for the money.

Class action

Dr Townley approached London based law firm Leigh Day which has now announced it is bringing a group claim against Foxtons on behalf of landlords. Experts at the firm say a win in court could mean Foxtons facing a multi-million pound pay out.

The claim is that Foxtons has been charging landlords hidden commissions of as much as 33% of a contractor’s fee for work done on their properties such as repairs, maintenance and electrical safety checks without obtaining the fully informed consent of landlords.

It is also alleged that the Foxtons has engaged contractors which charge as much as two or three times the market rate in breach of its duty to try to get a good deal for landlords. Of course, the more expensive the contractor, the more Foxtons makes in hidden commissions.

Solicitors are looking for other private landlords who have used Foxtons to let or manage their property and who have unknowingly paid commission charges.

Law firm Leigh Day is taking on the case on a no win no fee basis and is urging other affected landlords to get in touch.

Have you been hit by whopping commission charges like this? Let us know about your experiences in the comments box below.

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