The Office of Fair Trading v Foxtons Ltd

Under the Unfair Terms in Consumer Contracts Regulations 1999, the fairness exclusion for the main subject matter or price applies only to the core bargain, assessed substantively and from the perspective of the typical consumer. A term must also be expressed in plain and intelligible language, including its practical effect. Renewal commission was not part of the core bargain on the contractual presentation in issue. It was insufficiently transparent and caused a significant imbalance contrary to good faith. The obligation was therefore subject to fairness review and was unfair. A commission payable on a later sale of the property to the tenant was likewise unfair because it imposed a substantial liability unrelated to the letting services and contrary to ordinary consumer expectations.

The Office of Fair Trading sought declarations and possible injunctive relief concerning standard-form letting agreements used by Foxtons with consumer landlords. The old terms provided for renewal commission, commission on renewals involving connected persons, commission after a sale of the property to a tenant, and continuing liability after a sale of the landlord’s interest. Foxtons introduced new terms before the hearing, removing the sales provisions but retaining renewal commission in less explicit wording.

The issues were whether the commission provisions fell within the Regulation 6(2) exclusion, whether they were expressed in plain and intelligible language, and, if subject to review, whether they were unfair under the Regulations.

1. Core bargain. The Regulation 6(2) exclusion concerns the substance of the core bargain, not merely the supplier’s description of its pricing. The court must consider what both supplier and typical consumer would regard as central. Renewal commission was not part of the core bargain under either the old or new terms. The contractual presentation focused on finding and initially letting the property, while renewal was future, uncertain, insufficiently highlighted and involved limited additional services. The conclusion was fact-sensitive and did not establish that renewal commission could never form part of a core bargain.
2. Plain and intelligible language. The requirement extends beyond comprehensible words to the consumer’s understanding of the term’s effect. In the old terms, “associated” and “connected” persons were too vague to explain the scope of the renewal obligation. In the new terms, “nominee” was materially ambiguous and the obligation to pay renewal commission was buried in provisions which did not refer expressly to renewal. The obligation therefore remained subject to fairness review.
3. Fairness. Applying the statutory test of significant imbalance, detriment and good faith, and having regard to the circumstances and the contract as a whole, the renewal commission was unfair. It imposed substantial and potentially indefinite charges, even where Foxtons provided little continuing service or another agent acted. The obligation was not sufficiently prominent and would surprise the typical consumer. The new terms made the unfairness clearer because they removed the express reference to renewal.
4. Other provisions. The third-party renewal provision was, at least, as unfair as the general renewal obligation. The sales commission provision was also unfair. It imposed a potentially large charge where Foxtons had played no material part in the sale, was payable on exchange before receipt of sale proceeds, and would astonish a consumer engaging a letting agent.
5. All relevant provisions were declared unfair. The parties were to address the form of relief at a further hearing if necessary.

First instance decision. The judgment does not state any prior appellate history.