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“Administration fees”

Camden Council has successfully appealed against Foxton’s description of their agency fee in their lettings literature. Foxtons have been ordered to pay a penalty charge of £18,000.

Background to case

In 2015, the Council’s Trading Standards team undertook enforcement action after establishing that Foxtons was charging an administration fee of £420 for tenants and landlords.

The Council advised Foxtons that they needed to provide users with a breakdown of any fees which would allow them to clearly see what services they were paying for under the Consumer Rights Act 2015. However, Foxtons continued to use the term without undertaking this clarification.

Consequently, in early 2016 the Council’s Trading Standards team issued four ‘Notices of Intent’, for the maximum penalty of £5,000, to each branch of Foxtons located in the borough, as well as their website, for using the term without the required clarification.

Foxtons responded that they had modified their literature to explain that administration fees “can cover” certain services, including examples, but did not explicitly state a full breakdown of the fee on the basis that it covered a range of services which would vary from applicant to applicant. The Council considered that this did not provide sufficient clarity and issued four Final Penalty Charge notices in April 2016.

Foxtons appealed those notices to the First Tier Tribunal in October 2016. The judge stated that Foxtons were wrong to state, “administration fees £420” when enforcement action first began. They however decided that by the time the council served its final notices, Foxtons had revised their literature to explain a number of the services provided, and the fees therefore did not breach the law, consequently reducing each penalty charge notice for the initial breach to £3,000. This was on the basis that the applicant could see what was covered by other fees and therefore, by a process of elimination, could discern what the letting fee covered.

Upper Tribunal decision

The Council appealed the decision in the Upper Tier Tribunal in June 2017 on the basis that “administration fees” still did not give an adequate description for the services provided, and considered that by stating the “administration fee can cover…” it lacked the detail required to allow those using the service to know exactly what they were paying for.

The Upper Tribunal allowed the use of the words “administration fee”. However, it agreed with the Council’s argument and stated that the First Tier Tribunal had failed to consider what services the administration fee might not cover and revised the penalty charge notices to £4,500 for each breach, totalling £18,000. A £500 reduction on each fine was granted in recognition of Foxton’s attempt to amend their literature to comply with the Consumer Rights Act 2015.

The MP for housing in Camden, Pat Callaghan, said: “We are delighted with this judgment as it has clarified what letting agents must do when publicising their fees…..customers can now fully understand what they are liable for and make informed choices and proper comparisons with other letting agents about the fees charged.

“This judgment also gives clarity to Trading Standards officers nationally when enforcing fees and by assisting to ensure the market place is consistent for all letting agents and their prospective clients”.

Comment

The Upper Tribunal has clarified that there is nothing wrong with using the phrase “administration fee”. However, the description that goes with it must be clear and give a full list of fees payable. Where some of those fees will not apply to certain applicants that should also be clear and where a fee contains a range of work and sets a maximum cap then it should also be clear that the fee represents the maximum sum that will be payable.

Where agents are considering amending their list of fees following this decision we strongly recommend that they seek legal advice and do not rely on this post to guide them on what to do next.

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