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18 June 2015

The potential “hidden” costs of property rentals

News that dozens of landlords may be set to pursue a claim against estate and letting agent Foxtons has prompted a warning to Buckinghamshire landlords and tenants from an experienced property litigation lawyer.

Sarah McLoughlin, senior associate at Gerrards Cross-based law firm B P Collins LLP, says the potential case is a reminder to both parties to check the small print in their contracts and, if necessary take legal advice before signing on the dotted line.

Earlier this month, it was reported that law lecturer and landlord Dr Chris Townley was charged £616 to install a security light at a house he rented out through Foxtons. The sub-contractor revealed it had charged £412.50 for the work, after which Foxtons added £137.50 commission, plus an ad hoc management charge of 10 per cent, plus VAT.

Dr Townley launched a legal action claiming the “hidden commission” was not covered in the landlord’s contract and when the story was featured in the national press, many more landlords came forward. These included journalist and former Watchdog presenter Lynn Faulds Wood, who claimed Foxtons had tried to charge her and her husband John Stapleton £2,000 to mend a leaky shower, which the couple’s own plumber fixed for under £400.

The lawyers handling the potential legal action say that if all Foxtons landlords join a potential group legal action, the agent could face a legal bill of up to £42 million.

With the buy-to-let market booming across the county, B P Collins acts for both landlords and tenants, and Sarah says the key for all parties involved is transparency and simplicity of all charges involved.

“Our advice is two-fold. Landlords should make sure that when they engage a letting agent, they know what they are signing up for. That means reading all the terms and conditions in the documentation carefully and, if anything isn’t clear, talk to a lawyer for advice,” she said.

“For tenants, one of the key issues is to make sure that the landlord isn’t allowed to pass the cost of repairs on. There may be occasions when this is possible, for example if, through a tenant’s actions, damage was caused to the property.”

In the Faulds Wood case, Foxtons apparently claimed the higher cost of repairing the shower was because it was using a preferred supplier who had been vetted by them.

Sarah warns that such practice can be commonplace and says contracts can include additional ad hoc management charges to cover arranging for the work to be completed.

The alternative, she says, is for property owners to manage the letting process themselves, but she warns that while this can be cheaper, it can also be a time consuming and complex role to take on.

“Agents ought to be earning their income from the management fees for the rental itself, not from adding additional fees and commissions on service charges, so it’s really important to check the small print,” she said.

“When work is needed on a property, the letting agent should make sure it is carried out as cost effectively as possible for the benefit of both the landlord and the tenant.

“We would certainly recommend having an experienced lawyer check contracts for hidden charges, not to do so may well prove a false economy.”

For residential property litigation advice, contact Sarah McLoughlin on 01753 279035 or email sarah.mcloughlin@bpcollins.co.uk.

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