Tuesday, 10 December 2013

Foxtons’s trousers part company with its mouth

When I posted "Will civil claims bankrupt Foxtons, Countrywide and LSL?" on 29th October, Foxtons studiously ignored it and did nothing. A month later Dan McCrum of the FT's Alphaville site approached Foxtons for comment. Then its words and actions diverged.

Foxtons told Dan McCrum on Friday, 29th November, that it, and the rest of the industry, had dismissed all my blog as highly misleading and fundamentally misconceived, and said, "Foxtons is comfortable that it complies with all current relevant consumer regulation and that its fees are clear to consumers". But, by Monday, it had made radical changes to its “award-winning” website to make it significantly more compliant with its legal obligations to consumer tenants, and with the Office of Fair Trading's draft guidance to lettings "professionals". These changes included advertising the “administrative fee” charged to tenants alongside rent, providing a one click link to an explanation of other fees, and quoting all its tenants’ fees inclusive of VAT.

Foxtons has since amended its terms and condition for landlords to include VAT and it has removed its misleading “free advice” advertisement for mortgages.

Since it seems to recognise the need to quote consumer prices inclusive of VAT, it might now even quote its sales commissions to sellers inclusive of VAT, i.e. 3% rather than “2.5% plus VAT”, but this needs to be tested by someone willing to invite a Foxtons agent into his home.

Multi-brand agency, LSL, has made some effort to improve its compliance, but, inexplicably, multi-brand agency, Countrywide, seems to have made no effort whatsoever. After six weeks, the Property Ombudsman still hasn't bothered to correct the mistakes in his codes of practice.

Amazingly it is possible that Foxtons, long regarded as almost comically unethical, is now the most legally compliant agency in the industry. However it has much further to go to achieve lawful price transparency, and it has not addressed some of the misleading practices I highlighted in my original post. For example, its landlord examples remain misleading, its mortgage broking fees are substantially hidden, and it continues to charge some fees that the OFT says, in its recent draft guidance, are probably unlawful.

It now remains to be seen whether Foxtons will be able to maintain fees which are, for no particular reason, enormous. These include, for example, the £840 that it charges tenant and landlord together when a tenancy is agreed, and its 3% sole agency sales commission (i.e. £30,000 for a £1m house). I think these fees will prove ludicrously uncompetitive in a price-transparent market-place, in which case its fees will drop significantly and its profit margins will drop even faster.

Agents all remain at risk of civil claims for fifteen years of charges improperly disclosed to consumers.

Monday, 25 November 2013

An open letter to estate and lettings agents

You, your agency, and most lettings and estate agents are misleading consumers in criminal breach of the Consumer Protection from Unfair Trading Regulations so you risk being fined or imprisoned. You probably regard the risk as small because all your colleagues and competitors have been doing the same thing for years and regulatory enforcement by the OFT, trading standards departments and other regulators has been very feeble.  However, you and your agency face other large risks: accumulated civil liabilities, and prosecution for failing to provide for significant liabilities and for failing to disclose them to your auditors or to your professional negligence or legal costs insurers.

Wednesday, 13 November 2013

Update 2 on estate agencies' misleading practices

This is an update on Will civil claim bankrupt Foxtons, Countrywide and LSL? published on 29th October 2013.

Saturday, 2 November 2013

Update 1: Most estate agents have not complied with the ASA's adjudication

This is an update to my first post Will civil claims bankrupt Foxtons, Countrywide and LSL?.

Foxtons, Countrywide and LSL have failed to comply with the Advertising Standards Authority's adjudication about the transparent disclosure of tenants' fees.

Tuesday, 29 October 2013

Will civil claims bankrupt Foxtons, Countrywide and LSL?

The British Government is focussing regulatory efforts on estate agents and their chronic and extensive criminal non-compliance with consumer protection regulations. More aggressive regulatory activity is likely to provoke civil claims for conduct dating back as far as 1998. The majority of long-established residential estate agencies in the UK, including Foxtons (FOXT.L), Countrywide (CWD.L) and LSL Property Services (LSL.L), are exposed to the risk of claims which could, in total, far exceed their net assets.