Court rules on unfair management contracts

The High Court has recently ruled that some property management contracts may be unfair and so unenforceable.

Recently, the High Court ruled against Foxtons estate agents saying that some of the terms contained in the contracts they had with landlords were unfair. The contracts contained small print that required the landlords to pay large amounts of commission when a tenancy renewed or the property was sold.

The Court found that these terms were buried in the small print and written in a way which made them very difficult to understand therefore in breach of the Unfair Contract Terms in Consumer Contracts Regulations. It was found that the commission charges were excessive and had no time limits on them, leading the judge to call them a “time bomb”

This case has underlined the fact that any onerous terms need to be written in plain and intelligible language. It is also important that these terms are bought to the landlord’s attention. The judge has, however, made it clear that he did not consider the commission itself to be unfair in all cases but rather it was a problem with the way the contract was written.

So what’s the advice?

This case is not a major departure from the position before but it does serve to underline the principle that people should not try to bury terms in the small print. If in doubt it is important to take advice from the solicitor so they can consider the contract in light of this case.

What does this mean for your Professional Indemnity Insurance?

If you deal with tenancy contracts then it is possible that there will be an increase in claims that they are unfair. It is important that if landlords or tenants do raise the issue of fairness in the contract that you contact the Centor Claims Department as soon as possible.

An accusation that the contract is unfair, even if you believe it is not, is a circumstance that your insurers will need to be notified about. If in doubt please contact us to discuss it.