London estate agent Foxtons could soon face a huge legal bill of up to £42m after it charged a landlord £616 for changing a light fitting.
This could be the most expensive light replacement ever, which could lead to the stock market listed agent being sued by thousands of landlords.
Foxtons used a subcontractor, Maintenance1st, to conduct the work at Dr Chris Townley’s rental property. He was billed £550 plus £66 VAT, but later discovered that Maintenance1st had charged much less.
Dr Townley is a law lecturer at King’s College London and signed up to Foxtons to let and manage his London investment in 2011.
In 2013, he received a bill for the repair but demanded a refund after finding that the work was substandard. Maintenance1st disputed this and did not offer a refund.
Foxtons then grudgingly put Dr Townley in touch with Maintenance1st, which revealed that its charge was £412.50.
When Dr Townley challenged the agent on the price difference, it admitted to adding £137.50 commission, 33% of the subcontractor’s charge. Dr Townley then found out that Maintenance1st had paid Foxtons an undisclosed commission for carrying out the work.
Furthermore, Foxtons charged Dr Townley an ad hoc management charge of 10% + VAT, as the invoice was over £500. However, the bill only exceeded this amount because of Foxtons’ 33% fee.
In total, Dr Townley paid Foxtons £203 in fees, a 49% mark-up on the original £412.50 bill.
Leigh Day solicitors has sent Foxtons a letter of claim, which is served before legal proceedings. The claim states that the hidden commission was not covered in Dr Townley’s contract.
The firm believes that thousands of other landlords will also be entitled to compensation from Foxtons, with the claims reaching £42m.
Dr Townley comments: “When I first heard there was a commission I was not happy, but thought it may be 2% or 3%. When I found out the real amount I thought it was shocking.”1
Solicitors think Foxtons is wrong for failing to declare a conflict of interest, as it receives commission from contractors as well as from landlords. Foxtons says its charges are clear and Maintenance1st is not involved in the legal dispute.