And discovers anomalies amid company’s rental accounts

The Times recently conducted an undercover investigation into the Chiswick based estate agent Foxtons and discovered that a maintenance company that carried out work on hundreds of rental properties managed by the company reportedly forced them to pass on a 20% premium to cover commission that Foxtons charged them. The investigation reported that this additional charge was on top of a management fee of 17% for landlords for letting and overseeing the properties.

Foxtons are no strangers to controversy. Earlier this year Blue Peter’s Konnie Huq, who owns a number of buy-to-let properties in Chiswick, is reported to be furious after Foxtons demanded thousands of pounds for 'minor' repairs because the 'emergency' work on the flat was carried out without her prior consent. She has refused to pay the bill issued at the end of last year resulting in a summons to appear at Brentford Crown Court in July to face Foxtons. However both parties reached a confidential settilement the night before they were due to appear.

Foxtons, who reportedly manage more than 4,000 rental properties across London, was sold earlier this year netting its founder Jon Hunt an estimated £390m. But property-owners pay dearly according to documents shown to The Sunday Times by JDR Reactive, a firm that claims to have carried out repairs on 285 rented homes managed by Foxtons.

Shabir Rachyal, the owner of the firm, told the newspaper that the company regularly added 20% to the cost of parts and labour, as a matter of practice, before it issued invoices. This was to pay the commission that he says Foxtons expected on all work on properties it managed.

Rachyal claims he blew the whistle on Foxtons after more than 500 invoices, worth almost £100,000, remain unpaid by the agency even though payment had been taken from the client. He maintains that Foxtons knew his company’s bills were being inflated, and that the practice was discussed at a meeting with some of the agency’s executives.

During the investigation a private landlord claimed that he paid Foxtons for safety tests carried out by JDR Reactive at his house in 2004. “Job done from my point of view,” he said.

“Then, in the past few months, I received demands from JDR for payment. “It turned out that it had never seen a penny of the money I’d paid. Foxtons had kept money it had no right to for nearly three years.” The landlord only learnt what had happened when the contractor threatened legal action to recover the money directly from him.

Rachyal is now planning to sue Foxtons to recover the funds, and for damages, and is seeking a lawyer to take on the case on a no-win, no-fee basis.

Foxtons confirmed that it deducts a commission from fees due to contractors for giving them work on properties it manages. However, it insisted it was not aware that JDR Reactive had been inflating its prices to cover this fee, thereby passing the extra cost on to property owners.

The National Landlords Association (NLA), cautioned landlords to check that agents already charging management fees do not add a premium on top of the bills for work. “There is a bond of trust being broken when agents take these extra fees,” said Chris Norris, an NLA policy officer. “Landlords entrust their property to an agent because they want an arm’s-length relationship, or they are abroad. We hear about this regularly on an anecdotal basis with a number of managing agents.”

October 24, 2007