Thousands of buy-to-let landlords could be in line to claim millions back from estate agents as a result of a landmark High Court ruling yesterday against Foxtons.

Mr Justice Mann ruled that leasing agreements made by Foxtons, which operates mainly in London, unfairly overcharged commission to landlords. The Judge described Foxtons’ agreements as traps and timebombs.

Foxtons, which lets some of the most expensive property in Central London, charged customers 11 per cent commission when a tenant continued to occupy the property for longer than the initial term of the lease, and an additional 2.5 per cent commission payment if a tenant agreed to buy the property from the owner.

Foxtons was among many letting agents in London and the South East to run these agreements. As a result of the court ruling, landlords across the country can now issue proceedings to recover overpaid charges for the past 14 years on existing contracts.

A landlord renting out a typical two-bedroom property costing £15,000 a year would have paid Foxtons about £1,650 a year in commission. Over 14 years on an existing agreement this would entitle the landlord to reclaim an estimated £23,100.

Britain has 1.15 million buy-to-let landlords and, given that many of the UK’s 15,000 letting agents impose similar charges to Foxtons, the ruling could give rise to total claims across the industry of £26 million.

The National Landlords Association (NLA) hailed the decision as a victory.

Foxtons said last night that it had voluntarily reduced its renewal commission charges for all customers but declined to say by how much.

Michael Brown, the chief executive of Foxtons, said: “Today’s ruling brings clarity to an area which has been under dispute and which has created uncertainty for us and our whole industry.”

Mr Justice Mann accepted the Office of Fair Trading’s contention that all of Foxtons practices brought before the court were unfair. These include requiring a landlord to pay substantial sums in commission where a tenant continues to occupy the property after the lease expires, requiring a landlord to pay commission to Foxtons even after it had sold the property and allowing Foxtons to receive a full estate agent’s commission for sale of the property to a tenant.

Konnie Huq, the former Blue Peter presenter, who let properties through Foxtons and became the public face of a campaign against the agent, said that the ruling was “a great day for landlords”. She said: “Foxtons’ terms and conditions are totally unfair. They are earning money for nothing.”

Mr Justice Mann found that the terms were not fair because they disadvantaged customers and were not prominently disclosed. It is still possible for letting agents to charge renewal commissions, but not set them out as Foxtons and others had done. The NLA said that, now that these terms must be prominently laid out, no landlord would sign up to them.

John Spence, of Thomson Snell & Passmore, which represents landlords and lettings agents, said: “Private landlords who are in existing letting agreements with agents who are charging substantial renewal commissions similar to those used by Foxtons have a strong prospect of being able to successfully recover commissions they have paid to their agents.”

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