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Christmas comes early for buy to let landlords

A court ruling today has breathed new life into the buy to let sector and opened up the potential for compensation claims which could top £20 million. The case against Foxtons, the well-known London letting agency, resulted in Mr Justice Mann ruling that the company overcharged commission to landlords. Indeed the judge went on to describe Foxtons agreements as "traps and timebombs" which could prove very costly in the future.

The company had a number of commission charges in place which included 11% commission when a tenant occupied a properly for longer than the initial lease and a 2.5% commission if a tenant acquired the company from the owner. As a result of the ruling, buy to let landlords will be able to reclaim excessive commission charges going back 14 years on existing contracts. To put this into context, a two-bedroom property costing £15,000 a year to rent would have seen Foxtons receive £1,650 a year in commission. Under the terms of the judgement the landlord would be able to reclaim around £23,000.

When you consider that many other letting agencies use similar commission scales to Foxtons then the 1 million buy to let landlords in the UK could be able to reclaim around £20 million in total. For many buy to let landlords struggling amidst the ongoing recession this could not have come at a better time.

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