Foxtons’ share prices dipped 4% yesterday on news that a legal firm is attempting to bring a group claim against it on behalf of private landlords.
If successful, the group action could reportedly cost Foxtons £42m.
If other agents charging similar fees are dragged into the dispute, it is thought compensation payments could top £100m.
Meanwhile the landlord at the heart of the case, Dr Chris Townley, has said that Foxtons “tried to rip off the wrong guy”.
Townley, 44, is a lecturer in competition law at King’s College London, who previously worked as a principal case officer at the OFT.
He is seeking £14,000 in compensation for “inflated costs for work” done over the two and a half years he rented out his property through Foxtons.
He cites a repair bill of £412.50 that he claims was marked up by almost 50% to £616.
Townley said: “Foxtons were very dismissive when I first went to them saying the charges were unfair.
“Being a lawyer has helped. It gave me confidence. It meant they couldn’t pull the wool over my eyes. With my legal team, they have messed with the wrong guys.
“Who knows how many people will join the action. If a lot do, though, it could really revolutionise the rental market.
“I’m a simple guy. I’m not a hero by doing this: they ripped me off and I just want my money back.
“I hope other landlords join, and together we can form a powerful case.”
His legal firm Leigh Day alleges that Foxtons has been charging landlords hidden commissions.
Solicitor Chris Haan said: “These kind of practices may be widespread in the lettings industry and it needs to stop.”
He added: “It’s a very significant case and there are potentially thousands of claimants out there.
“The case could significantly change what charges estate agents bring to landlords in the future.”
A spokesperson for Foxtons said: “We are incredibly disappointed to hear when any customer is dissatisfied with the service they have received. However, as a legal dispute we are not in a position to comment on the specifics of this case.
“We are satisfied though that our fees are clearly laid out within our terms and conditions and that approvals are obtained from our landlords before works commence on their property.
“As part of our managed service to our landlords we arrange for maintenance works to be carried out on their behalf from a panel of carefully vetted and trusted contractors.
“Due to the volume of work we provide we are able to achieve discounted rates offering competitive value with the benefit of efficiency, availability and quality of work that many landlords would not be able to achieve on their own.”