It is one of Britain’s highest-profile and most successful estate agents. But Foxtons is facing allegations from disgruntled clients that it may have caused repair bills to be artificially inflated on rental properties it manages.

A maintenance company that carried out work on hundreds of properties handled by Foxtons claims the agency has obliged it to pass on a 20% premium to cover commission that Foxtons charged it. This is on top of a management fee of 17% for landlords for letting and overseeing the properties.

Scores of private landlords have been affected by the practice — among them Paul Webster, the producer of films such as Pride and Prejudice and Atonement. Others include a trainee doctor, lawyers living in Hong Kong and Moscow, a banker in New York and a barrister in London.

“I didn’t know they charged the contractor 20% commission , but it doesn’t surprise me,” said Nick Grundy, a trainee doctor, who let out a four-bedroom house in Finsbury Park, north London, through the agency. “It’s pretty despicable, particularly given what Foxtons say about being on your side when they ask to rent the property. I will never use them again.”

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BACKGROUND

• Estate agents under fire

• Police investigate estate agent over board wars

• Loveable rogues?

• Foxtons faces allegations of inflating bills on rental properties

Foxtons manages more than 4,000 rental properties in London and Surrey as part of a business that this year netted Jon Hunt, its founder, an estimated £390m when he sold his 97% stake to BC Capital, a private equity firm. As part of its service, the agency deals with repairs and other problems that arise with its clients’ properties.

But property-owners can pay dearly for this service, 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, said it 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 came forward, he said, because the agency failed to pay his firm for more than £100,000 worth of work — which, he claimed, brought him close to financial collapse.

Foxtons’ own records show that between January and August this year, it paid JDR Reactive £8,800.64 for 76 repairs and safety tests on properties it managed across London. The same records show its clients paid £11,307.63 for the work — with the difference going to Foxtons.

Rachyal insists 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. In a signed witness statement, he said: “When I purchased the business [JDR] in September 2006, the previous owner told me this arrangement was normal practice with Foxtons.

“In November 2006, this was confirmed when I had a meeting with some of Foxtons’ managers. We discussed how we charged the customers £65 for the first hour of labour and only got paid £52, so they knew we were adding to our bills to account for their commission.

“If the cost of the work is £100 for parts and labour, we have to invoice £120 because we know that Foxtons will take 20%,” Rachyal added. “Otherwise we are paying their commission out of our own pocket.”

Foxtons is also accused by JDR Reactive of regularly failing to pay for work it (JDR) has carried out, even though payment has been taken from clients.

Grundy, for example, said 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.”

Grundy only learnt what had happened when the contractor threatened legal action to recover the money directly from him.

JDR Reactive has compiled a dossier detailing similar cases. Mrs Brihi, the landlady of a flat in Belgravia, for example, paid £246.75 in June for work carried out in 2002. “This amount was paid to Foxtons and should have been passed to you by them at that time,” she told it.

Rachyal’s firm also chased a British lawyer, now based in Hong Kong, for a £200.40 repair bill on his two-bedroom flat in King’s Cross. “I recall that Foxtons said they had paid this bill,” said the lawyer, who declined to be named. “But we have received three letters since then demanding payment from JDR. I know receiving payment is important for a small business, so I paid them. We sacked Foxtons in 2004 because of the way they managed our property.”

Webster, whose film career stretches back more than 20 years, is reserving his right to take Foxtons to court in a final effort to recoup money he believes the agency has wrongly deducted from his rental income on a two-bedroom flat in Hampstead.

During filming for Atonement, JDR Reactive demanded payment from Webster of £120.44 for a gas-appliance survey it had carried out at the flat. He had never heard of the firm. Foxtons had been holding a £600 “float” from his rental income for nearly a year, for the purpose of paying such bills, but JDR had never been paid out of it.

Webster felt sorry for the contractor and decided to pay its bill before launching an attempt to get his money back from Foxtons. “I will spend whatever it takes,” he said. “It’s a matter of principle now. It seems to be normal practice to withhold money.”

After JDR Reactive and Webster chased Foxtons last month, it released the float — minus the £120.44 Webster has already paid the contractor and another amount for fixing a hob leak.

Rachyal claims more than 500 invoices, worth almost £100,000, remain unpaid by Foxtons.

He also alleges that the agency told several clients for whom he did work that their bills had been settled, although he had not received payment.

He is 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 last week 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.

“All approved contractors pay Foxtons an agreed percentage for referring works to them,” said Karl Daly, senior legal counsel at the agency. “For JDR Reactive, this rate was 20%. In accordance with the contract, Foxtons was entitled to commission out of — and not in addition to — the amount of each invoice. Therefore JDR pays this 20% and not the landlord. If this was JDR’s business practice, it was dishonest.”

Foxtons blamed the lack of payments to the electrical contractor on the latter’s “poor accounting systems” and said any money owed will be paid. It said it is processing the missing invoices and estimates it will question details of half of them.

Some landlords are unhappy that such commission payments — which could mean they are paying over the odds for repairs — are not laid out more clearly in Foxtons’s management-agreement terms and conditions. They are also uneasy about extra charges buried in the small print of the agency’s agreement. An “administration charge” of 10% of the cost of works, for example, is levied on repairs and maintenance costing more than £500. The agency also adds £45 to the cost of safety inspections for gas and electrical appliances if it arranges them.

The National Landlords Association (NLA), which represents private-sector residential landlords in the UK, warned landlords to check that agents already charging management fees do not add a premium on top of the bills for work — which means owners are effectively paying twice for the same service.

“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.”

Foxtons, which has 20 offices in London and Surrey, and employs 1,300 staff, many of whom travel about in Minis customised with its green-and-yellow corporate colours, is no stranger to controversy. In 2003, it faced a Scotland Yard inquiry after admitting authorising the removal of “for sale” signs posted by its rivals.

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