Foxtons, the London estate agency whose fleet of liveried Minis were synonymous with the property boom, has breached its banking covenants and its UK private equity backer has ruled out a bailout of the business.

BC Partners, Foxtons's owner, has conceded that its decision to buy the company from Jon Hunt, the property magnate, for £360 million just before the credit crunch hit was a mistake.

It said yesterday that Foxtons breached performance terms set by its lenders, Bank of America and the Japanese bank Mizuho, last month, adding that it would not put more cash into the business unless lenders agreed to write off some of their £260 million debt.

Andrew Newington, a BC partner, said: “As housing markets fall, so do estate agents, so we got that wrong. In hindsight, we made the wrong assessment of the market,” he said.

Foxtons' fate is in the hands of its banks. BC Partners will continue to manage the estate agency until the banks decide whether to take control. So far Bank of America and Mizuho have shown little appetite to do so.

“If we are lucky enough to see a recovery in the London property market, this business will come roaring back,” Mr Newington said.

However, it has also emerged Mr Hunt, Britain's richest estate agent, was less fortunate than it first appeared when he pocketed £360 million for Foxtons in July 2007. Mr Hunt lent BC Partners about £50 million to buy Foxtons from him, which will not now have to be repaid because Foxtons has not performed as well as Mr Hunt predicted. Mr Hunt, who founded the business in 1981, was paid £7.5 million in dividends in the last two years he owned the business.

The estate agent was at the centre of allegations of sharp practices aired two years ago. In a documentary the BBC alleged that Foxtons agents lied to buyers to inflate prices and faked signatures on landlords' contracts. The company denied the allegations and has since implemented a new training regime. Foxtons' US arm, which was not bought by BC Partners, went into Chapter 11 bankruptcy protection last year and Mr Hunt was forced to shed hundreds of staff.

BC Partners emphasised that Foxtons accounted for a small part of its portfolio, most of which is performing well. It invested only £50 million of a €5.9 billion fund in Foxtons. “Our investors are frustrated that Foxtons attracts as much attention as it does,” Mr Newington said.

BC Partners also said that Dometic, its Swedish portfolio company that manufactures fittings for luxury boats, is set to breach its banking covenants. BC said it expects to start negotiations with Dometic's banks soon.