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ARLA Proposes Mandatory Regulation of Residential Property Sector

March 27, 2013 | Company News  

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With the massive growth of the private rented sector and the shrinking number of home owners, ARLA believe that now is the time for all landlords and all types of agents to be regulated. They say that it is necessary, not only to ensure consumer protection, but also to heal the negative public perception of letting agents.

ARLA has laid out in detail exactly why they believe regulation is necessary, regarding with incredulity the fact that the energy industry is regulated, but the lettings industry is not. People, they say, spend more on gas than they do on rent.

A document released by ARLA says, “The majority of letting agents are professionals, working in the interests of their clients and consumers. However, the sector is tarnished by the conduct of a minority of agents who fail to adhere to basic standards.

“Failure to protect client money, mis-advertising of properties, failure to properly maintain leased accommodation and provide a safe environment for tenants – all these issues must be addressed.”

It goes on to say that “the best way to tackle rogue agents and promote professionalism and basic standards in the letting sector is to introduce a system of mandatory regulation for those working in the letting, sales and management of property.”

 

They refer to their own licensing scheme for members, which they believe provides the most protection to consumers. But there are still many letting agents operating in the sector that are doing so without membership to any of the voluntary regulation schemes. Part of the problem, the document highlights, is that the rapid growth of the industry has led to a parallel growth of regulatory bodies and schemes operating within it, the complexity of which has made it difficult for consumers understand. As a natural consequence, consumer decisions have become less well-informed, therefore resulting in greater consumer vulnerability.

The solution, ARLA believes, is to establish a system whereby a single industry regulator would oversee and audit “accredited” industry bodies across lettings, sales, management and landlord sectors. All letting agents and landlord would be bound by law to belong to one of the accredited bodies. Each of these accredited bodies would run their own licensing schemes, except for the landlord bodies, which would operate registers of landlords.

Licensing for letting agents would be based on qualifications, provision of client money protection, holding of professional indemnity insurance, external auditing of client accounts, and a code of practice.

Landlord bodies would operate more simply, merely promoting best practice along with operating registers. The landlord bodies would be held accountable by the industry regulator. All landlords would be required to register in order to let property.

The big question is, who would take the role of industry regulator? ARLA suggests The Property Ombudsman would be the most appropriate choice. However, Ombudsman Christopher Hamer has remained insistent that it is not his duty to regulate the industry, but to run a redress scheme. This leaves the question unanswered, for now.

It has been proposed that only one government department should ultimately shoulder the responsibility for the property sector. The department ARLA believes to be most appropriate is the Department for Local Communities and Local Government.

The chairman of the Residential Landlords Association, Alan Ward, supports the proposal of mandatory regulation for agents, but believes that there needs to be a clear and fair distinction between commercial letting agents and landlords who manage a few other properties in addition to their own portfolios. He said, “They may develop into commercial letting agents, but to make their operation illegal would be to stifle the development of small business.

“The report also refers to the regulation of landlords – on which it is very loose.

“Proper accreditation is required with standards for property and management – but this would only be acceptable if the system operated like building control, where independent approved inspectors (operating, for example, like FENSA and Gas Safe competent persons) are able to certify, which would allow councils to focus on enforcement.”

 

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