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New Twist in Letting Agent Regulation Saga

April 16, 2013 | Landlord News  

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The lettings industry is to be a subject of discussion today in the House of Commons. The Coalition Government has until now stood firmly in opposition to letting agent regulation, but announced to MPs yesterday that they would be putting forward their own amendment.

The change of heart was revealed in a letter to Baroness Hayter from Lord Younger, a business minister, and Lady Hanham, a communities minister. It said, “Ensuring that landlords and tenants have access to redress, via an ombudsman, will not only provide an avenue for dealing with complaints when they arise but, in the case of those agents who do not currently offer redress, will act as a strong deterrent to providing unacceptable services and engaging in unlawful practices.”

They added, “Good quality management in the residential leasehold sector is important, where people’s homes are involved.”

The Enterprise and Regulatory Reform Bill proposed by Baroness Hayter would see letting agents regarded as estate agents, by law. However, the new amendment put forward by the Government would not amend the Estate Agents Act to include letting agents, although it does amend the enterprise bill to allow for a system of redress. If it passes today – and many fully expect that it will – it will mark the first time the lettings industry has been regulated in England and Wales.

Despite the new amendment falling well short of the measures outlined in her own proposal, Baroness Hayter was pleased with the development, saying, “This means landlords and tenants have somewhere to go with a complaint.”

Housing minister Mark Prisk said in a letter to MPs yesterday, “The Government considers that the majority of letting and managing agents provide a good service to their clients.” He goes on to acknowledge the unacceptable practices of a minority of agents.

He makes it clear that he is still not in favour of full regulation, preferring instead voluntary self-regulation, specifically mentioning the SAFEagent scheme. He said, “The Government does not consider that full regulation of letting agents, as proposed within Baroness Hayter’s amendment, provides the answer and is concerned that this could impose a significant regulatory burden which would ultimately be passed across to tenants and potentially reduce innovation and competition within the industry.”

Shadow housing minister Jack Dromney described this new development as a “victory”, although he would like for the government amendment to go further, to at least give the ombudsman the power to ban rogue agents.

Letting agent regulation has been supported by many industry bodies, consumer groups and politicians. It seems likely that the government amendment will just be a stepping stone to full regulation as long as popular support is maintained.

Jane Ingram, president of ARLA, saw the move as a “step forward”, saying, “As many as 40 per cent of letting agents are not members of a redress scheme so if this forces them to get membership then it is good news for the consumer.”

The British Property Federation also see it as a move in the right direction, but like Mr Dromney, would like to see further measures introduced. Ian Fletcher, policy director at the BPF said, “There are still issues on the table. We should not kid ourselves that this will expunge the sector of bad letting agents. For example, we will continue to campaign to have client money protection insurance extended so that money paid over by landlords and tenants is accounted for and not at risk.”

Peter Bolton King, global residential director at RICS, holds a similar view. He said, “The lettings market has for far too long been in danger of becoming the Wild West of property industry. While, clearly, there are good agents out there, the market has been dogged by poor practice and a lack of consumer protection.

“From now on, should a tenant or landlord experience problems due to poor service, they will be able to register their grievance with an independent redress scheme which, if appropriate, will investigate and award compensation.

“RICS has long called for regulation of the lettings industry, and this is a big step towards ensuring tenants and landlords are comprehensively protected.

“What we would now like to see is lettings and managing agents required to sign up to a professional regulation scheme that would ensure a better standard of professionalism right across the sector. We still think there is a very strong business case for better targeted regulation and we are working with Government to this effect.”

NALS chief executive Isobel Thompson said, “We welcome this common-sense approach to improving the consumer experience of renting and letting, and support the Government’s amendment as a considered measure.”

“We believe this is a sensible alternative to the heavy-handed bureaucracy of a formal regulatory regime which we believe would lead to increased rents for tenants and ultimately stifle entry into the market.

“NALS believes that the introduction of mandatory membership of an ombudsman scheme is the first step, and there is more industry organisations can achieve.

“We need to work collaboratively for the interest of the consumer on initiatives such as the SAFEagent campaign to raise awareness among consumers of the protection they are afforded by using an agent who is part of a Client Money Protection Scheme.

“We see SAFEagent as wholly complementary to the proposed amendment for the benefit of the consumer.

“We await the outcome of the debate in Parliament.”


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