An independent regulator and a code of practice are to be introduced in England for letting and managing agents in the private rented and leasehold sectors.
The Ministry of Housing, Communities and Local Government says that the crackdown on rogue agents means that tenants will benefit from stronger protection and leaseholders will be able to challenge unfair fees and service charges.
Housing Minister Heather Wheeler said that thousands of renters and leaseholders suffer at the hands of rogue agents every day from unexpected costs, deliberately vague bills or poor quality repairs.
To combat this a new mandatory code of practice is proposed to stop managing and letting agents from flouting the law and to further professionalise both sectors, letting and managing agents will be required to obtain a nationally recognised qualification to practice, with at least one person in every organisation required to have a higher qualification.
A new independent regulator responsible for working practices of agents will be given strong powers of enforcement for those who break the rules and agents who fail to comply will not be permitted to trade. Criminal sanctions could also be brought in for those who severely breach the code.
‘Most property agents take a thorough and professional approach when carrying out their business, but sadly some do not. By introducing new standards for the sector, we will clamp down on the small minority of agents who abuse the system so we can better protect tenants and leaseholders who find themselves at the end of a raw deal,’ said Wheeler.
Other proposals to be brought in under the code include a new system to help leaseholders challenge unfair fees including service charges, support for leaseholders to switch their managing agents where they perform poorly or break the terms of their contract and a requirement for all letting and managing agents to undertake continuing professional development and training.
The new code will be developed by a working group comprising representatives of letting, managing and estate agents, as well as tenants and regulation experts. Wheeler said that the group will be established as soon as possible and is expected to draw up the final proposals in early 2019.
The group will also look in greater depth at unfair additional charges for freehold and leaseholders and whether they should be capped or banned. This includes the use of restrictive covenants, leasehold restrictions and administration charges.
The Government has also published its response to its consultation on the introduction of mandatory Client Money Protection schemes for letting agents, with legislation to be brought forward to introduce privately led schemes and civil penalties of up to £30,000 for agents who fail to comply with the scheme.
According to industry estimates, £2.7 billion in client funds is held by letting agents at any one time. Ministers believe that making this scheme mandatory is vital to ensure every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve, and will mean they are reimbursed if their letting agent is fraudulent or goes bankrupt.
The news has been welcomed by the industry. ‘Tenants have little choice over which agent they deal with as they often choose a property first and then have to use the agent which is managing it,’ said Gerry Fitzjohn, chairman of the Property Ombudsman.
‘These reforms however, will create a level playing field for consumers who will finally be able to expect a consistent level of service and knowledge, regardless of which agent they choose. This will also help consumers feel more empowered to raise concerns if necessary,’ he explained.
‘We also welcome the news that civil penalties will be introduced for those that fail to comply with Client Money Protection. The requirement to share data across providers, redress schemes and local authorities to ensure compliance will help with enforcement and protect consumers,’ he added.
