Regulating the agents

Landlords are understandably relieved that the changes proposed for the private rental sector have been dropped by the Coalition Government. 

No more ridiculous landlords licence!

However part of the proposals by the previous Labour administration was to regulate letting agents.

Many landlords and tenants organisations welcomed the move to a more regulated model for the lettings industry. 

A recent survey by the Young Group found that eight out of ten landlords believe the residential property sector should be regulated in some way.  Almost all landlords polled (93%) believe that estate agents and letting agents should be regulated, with 86% wanting regulation to extend beyond businesses to individual agents.

Letting and Buy-to-let expert David Lawrenson also urged the government to reconsider dropping efforts to regulate the letting agents:

“More regulation of letting agencies is needed, especially in relation to making sure tenants deposits are always duly protected in tenancy deposit schemes (and not used as working capital) and ensuring all letting agents provide an acceptable standard of service to both tenants and landlords.”

Many landlords consider letting agents to be a rip off.

The current situation

Under existing laws anybody can set up as a letting agency, regardless of experience or qualifications.

Hugh Dunsmore-Hardy of estate agency Winkworth Franchising Ltd points out, ‘estate agents are subject to statutory regulation and are required to provide routes to independent redress, whereas letting agents are not subject to such regulation.  Yet they have far greater access to clients’ monies which remain unprotected.’

Under the current laissez faire environment it’s not a surprise that there are rogue operators out there in the letting agency world.  The existence of these ‘cowboys’ is not only bad for the landlords and tenants that fall victim to them but also for the reputation of the letting industry as a whole, whose reputation becomes tarnished.

Although no mandatory scheme exists; there are voluntary schemes and organisations that letting agents can sign up for.  One such organisation is the Association of Residential Letting Agents or ARLA. 

Membership of such a scheme provides landlords some protection against the conduct of the rogue letting agent and some recourse should things go wrong.  For those landlords using ARLA members; this gives them the assurance that any client monies are fully protected by a bonded scheme.  This means that should the letting agent go bust; the landlords and tenants monies are protected.  ARLA members are also subject to a code of practice and requirement that at least one member of staff has a suitable residential lettings qualification.

Many complaints against letting agents revolve around sharp practices where landlords and tenants believe that they are being charged excessive fees for letting related products such as gas safety checks (GSC), EPCs, inventories, check outs & check ins.

My accountant recently revealed that his letting agent was trying to charge him £150 for an EPC.

Outrageous!

Regulation of letting agents

The previous government proposed that all letting agents would have to be a member of a national regulatory body before they could trade.

This proposal was one of the main recommendations of a study carried out by Professor Rudd in her 2 year investigation into the letting industry.

However, despite these proposals no real detail was ever worked up by the Labour Government.  The reality is that any regulation would more than likely have to be self financing.  This meant that any charges or costs would be passed on to the letting agents.  The result of this would be likely to make it uneconomic for many of the smaller agents to practice; reducing competition and driving up charges.  Ultimately, any regulatory costs would also be passed on to landlords and tenants in the form of higher charges.

This is the bit that governments often fail to mention when they bandy about their next regulatory solution.

Landlords are protected by law!

The reality is that landlords are protected by the law.  Whilst there is no mandatory regulating body as the type proposed by the previous government.  Letting agents are still subject to the laws of the land.

The starting point for the landlord is the letting agency agreement that a landlord signs when using a letting agent.  Landlords should ensure that they read the contract and make sure they understand it and are happy with its terms.

The recent case against London estate agent Foxtons shows that the courts can act against letting agents where they do not make their terms clear and where the terms of the agreement were ‘unfair’.  The Judge Mr Justice Mann found in the case found that the Foxtons’ contract was not sufficiently clear to the landlord and that important aspects of the contract were buried in it like a ‘timebomb’.


The Office of Fair Trading (OFT) can therefore act under the Unfair Terms in Consumer Contracts Regulations 1999 to enforce these controls.
 
Landlords need to be aware that there is no ‘standard’ contract between themselves and a letting agent.  Just as you would shop around between solicitors, accountants and estate agents to get the ‘best deal’.  The same applies for a letting agent.  You must ensure that you know what you are getting before you buy.

Letting agents are notorious for selling additional services.  Be careful therefore that you don’t fall fowl of the approach of being sold a ‘bargain’ initial fee and then get clobbered for the other over inflated required services such as: Gas Safety Certificates, EPCs, maintenance, inventory preparation,etc.

The easiest way to be protected against letting agents

The easiest way to protect yourself against a letting agent; is not to use one in the first place.  If landlords let and manage their properties themselves, they instantly side step all the potential pit falls.

Property Hawk provides landlords with the letting agreements and legal forms they need along with our free property management software which allows them to keep tabs with their rental business.

Finally, my point about the regulation of letting agents.  A landlord who feels they need to hide behind the nanny state should remember that letting property is a business and it’s a jungle out there.

As long as you remember this you won’t go far wrong.

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"The Young Group who recently surveyed 86% of Private Rented Sector Landlords Across the country, still want to see the Government bring in legistation to regulate Residential Letting Agents.
Most complaints made about agents was that they charged high fees, but provided a lousy service in return. The other issue mentioned was that some agents demanded extra costs, but were unable to give a satisfactory reason of why they did this. What is undeniable however the Residential Letting Industry as a whole is in urgent need of a complete and full over haul, and this situation must be considered as important.
About fifty labour MPs recently set down an early motion, where they want the government to look again about regulating landlords. Any form of effective licensing in my opinion, would get rid of both so-called cowboy landlords and un-regulated letting agents.
I welcome sensible points of view."

Richard Globe. (General Secretary of the Merseyside & Wirral Property Landlords Action Group).