Do Letting Agents Need Regulating?
This is a regular discussion point amongst many landlords. Those that have been dissatisfied with the service or competency of their letting agent will no doubt argue vociferously for some kind of regulation. To ensure letting agents meet a minimum level of competency or at least for a landlord to have some kind of redress. Those that are happier with the services they have received will put forward the point that more regulation will mean less choice, higher fees and the only ones to gain will be the bureaucrats occupying the seats of yet another regulatory quango.
Property Ombudsman Calls For Regulation
Christopher Hamer the Property Ombudsman recently called for the statutory regulation of letting agents in an interview with the Financial Times’s, Tanya Powley. Chris has presided over the The Property Ombudsman for 6 years. He uses the changing UK housing market, with increasing numbers of renters, as a justification for compulsory regulation within the letting agent market. Looking to match that which exists within the estate agent industry. He sites the growing levels of complaints against letting agents as justification. The complaints against letting agents have soared by 123% in the last 5 years from 3739 in 2008, to 8334 last year.
He acknowledges that about 60% of the 15,000 letting agents are already signed up to the The Property Ombudsman (TPO) scheme or another such as the one run by the Association of Residential Letting Agents (ARLA). But this still currently leaves 2 fifths of letting agents effectively making up their own rules. Is this good for the letting industry or landlords?
Common Problems Dealing With Letting Agents
Landlords frequently complain about elements of the service from their letting agent. Overcharging, poor service, deposits not being protected or returned, landlords facing rent arrears.
Would all these issues disappear if regulation of letting agents was introduced? We know that any commercial relationship is governed by contract law; a landlord should always check the terms of engagement. If there isn’t one perhaps that should raise a landlords concerns and they should move on to another agent. The reality is that a regulator won’t be able to stop landlords and tenants being ‘overcharged’ for things like EPCs or tenancy agreements or the preparation of property inventories. If you are asked if you want any of these charges and they give you the costs and you agree. Then it is the landlords’ responsibility to check out what the market rate is for the services. Just as if you buy a second hand car you need to make sure that you don’t over pay! The Office of Fair Trading (OFT) can already act under the Unfair Terms in Consumer Contracts Regulations 1999 to enforce these controls and prevent landlords being exploited. This was recently witnessed by the action taken against Foxtons with their terms and conditions
What regulation could provide on top of the existing law, is a free, easy to access body that effectively stands in between the landlord and the courts, and provides a customer friendly interface ensuring letting agents comply with the existing law. Regulation itself would not necessarily insure that letting agents ‘act fairly’, unless there were additional levels of compliance, such as the code of practice required by ARLA. This additional level of supervision and regulation all have to be paid for by the letting agent. These charges are ultimately then bourne by the landlords and the tenants. However, we effectively pay twice to enforce the same law.
Rights of landlords against letting agent malpractice?
The Property Ombudsman is empowered to make financial awards however there is no compulsion for the letting agent to pay these to the landlord. If they don’t then the Ombudsman can and does expel offending letting agents. Whilst the average awards are low, with an average of £325 for letting disputes. There have been a number of large payouts with the largest against a letting agent of £13,500. In the case of ARLA scheme the remedies are not so much financial but a guarantee that all rental deposits are protected and that a code of practice exists that the letting agent needs to adhere to. However, the only real recourse should they fail to do this is that the letting agent is expelled from the respective schemes.
Motivation For Compulsory Regulation
Call me suspicious but could the drive from the current Ombudsman be as much about him empire building and shoring up his pretty substantial gold plated public sector pension. Or is it about leaving some kind of professional legacy? Currently the TPO office is 55 strong how much bigger would it become if Regulation of letting agents is brought in?
Is regulation of letting agents inevitable?
I do think that there is a degree of inevitably about compulsory regulation. As the size of the rented sector grows, more tenants and landlords, will mean that calls for regulation are likely to grow. However, we as landlords and a letting business have to ask ourselves, do we really need another regulator, or actually would a greater awareness amongst landlords and tenants serve the same purpose just using existing laws more effectively. Ultimately, if we do get a regulator for the letting agents; who will regulate them? To insure that they deliver on the gushing promises they make for a problem free rental utopia!