October 30, 2024 6:38 am

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Nikka Sulton

Labour’s housing minister, Matthew Pennycook, has surprised the industry by pledging to regulate agents. This announcement comes as a significant shift in the government’s approach to the lettings sector.

Over five years ago, Lord Richard Best, chair of the Regulation of Property Agents working group, published a comprehensive list of radical recommendations aimed at transforming the regulation and transparency of the agency industry. A summary of these recommendations will be provided later in this article.

Since 2019, the Conservative government has repeatedly expressed its support for the principles outlined in these recommendations but has made little apparent progress in implementing them. However, during a recent question-and-answer session in the House of Commons, Pennycook stated, “The government is committed to ensuring that those living in the rented and leasehold sectors are protected from abuse and poor service at the hands of unscrupulous property agents. The government will set out its position on the regulation of letting, management, and estate agents in due course.”

Nathan Emerson, chief executive of Propertymark, highlights a significant concern regarding the lack of regulation in the industry. He comments, “Many renters will be unaware that there is currently no requirement for estate or letting agents in England to be qualified or licensed to operate or open their own business. This gap leaves many individuals vulnerable to unscrupulous and illegal practices.”

Emerson further emphasises the importance of regulation, noting that over 64% of landlords in England rely on letting and management services to rent their properties. He insists that it is crucial for regulation to be introduced in order to professionalise the industry.

Such measures would help stamp out bad practices, enhance transparency, and provide consumers with greater control over who manages their properties.

 

Here’s a summary of the recommendations from the Regulation of Property Agents (RoPA) working party published in 2019:

Scope of New Regulation: The working party recommends that all individuals and firms engaged in property agency work should be regulated. This includes auctioneers, rent-to-rent firms, property guardian providers, international property agents, and online agents. However, the regulation will not extend to property portals such as Rightmove and Zoopla, nor to the Airbnb-style short-let sector.

The recommendations also suggest that the legislation required to regulate property agents should allow for potential future extensions. This could include the regulation of landlords, freeholders, developers, retirement housing managers, and Right to Manage companies at a later date.

The New Regulator: The working party states that an existing body would not be suitable to take on the role of the new regulator. Therefore, the government should establish a new public body dedicated to this purpose. This new regulator should be founded and operated in accordance with general principles of good governance, which include independence, openness, transparency, accountability, integrity, clarity of purpose, and effectiveness.

Furthermore, the new regulator should be accountable to the Secretary of State for Housing, Communities, and Local Government. It is recommended that the regulator publish an annual report detailing its progress in raising the standards of property agents, using agreed-upon key performance indicators, including customer satisfaction.

The recommendations also state that the new regulator should assume responsibility for approving property agent redress and client money protection schemes. Additionally, it should have the authority to appoint a single ombudsman for property agents, rather than allowing multiple competing redress schemes, if this approach is deemed the most effective way to enhance standards.

Lastly, the new regulator should be equipped to consider complaints from all sources. If solicitors, lawyers, or other professionals have evidence of potentially illegal behaviour by agents, they should be obligated to present this information to the new regulator.

Licensing: To ensure that property agencies and qualifying agents possess the appropriate qualifications and credentials, it is recommended that they must obtain and display a licence to practise from the new regulator. Before issuing a licence, the regulator should verify that the agent has met their legal obligations, such as being part of a redress scheme and submitting their annual audited accounts. Additionally, agents must pass a fit-and-proper person test. The new regulator should have the authority to modify licensing conditions as necessary and maintain accessible records of licensed property agents.

Codes of Practice: Codes of practice are essential for establishing clear standards of behaviour. The government has already committed to requiring that letting agents adhere to a code of practice, and it is suggested that all property agents should be obligated to do so as well. A single, overarching set of principles should be set in statute and apply to all property agents. Beneath this, there should be regulatory codes specific to different aspects of property agency practice, which would be binding only on those providing those particular services.

The key principles for the overarching code should include requirements for agents to act with honesty and integrity, ensure all staff are appropriately qualified, declare conflicts of interest, and maintain an effective complaints procedure. To develop and sustain the regulatory codes, the new regulator should establish working groups for each sector of property agency to focus on sector-specific details.

Qualifications: Under the new regime, every property agency will be responsible for ensuring that their staff receive training to the appropriate level, with clear oversight arrangements for junior staff members. To ensure that qualification levels are appropriate yet proportionate, the working group recommends that licensed agents should be qualified to a minimum of Level 3 of Ofqual’s Regulated Qualification Framework. Company directors and managing agents should, in most cases, be qualified to at least Level 4. The new regulator will also be expected to implement a system for quality control of qualifications.

Leasehold and Freehold Charges: The new regulator should have a statutory duty to ensure transparency regarding leaseholder and freeholder charges. It should collaborate with the sector—including property agents, developers, and consumers—to develop detailed regulatory codes that support this goal. Additionally, the regulator is recommended to take over the power from the First-tier Tribunal to block a landlord’s chosen managing agent if the leaseholders have reasonably exercised a veto. Furthermore, the regulator should provide information on managing agent performance, enabling landlord freeholders—and leaseholders, where relevant—to make informed decisions regarding managing agents.

Assurance and Enforcement: The new regulator should possess a range of enforcement options, depending on the severity and frequency of any infringements. These options should vary from agreeing on remedial actions and issuing warnings to revoking licences and prosecuting unlicensed practices.

To enhance efficiency, the new regulator and other bodies, such as Trading Standards and redress schemes, will need to share information and work collaboratively. There should be a system of flexible collaboration between the new regulator and Trading Standards teams, and the new regulator should clarify their respective roles concerning enforcement actions to avoid duplication of efforts.

 

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