2013 – Moving towards regulation in a growing market
Looking back on the newsletter that I wrote this time last year, many of the topics are still being discussed such as regulation of the industry. Predictions of rents rising and increased demand have both been realised and predicted again for next year. This year though has seen some movement in regards to regulation albeit only small steps.
In January regulation of letting agents was being widely discussed in the industry as well as by Parliament. In the House of Commons letting agents’ fees, criminal landlords and longer tenancies were being debated. By February the focus was on letting agents fees with a report by the OFT “calling for letting agents to spell out their fees in clear tariffs”, whilst the Property Ombudsman called on the Government to “stop dodging the issue” of regulation of letting agents. Crucially in Northern Ireland it was announced that Deposit Protection was to be introduced from April 1st, although unlike its counterparts in England, Wales and Scotland, landlords and letting agents would only have 14 days to lodge the deposit.
March was the turning point in regards to letting agents fees this year. The Advertising Standards Association (ASA) ruled against Your Move, regarding its advertising on Rightmove as misleading because it did not include a compulsory administration charge. This ruling caused great concern across the industry as there was no clear indication on what exactly must be stated, or where it must be stated, not to mention from when the ruling would come into effect. Regulation also looked like it might be a step closer with an amendment to regulate letting agents by bringing them under the scope of the Estate Agents Act only just scraping through in the House of Lords. However in April the Government fell short of this amendment and only took the small step of making letting agents belong to a redress scheme. Although welcomed by some as not being too heavy handed, others pointed out that “it only offers the consumer support after the damage has been done.”
May started off encouragingly with The Property Ombudsman announcing that they had passed the milestone of 10,000 letting agents as members of the scheme. Demonstrating that the lettings industry is not only willing to, but wants to show customers that they are responsible agents. In the Queen’s speech it therefore came as a shock to many that the Government, who had previously raised concerns that regulation may impose a regulatory burden on letting agents, was proposing that private landlords would be responsible for checking the immigration status of tenants. Concerns over a landlord’s ability to check the immigrant status of tenants or face a fine were somewhat relieved by the announcement by housing minister Mark Prisk that “The immigration status of tenants will only have to be checked under a ‘light touch’ regime”. However, there was still concern as to why the government was prioritising this and not making conditions better for those in the private rented sector.
Additional worry was given to landlords and letting agents in June when the Court of Appeal ruling on tenancy deposits in the Superstrike vs Rodrigues case meant that many may have unwittingly broke the law. The Deposit Protection Schemes were quick however to take legal advice, and the National Landlords Association released a message to landlords to allay their fears somewhat. This was not the only thing that industry had to contend with this month, the London Assembly issued a report calling for “rent stabilisation” and encouraging longer tenancies. Although rent stabilisation was dismissed by many as the redress of rent control, there was confusion from the press in them reporting that the Assembly was telling landlords to issue longer tenancies, when in fact they were calling for the lenders to look at this restriction and reverse it. Shelter also launched its campaign to have letting agent fees banned throughout England which was met by opposition from many within the industry who support transparency on fees.
The beginning of July, saw the introduction of a new scheme that would allow “all letting agents … to get Client Money Protection, whether or not they are members of a recognised trade body or association.” Closely followed by another scheme that would provide both Client Money Protection and Professional Indemnity insurance, but only to members of one of the ombudsman schemes, TPO. In line with this a report from the Communities and Local Government select committee, proposed bringing regulation for letting agents up to the level of that for estate agents. The CLG committee proposals would give the Office of Fair Trading power to ban letting agents, just as it can ban estate agents. The proposals, if adopted, would also make both Client Money Protection and Professional Indemnity insurances a mandatory requirement right across the industry. In regard to letting agents fees, which were questioned this month in the House of Lords, the committee proposed a Code of Practice that would require agents to publish a full breakdown of fees charged to tenants “alongside any property listing or advertisement, be it on a website, in a window or in print”.
With the Government going into Summer Recess until September, August was a fairly quiet month, with ongoing discussion of the potential consequences from the Superstike vs Rodrigues case, Housing Minister, Mark Prisk, in a letter to the Residential Landlords Association informed that the “Government was “urgently exploring whether new legislation would be required“. September proved to be a formidable month for the industry with guidance finally being published on how agents should include tenant fees in their property advertisements; the Government revealed that they may be set to make a u-turn on making landlords responsible for immigration checks on their tenants, and new legislation was going through Parliament to enable landlords to evict tenants on grounds of anti-social behaviour.
October saw the Government announce plans to better regulate the private rented housing sector, including a requirement that all letting agents join a new compulsory redress scheme, as well as potentially issuing a Tenant’s Charter and Code of Practice. The Office of Fair Trading also launched a new consultation on draft guidance aimed at getting letting agents and landlords to comply with the law, with the centre of its subject being on fees.
In November the new advertising rules kicked in for agents displaying tenant fees, though as we come to the end of the year there is speculation that many agents are still not complying. A report by a cross-party group of MPs threw serious doubt on to how the immigration status of prospective tenants can be checked by landlords and agents and recommended that they commission an impact assessment to gauge the likely effect of these proposals on discrimination against migrants. The Government did take a step closer though to forcing all letting agents to join a redress scheme by setting out draft rules that would be debated this month in the Houses of Parliament.
As we come to the end of the year more positive talk about the market has been emerging with both Savills and Knight Frank arguing that despite the Help to Buy more households will become tenants and rents will rise also over the next five years.
2014 is predicted to be a buoyant year for landlords and with the increasing pressure there has been this year for regulation within the sector we may be moving closer to this, so it will be interesting to see what developments on this front happen.