Has the time arrived to clean up the property industry’s “Wild West”?
This month has seen numerous calls for regulation of the lettings industry. It was only this time last year that the Government steered away from regulating letting agents and landlords, and pledged to avoid ‘unnecessary’ regulation of the private rented sector. However, this year it appears that more and more agents and industry bodies are in favour and want some form of regulation for the industry.
In January we seen the first of this year’s many stories about the lack of transparency around charges and fees and how these vary significantly. In February Mark Alexander of Property 118 started an e-petition for a licensing scheme that would “ensure that redress is available in the event of financial failure or negligence on the part of Letting Agents.” Though, as of 29th November 2012, this has only received 264 signatures.
In March the Property Ombudsman took legal advice on compulsory regulation of letting agents, and in April it announced that more than 300 agents had joined The Property Ombudsman Scheme, a sign that agents are committed to offering consumers greater protection.
In May, SafeAgent had an Awareness Week to highlight the risks to consumers of using agents who are not part of Client Money Protection Schemes and informing on how these risks can be avoided, by checking that the firms managing their properties belong to the scheme or other similar schemes run by other self-regulated organisations in the industry. May also saw the kick off of Shelters campaign against unfair letting charges, which has since resulted in all upfront fees charged to tenants being abolished in Scotland, and Shelter turning its attention firmly on England now.
Over the summer Labour launched its policy review into the private rented sector focusing on letting agents and landlords just after the then housing minister Grant Shapps said “no yet again to licensing letting agents”. Licensing of landlords was also being focused on as Newham Council announced it decision on borough wide licensing which received a mixed reaction with many believing it would smother the local housing market.
September saw the appointment of new housing minister, Mark Prisk, who had previously attempted to amend a bill to include greater regulation of lettings agents. However, since his appointment he has been treading the party line that he will not regulate either agents or landlords though just this week he has been pressed for action following a meeting at the House of Lords.
RICS recent findings from its consumer survey have highlighted that the lack of regulation has allowed rogue letting agents to cash in on the current high demand for rental property and is putting consumers at risk, even calling the private rented sector the “Wild West” of the property market. Further pressure for the Government came this week following the latest Which? Report that “uncovered bad practice, unexpected and unfair fees, and a lack of protection for both landlords and tenants”.
It is currently possible for anyone to set up a lettings agency without appropriate qualifications, knowledge or understanding of the rental process. In addition, it is not compulsory for agents to conform to any code of conduct, provide safeguards or register with a government-approved redress system.
Despite this, four out of five renters believe lettings agents are required to abide by a government, ombudsman or regulatory body code of practice – demonstrating a lack of accessible information on lettings agents’ legal requirements. In addition, there is a clear demand for regulation among consumers, with 87% of renters supporting a single compulsory regulation scheme for all letting agents. (1)
The government is currently conducting an inquiry into the lettings industry, that will look at the possibility of compulsory regulation for both agents and landlords, and into imposing rent controls, as well as looking at letting agents’ fees and the quality of accommodation in the sector.
With agents starting to speak out in support of some form of regulation to demonstrate their willingness to show they are reputable agents, see news stories (2). Now seems to be the time to get involved with the government inquiry to ensure that they get the relevant feedback from the industry to direct what type of regulation should be introduced.