Regulation of Letting Agents – the true story

July 28, 2014

For years, we have heard calls to regulate the lettings industry, but never more so than now. MP’s have rounded on the Industry supported by organisations such as Shelter and more recently the voracious Generation Rent. BBC Panorama ‘exposed’ many of the issues face by tenants with a focus on the emotive subject of evictions. More and more councils are introducing ‘Licensing’ and deposit schemes are coming under attack for failing to protect tenant’s deposits.

The truth is that all the calls in the world won’t have any effect as we in the industry have no mandate to change anything but our own practices. Only MP’s can change the Law, but successive Governments steadfastly refuse; instead they call for change and point the finger of blame at the industry as a whole. This refusal to act is a tacit invitation for rogue agents to abuse their roles and, frankly, rip people off. Thankfully these agents are in a small minority, however it’s their actions which hit the headlines.

Look at the letting agents in your High Street. If they aren’t members of ARLA, NALS, NAEA, RICS or the Law Society, you should ask ‘why?’. Voluntary regulation carries with it an increased financial burden for the letting agents in question. We pay for Professional Indemnity Insurance, Clients Money Protection Insurance, Client Accounts, Regulatory body membership, staff training, CPD courses, Legal fees for contracts, terms of business etc. It is not cheap, so imagine how we feel when an agent opens with no compliance costs, no insurance and undercuts our fees enticing customers in to the murky, unregulated world exposing consumers to risk. Without training, notices and contracts can be drafted poorly resulting in landlords failing to gain possession which can cost them thousands of pounds.

The sad fact is anyone can open as a letting agent with no training, no experience, no track record and no protection. Often, these new businesses are underfunded and the myriad of rules and regulations which currently apply are ignored.

Further, the amount of regulation with which agents must comply is onerous. It is therefore galling to see so many simply ignoring these rules. For example, many agents still don’t publish compulsory fees. How do they get away with it? Partly this is due to the fact many tenants do not know their rights but mainly, its due to the fact that no one polices or enforces such matters.

This Government wants agents to effectively regulate themselves.  Their reason is in no small part due to the horrors which would be realised if agents were forced to regulate. Clients money should be held in a ‘ring-fenced’ clients account, however whilst this may protect money from creditors, it is not ring-fenced from the agent. If their business is struggling, there is little point in seeking bank assistance and as such, clients money is a very tempting resource.

Ideally, all deposits should be held in a custodial rather than insurance backed scheme as they are in Scotland. The Deposit scheme providers would welcome this, however the Law doesn’t allow this obvious answer to be imposed. In Scotland, when such Law was introduced, millions of pounds were found to be missing. Imagine the ‘hole’ in the much larger English / Welsh private rented sector and you will appreciate why the Government is reluctant to change things. Landlords would lose money. Landlords are also voters.

Grant Shapps MP during his time as Housing Minister asked industry to raise awareness of these issues and find a way to promote this to consumers. We and a group of like minded agents formed SAFEagent – a campaign to promote consumer interests and to act as a signpost towards regulated agents. There are over 3000 members and SAFEagent continues to grow and fight for improved standards.

Nevertheless, there is one undeniable truth. Rogue agents will remain whilst landlords and tenants continue to choose agents who are not members of a regulatory body. Often, consumers are tempted by agents offering the lowest fees. This can prove an extremely costly mistake if things go wrong. Would you book a holiday with a travel agent who wasn’t a member of ABTA? Yet landlords hand over keys to their property and tenants hand over thousands of pounds to someone with no professional accreditation, no insurance and no training. In the case of some on-line business, they may not even have a valid address.

Our advice is to check that your agent is regulated. It may be a little more expensive, but if things go wrong, you could save a great deal of money and aggravation. Finally, remember, most letting agents are extremely good at what they do and will often provide excellent advice and expert assistance making renting a stress free process.

*DOWNLOAD Northwood’s free guide:  How to find a professional letting agent*

Northwood is one of the largest and most recognised lettings agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

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