Letting agents to be regulated

Updated on 17 April 2013 | 2 Comments

The Government is to introduce new legislation to curb the bad behaviour of dodgy letting agents.

The Government has proposed new legislation to regulate letting and managing agents.

Just as there are good and bad tenants and landlords, there are also good and bad letting agencies. The best are professional, skilled individuals with expert knowledge of local property markets. However, the worst are little more than fly-by-night cowboys, dedicated to ripping off prospective tenants left, right and centre.

Many tenants will have come across the bad practices of the letting industry.

For example, there are hefty -- and often hidden -- fees for simple tasks such as credit checks, inventories, renewals and other administration. What's more, agents sometimes 'double dip' by charging fees to both landlords and tenants for the same job. Also, some agents do little to deal with tenants' complaints regarding maintenance, repairs and the return of deposits when tenancies end.

Recognising the sharp practices common in this market, Mark Prisk MP, Minister of State for Housing and Local Government, this week agreed a late amendment to the Enterprise and Regulatory Reform Bill currently going through Parliament. This will force all letting agents to sign up to a redress scheme aimed at improving compensation for wronged tenants and landlords.

More protection for 'generation rent'

At present, there are schemes to deal with complaints against letting and managing agents, but these are entirely voluntary programmes. Right now, it's estimated that up to two-fifths (40%) of all letting agents are not members of any such schemes, leaving hundreds of agents effectively unregulated.

The largest redress scheme currently covering UK letting agents is The Property Ombudsman (TPO). It can issue binding rulings on various complaints, but is powerless to act against agents not signed up to its scheme.

As it cannot compel agents to join a redress scheme, TPO is effectively 'a watchdog with no teeth'. For instance, of 8,334 complaints it received last year, 2,121 related to unregistered agents. In other words, the TPO was unable to deal with more than a quarter (25.4%) of the complaints it received in 2012.

This proposed legislation will finally give tenants and landlords access to a legally binding complaints scheme. Obviously, this is good news to the estimated 4.7 million UK households let by private tenants -- especially in London, where rents, deposits and letting fees have been spiralling out of control for years.

Two big problems

While the proposed legislation will clean up the vast majority of this market, it will not help tenants in two important circumstances.

First, many private landlords do not use letting agents to market and manage their properties. This is because the fees taken by agents are around 7.5% to 10% of yearly rents. It's estimated that more than half of all landlords don't bother with letting agents.

Second, having a compulsory redress scheme may not weed out the real charlatans in this market -- career criminals who collect upfront fees and deposits, only to vanish afterwards, never to be seen again.

In the meantime, tread carefully

Unfortunately, the new law will not force letting agents to obtain professional training, nor will it allow a regulator to quickly ban rogue agents.

In addition, given that this new legislation won't be in force until this autumn, what can you do now to tackle complaints against a letting agent? You can approach a trade body such as the Association of Residential Letting Agents (ARLA) or the UK Association of Lettings Agents (UKALA). However, your letting agent may not belong to these redress schemes.

Alternatively, you can seek financial redress by taking your complaint to your local small claims court. Read Small claims court: get the money you are owed for more.

In short, always tread carefully when dealing with letting agents -- look for obvious proof that you are dealing with a reputable, established operation. After all, it takes no professional qualifications or training to become a letting agent. All one needs are a mobile phone and a computer. Even an office is optional these days.

Perhaps England and Wales should consider going the way of Scotland, where it is illegal for letting agents to demand fees from tenants. Instead, Scottish landlords are responsible for all fees, which are then reflected in higher market rents. Frankly, this would be a much simpler system for all!

More on renting your home:

Lodgers vs tenants: how your rights and responsibilities change

Letting agents ordered to display their fees

Tenants: know your rights

Rising number of tenants falling severely behind with rent

Deposit security: how safe is your deposit?

Rent-a-Room: tax-free cash from your spare room


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