Letting agents hold millions of pounds of other people’s money, but remain unregulated.
Why is this?
Particularly as there are many reports in the press of negligent and criminal agents.
Two recent examples:
The first is from Plymouth (first brought to my attention by the excellent Property 118 blog) where Jacqueline and Tony Burridge trading as Hothomes UK disappeared owing landlords and tenants sums estimated at almost half a million.
Rent has been collected but not paid over to landlords, save by cheques which subsequently bounced. Deposits have been collected from tenants and not protected (meaning that the hapless landlords will be liable to the tenants for the money).
Then there is this report on Lettings Today about a company in Milton Keynes who have closed down, again owing both landlords and tenants vast sums of money.
These are just two recent examples of a problem which occurs again and again. It will continue to occur until letting agents are properly regulated by law.
The need for proper regulation
In my opinion, which I am sure will be shared by many people (not least those who have lost money by negligent and criminal agents) it is an absolute scandal that the lettings industry remains unregulated.
Organisations which hold other people’s money are in a special position. They have the power to cause very serious loss to people who trust them. Letting agents generally hold many thousands of pounds at any one time. Why are they exempt from regulation?
Other organisations holding other people’s money are regulated
Banks and financial institutions are regulated by the Financial Services Authority (FSA), the Treasury and the Bank of England. Solicitors, who often hold clients money, are regulated by the Solicitors Regulation Authority (SRA).
For example, as I solicitor I have to hold all clients money in a separate clients account. This is audited annually by an independent accountant who has to file a report with the SRA.
To get my practising certificate I have to confirm that I have professional indemnity insurance in place and have done 16 hours per year continuing professional development.
If I fail to comply with the requirements or if I breach the solicitors accounts rules and deal inappropriately with clients money, I can lose my practising certificate and my livelihood.
Finally, the whole profession pays into a fund which is used to provide compensation to clients who are for one reason or another unable to claim under their solicitor’s PI insurance.
So why are letting agents exempt?
If someone wants to set up as a letting agent, all they have to do is set up shop and start taking peoples money.
- They do not need to have any training
- They are not required by law to have a separate client account
- They do not have to get their accounts independently audited
- There is no regulatory body
And yet these people can hold thousands and in some cases millions of pounds of other people’s money. To do with as they like.
Problems are not just financial
As well as the financial side of things, incompetent agents can cause endless misery by
- Failing to do proper or any checks on new tenants (resulting in unsuitable tenants being accepted, generally resulting in substantial financial losses for their landlords)
- Failing to do regular inspections of properties, meaning that problems do not get picked up
- Failing to deal with tenants requests for repairs
- Failing to protect deposits under an authorised scheme
To mention just a few things.
Confusion for the public
Not all agents are negligent or criminal. Not by a long stretch. There are many, many agents who provide an excellent service. Firms who are regulated voluntarily by joining organisations such as ARLA and RICS. Or the forthcoming SAFEagent scheme (website here).
However excellence does not come cheap. And if the firm further up the street offers what appears to be a more competitively priced service, they will attract customers. Who will have no idea that the firm they have selected is unregulated and inefficient. Until the problems start.
Calls for regulation
There have been calls for agent regulation for many years, in particular from ARLA. Understandably, as rogue agents taint the entire industry.
The report commissioned by the last government from Dr Julie Rugg recommended agent regulation and the last government indicated that they would be bringing this into effect.
However the current administration seems to be happy with things the way they are and see no need for additional regulation in the private rented sector. This is maybe understandable for standard lettings law. But in the case of agent regulation? I think that they are wrong. Very wrong.
What do you think about it?