A new code of practice has been published by the Property Ombudsman. This is not what we really want, which is a code which is mandatory for ALL letting agents (the industry being unregulated). However it is a good start.
It applies to all agents who are registered with the Property Ombudsman and came into force on 1 August, replacing the previous code from 2006.
It is quite a long document so I have not had time to read it all in detail. However here are a few points which struck me when flicking through it.
Clause 2d requires the agent to advise a landlord to obtain any necessary consents, e.g. from mortgage lenders, and inspect any necessary consents.
Some of the worst problems (admittedly fairly rare) come when a landlord conceals the fact that their mortgage lender is seeking possession. If this property is then offered to rent by an agent, tenants assume that everything is in order, because it is being offered by an agent.
It would be nice if agents had a greater obligation here, more than just giving advice and taking a look at the documents proffered by the landlord. Maybe to make an independent check, follow up any suspicious circumstances and refuse to let if queries are not satisfied. [Stop press!! See this news item here about an agent requiring landlord checks]
Section 3 on instructions and terms of business has obviously been heavily influenced by the Foxtons litigation a year or so ago. So you will see that the code requires the agent to state all fees and expenses clearly and draw them to the attention of the client (rather than burying them in the small print where he won’t see them, as Foxtons did with their offending clauses).
Agents will need to be clear about how the agreement is to end (I often hear landlords complain that they don’t know how to end their agency agreement), give the landlord time to read it, and then give him a copy after he has signed it. All things which I have heard complained about by landlords.
The code then states that the clauses must be fair and refers to the Unfair Terms in Consumer Contracts Regulations 1999. It then specifically prohibits clauses claiming commission where another agent has dealt with the renewal or where the tenant wants to buy it.
Clause 3p usefully considers the question of deposits when the agency agreement is ended and states that the tenant must give written consent for the deposit to be released.
General comments
Reading the code is rather like reading a list of all the wrong things that agents have done in the past. I was particularly amused to read about ‘ghost’ advertisements (4h) for example.
I suspect that many landlords and tenants who have suffered from agent malpractice, will find it difficult to refrain from hollow laughter on reading the code (which is on the whole excellent) when comparing it with their own experience.
Providing landlords with information about prospective tenants, protecting client money, telling landlords about build up of serious rent arrears, responding promptly to communications – yes all very important. I have known of numerous cases where agents have failed to do these things, and others things covered by the code.
Really my main complaint about this code is not that there is anything wrong with it, but that it only applies to agents who are registered with the TPO. These are mostly going to be the ‘good guys’. It is the other agents, who need it. When will the industry be regulated?
If you want to read the code you will find it here. Do you have any comments on it?
My thoughts entirely Tessa, on the voluntary nature of it. The decent agents are already doing it so what effect will it have on the industry as a whole?
All the government has to do is what they did with the Mortgage Arrears Pre Action Protocol in April this year, turn them from guidelines into rules that must be followed. Just make membership mandatory.
The big flaw I can see in this that could have an effect on renting as a whole is on clause 2d, agents checking that mortgage company are happy with the letting. They are already supposed to ensure they are allowed to let under the Accommodation Agencies Act but this is largely ignored.
Many many properties are let without the lender’s consent or even knowledge. It is one of those ‘look the other way’, bits of housing. I could see it disincentivising landlords wanting to let if this were the case. They would have to be paying business rate mortgages which are higher, so rents could go up even more.
I am not saying that silence on this matter is right but it is a practical approach. A huge number of landlrods are letting without permission. You suggested the problem was ‘Fairly rare’ but I dont think so. Lets face it, it was a big enough problem for a whole new Act to be brought in last year to deal with it, the Mortgage Repossesion (protection of Tenants) Act 2010