Statistics have shown that an increasingly large percentage of households are living in the private rented sector.
And that a large percentage of THAT is low to middle income households and families.
Given its increasing importance in our society, I suggested in earlier posts in this series that the private rented sector is no longer something that should be left unregulated.
To enable this to be done, I suggested there should be a rented property register where landlords are required to provide details and list the properties being rented (incidentally very similar to proposals currently being made for Wales).
Landlords, should be required to register and obtain accreditation if they want to manage their properties themselves, failing which the properties should be managed by an accredited letting agent.
There is a problem with this vision however:
The case for agent accreditation
At present there is no requirement for agent accreditation. At all. There are voluntary schemes but today a letting agent can set up with no training whatsoever.
This is a national scandal.
Letting agents hold huge amounts of other people’s money and yet are subject to no control at all (other than through voluntary schemes such as those provided by ARLA and SafeAgent).
With the result that we regularly read in the press about agents going bust after having spent money which does not belong to them, to shore up their failing businesses (or sometimes on extravagant living). Resulting in massive losses for their hapless landlords, and generally a poor service to tenants.
There are also tales of estate agents who fall foul of the estate agency regulations, closing down and setting up shop as a letting agent where they can act as they please.
Even the thousands of well meaning agents, can do untold damage through ignorance. Frequently they will economise on training when times get hard, or just consider it unnecessary.
But letting agents should not be ALLOWED to economise on training. It should be a mandatory requirement for being allowed to continue in business.
Surely government must recognise this soon and introduce compulsory letting agent regulation?
An example
I am a solicitor and I am regulated by the solicitors regulation authority (SRA). Every year I must :
- Have my accounts audited by an authorised accountant who then has to submit a report about me to the SRA
- Obtain professional indemnity insurance that has to comply with special standards
- Contribute to a fund which is used to compensate people who have suffered loss caused by a solicitor in circumstances where the loss is not covered by insurance
- Obtain at least 12 hours CPD (continuing professional development) per year
- Apply and pay for a practising certificate annually (around £2,000 per solicitor), which will only be provided if I certify that I have obtained the required PI insurance and CPD
Not to mention the practical and academic standards we have to achieve in order to become a solicitor in the first place.
So I do know a bit about regulation and what it involves. I don’t say I like it, but it is a part of being a solicitor. Letting agents manage people’s homes. They should be subject to something similar.
Accreditation for agents
When (and I very much hope it IS when) accreditation is introduced for letting agents I would suggest it include the following:
- A qualification – lets call it an accredited letting agent (ALA) which is recognised nationally
- A requirement that all letting agent firms should be owned by ALAs or (in the case of limited companies) have a majority of directors who are ALAs
- Compulsory CDP for ALAs
- A requirement that all agencies which hold other people’s money (presumably all of them) be audited annually and a report sent to a national regulatory body
- Strict standards for holding other people’s money in a separate ring fenced account (like a solicitor’s client account)
I am sure there are things I have missed out. What else would you suggest?
Good for the industry
I think one of the big gainers of all this would be letting agents themselves. This is why ARLA has been calling for regulation for years.
It would cut out the cowboys and therefore improve the reputation of the industry – giving those who DO act with honesty and integrity the good name that they deserve.
I’ll be looking further at the whole question of landlord and agent accreditation next week
Are you wanting to increase rents? Who is going to pay for all the licensing and regulatory oversee?
I guarantee you that the extra costs will be passed down chain to the final customer – the tenant. They always are – that is the nature of a free society.
Of course ARLA wants more regulations – every professional organisation wants to create barriers to prevent small entrepreneurial competitors entering their market. Some even believe their own claims.
For every emotional soundbite about cowboys, there’ll also be untold stories of great personal service and common humanity delivered by letting agents.
I’m sorry, but your proposal seems to want to increase market entry costs and running expenses, and make the tenant pay. I vote no.
I know there are great letting agents out there. Many of them read this blog (the cowboys won’t). However sadly there are also a lot of very poor agents.
Agents can’t be trusted (not ALL agents) to regulate themselves. Otherwise all agents now would provide a good service – and clearly they don’t.
If the cost argument was extended we would say that we don’t need the police as most citizens are law abiding.
If you have a situation where people providing an important public service (which housing is, whether or not it is owned by private individuals) are perceived to be ‘getting away’ with poor service and often downright dishonesty, that is bad for our society as a whole.
But tenants already have the choice to use property already looked after by ARLA agents or not. Regulation would just take that choice away for something as subjective and nebulous as ‘the good of society’ and make all rents rise.
Police are a red herring – you are talking about imposing costs on selected consumers, limiting their choice and decreasing the kind of competition that can create a better service.
Talking as a tenant, I vote no again.
The ‘important public service’ argument….? I thought we were talking about the private rental market…? Composed of private individuals/companies operating under the law of the land. It’s a market, not a public service.
It’s a thorny old issue regulation. Surprisingly, speaking as one who’s job it is to prosecute harassment and illegal eviction, I was against it for many years because I agreed with comments from landlord land that too many layers would discourage investment in the PRS at a time when we need more housing than ever before. I always took the holistic view and still do to an extent.
Having said that, this argument was based on a different set of circumstances. The relaxing of what were perceived to be too many tenant friendly laws of the 1970s and 80s were not made against the explosion of amateur buy to let landlords who, I read somewhere comprise 74% of the market and 23 years of more landlord friendly legislation has done nothing to improve property conditions or to reduce the allegations of harassment and illegal eviction which continue to grow. I am busier now than I was when I started in 1990.
I wrote an article in Friday’s Guardian Housing Network http://www.guardian.co.uk/housing-network/2012/jul/06/rogue-private-landlords-civil-criminal about the logistical difficulties of taking action to protect tenants from Criminal landlords and I coming around to the idea that regulation is the only way to deal effectively with problems if the landlord community wont do anything about it from the inside, which clearly they aren’t.
Reading the Welsh proposals rekindles the idea that it is far more effective to bar criminal landlord’s and agents from renting by removing them from the register than chasing pointless actions in the courts.
As to the matter of increased costs the welsh proposal states the scheme should be self supporting not profit making and suggest a registration fee of £20 and some mandatory training that they estimate will cost £100. Hardly a financial burden worth raising the rent over.
As for the old argument about good landlords and agents paying for bad ones, as Tessa succinctly points out, you could level this at paying tax for the Police. The argument doesn’t wash.
And on the point of tenants already having the choice to sign with a landlord accredited to ARLA, these bodies do nothing for tenants, they are landlord bodies only, with minimal teeth. They cant strike off all landlords about whom complaints may be made, they wouldnt be able to function as a company. Lets not forget the fact that voluntary accreditation bodies are profit making industries not independent arbiters.
The most sensible thing I’ve read is your suggestion to hit bad landlords with civil actions through contingency fee lawyering and spread the word about that.
Dealing with landlords who are criminals – well, surely a simple thing here might be to legislate for all landlords having to reveal criminal (and civil?) records on a rental contract? With good and proper penalties for lies.
Whilst not perfect, it might also avoid the downsides of regulations – which sad experience suggests would end up costing much more than envisaged (has the Welsh assembly factored in the landlords’ time costs?) and be very difficult to regulate along with the local authority cuts and workload.
What I can’t see is why letting agents (who hold thousands of pounds of other people’s money) should be exempt from regulation when other professionals such as solicitors, accountants etc are not.
If it is right and proper for letting agents not to be regulated why should solicitors be regulated? Why should I have to pay thousands of pounds in fees, training, insurance etc so as to protect my clients?
Stopping and thinking about it, actually I don’t think that taking away the regulation would make me reduce my fees particularly. One charges what one hopes is a market rate.
What do other people think?
I heartily agree with Tessa on the agent side of things. And please, you decent agent who read this, I know who you are, dont think I am having a go at you. The cowboys are tarnishing your services. It beggars belief that an estate agent has to be regulated but a letting agent doesnt. You good agents should also be calling for regulation, you have nothing to lose when you provide a good service.
Thanks Doug for your support for my my proposals.I’m not anti agent, just anti rubbish agent. For instance 2 years ago a new agent in my area started to come on my radar. I was getting more and more complaints about them and started to look into their business dealings but in actual fact, what they are turning out to be is a couple of clueless amateurs, operating on a wing and a prayer, rather than wilfull bad behaviour. Since they started I have had many a phone conversation with them and I see them learning and growing. On that basis I am happy to give them my time as they get better at what they do. I think they could become a useful and honest local service.
But Doug you are misunderstanding the criminal landlord idea. I deliberately use the term “Criminal” as opposed to “Rogue”, which Shelter use, because I dont like it. It is too sweeping and vague. The Guardian gave my article its own title. I wouldnt have used the term Rogue myself.
The issue isnt landlords with criminal convictions being barred from renting. I work in South East London, if that were the case we wouldnt have a single property available haha
I’m talking about landlords acting criminally in a rental situation. The police and judicial system dont take it seriously, only the council and we cant act without them so we are screwed basically, but if we had a register, that perpetrators could be struck off of, as Wales is proposing, action against the ‘Criminals’ would be swift and effective, leaving the good guys to operate freely and with the support and assistance of councils. A register could help close the credibility gap between landlords/tenants and councils.
Lets face it, at the moment, landlords generally hate tenants, tenants hate landlords and everyone hates the council. Registering, if handled well, could put councils in the middle role of mediator,facilitator that might be useful to all concerned.Registering landlords and agents, with swift remedial action, might just be the best thing to happen to the good guys in the PRS
Yes, I can see the uses of a simple register. That too might do a job without additional regulations – just motivate letting agents and landlords to follow existing ones.
And Tessa… you might not initially reduce your rates if your costs came down appreciably, but I’d bet some of your competitors would. Whether you would need to follow suit would depend on a few factors – primarily if your expertise and skills made your client happy to pay more.
Well Doug, maybe that is the solution. A simple register. You are either on it or not. If not, you cant trade; end of.
I like the simplicity.
If you have had the council on your case for property conditions, if the council/tenant has had to serve notices on a landlord for disrepair, obtain an injunction for unlawful evcition or trespass to goods your struck off, or, as the the Welsh model, you can only let through an agent who is still in the loop. If the agent doesnt fit the bill then it’s game over. That should be cheap enough to adminstrate and wont result on huge costs for landlords, just compliance with standards of decency and who can object to that?
I think you should add: “A requirement for ALL charge to tenants be clearly listed at the top of all on-line adverts and to be given to all tenants at the start of any viewing.“
I’m always in two minds about regulation.
On the one hand I want my industry to be seen as more professional but on the other hand I don’t want any more useless beaurocracy. I also want a fair marketplace for landlords and tenants.
Lets clear one thing up. Regulation will not help my business becasue it will drive out the bad agents. As a member of various trade bodies our company can already differentiate itself from lots of agents, and not just the bad ones. It also enables us to justify our fees which are higher than some. This is arguably better for us than if every agent were operating at the same regulated level.
Doug is right, regulation will inevitably drive up the direct cost for landlords which in turn will lead to higher rents.
However, more importantly, the industry would become homogenised. According to the the Law Gazette “The year-long study [into Estate Agents by the OFT] found the housing market was dominated by traditional high street estate agents, which has led to weak competition. Failure by consumers to negotiate on their fees could have cost them up to £570m.”
We’re already seeing companies like Countrywide collecting agents like a hoover. Increased regulation may drive out smaller agents, the majority of whom are actually very good. Will an industry dominated by a few big players really help consumers?
Interestingly, in 2010 the OFT said there was no case for a dedicated regulatory regime for estate agents.
Perhaps the Estate Agency Act could just be amended slightly to include Letting Agents because it already covers the important things like client money protection without being too onerous.
One thing we shouldn’t do is regulate Letting Agents simply becasue it’s unfair on all those poor Solictors :)
Apologies for my terrible spelling of bureaucracy.
Jamie I don’t see how regulation would homogenise the letting agent industry. All that is being proposed in the Welsh report (Lets leave Newham’s cataclysm out of it haha) is for a cheap registration and a set of criteria in terms of property standards, legal processes and knowledge.
Conforming to these basic standards doesn’t harm competition or hand the ball to the high street chains.
The very thing that landlords and tenant don’t like about the big names, apart from the rip off fees, is the lack of a personal touch, that spark of individuality that separates the 2 camps, and I say that as a tenant with an agent myself and an ex-letting agent.
Speaking as a TRO trying to work with my local PRS I am more optimistic about the small independents in my area who we can just sit around a table with and thrash out a solution.
The worst agents who comprise so much of the money frauds, withheld deposits, harassment and illegal eviction allegations would be driven out by regulation under the Welsh model which proposes a national set of standards administered locally. All people in my kinds of jobs know our good and bad agents and landlords and regulation would allow us to take the cowboys off the board far more quickly and effectively than we can now.
Its frustrating watching this shower getting away with murder everyday but knowing the bureaucracy it takes to tackle them in the present system lets allows them to trade with impunity.
This would help improve the image of agents which is tarnished by the bad ones who proliferate because there is no law to stop them
When I decided to set up my agency I wanted to show that we were reputable. The only way I could see to do this from a standing start was to take a qualification and then to become registered with NALS.
NALS make sure we have PI, that we get our accounts checked annually to prove that we’re handling clients money correctly.
We also belong to TPOS and SafeAgent. These all require an annual subscription.
It would be nice if there was only one body to belong to. Then we could continue to do the work we do, still proving that we are doing it right without having to belong to all these various bodies.
It might also put a halt to all these trip advisor type website’s. They want to get a piece of the action by asking you to sign up with them to prove you are an upstanding agent.
We are continually updating CPD to map sure we look after our clients.
The way forward I believe is to run an agency based on relationships. After all it is people you are dealing with on a daily basis.