An easy way to regulate the lettings industry

An easy way to regulate the lettings industry

11:44 AM, 1st February 2012, About 11 years ago 97

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There has been a lot of discussion on Property118 in recent weeks about Letting Agents, regulation and trust issues. That’s hardly surprising given the number of reported instances of the closing down of Letting Agents whilst owing landlords rent and having failed to protect deposits. We have also witnessed an increasing level of debate surrounding the competence of agents.

The government have announced their intentions not to regulate the Lettings Industry and that has stirred up mixed reactions. Those in favour of regulation obviously include people who have lost money but also some Letting Agents would welcome regulation to put the cowboy operators out of business and get the market share they believe they deserve. On the flip side those opposing regulation are fearful of the costs and the impact on the industry based on the reality of what has happened since the FSA begun to regulate financial services. Now in my opinion that really is bureaucracy and red tape gone mad.

Why does regulating the Letting Industry need to be so complicated?

I take the point about ARLA bonding only protecting clients money but don’t their members also have to carry Professional Indemnity Insurance to indemnify themselves against negligence claims? I also accept the point on what happens if they subsequently lapse memberships and policies and I think statutory regulation with effective checks and balances is the only way to enforce against that scenario. Make bonding and professional indemnity insurance compulsory and that’s the problem sorted so far as I can see.

A bit of lateral thinking and a simple licencing scheme is all that would be required to regulate this. The rest would be down to market forces because if Letting Agents were incompetent their Professional Indemnity Insurance premiums would rocket as a result of claims. This would eventually close down those who don’t perform as they wouldn’t be able to renew their licences without proof of bonding and Professional Indemnity Insurance. I suspect insurers would also look to reward those who undertake recognised Continued Professional Development and get qualifications through discounts on PI insurance premiums.

It’s really that simple to regulate Letting Agents if you think about it. Three pieces of paper to check every year and it’s sorted. The Councils could raise revenue from the licencing and use Trading Standards to close down unlicensed operators. Another simple enforcement tool would be to make it illegal for the media (on and offline) to carry advertising for unlicensed operators.

What do you think?

I believe so strongly in this I’ve created an e-petition.

Please click here to sign the petition for compulsory licensing of Lettings Agents to protect Landlords and Tenants



Comments

0:18 AM, 3rd February 2012, About 11 years ago

Well I appreciate what you are saying.
However before I could trust your circumstances; and I am not for one moment casting any doubt whatsoever on your probity;  I would need to be assured that in the event of you running off with my  rent and deposit monies and had been incompetent in managing my situation, that I would have insurance redress to recover those monies etc.
I am yet to be convinced that this sort of cover is available to protect LL from LA.
I am in the fortunate position where I do not need a high st  LA.
Online agents who just forward tenant enquiries are all I need.
Esentially the online agent is only required as a tenant lead generator.
Were my circumstances different I would have no choice but to use a LA.
I would still be concerned; but I would very much be a hostage to fortune.
I believe that most LL only use LA as they have no alternative.
I believe that refeencing tenants and charging them is an incorrect thing to do.
All they should do is refer the tenant details and I will carry out the reference details.
It only costs me £10.00 to obtain a RGI reference.via a 10 min phone call..
I would NOT take ANY notice of a LA referencing on a prospective tenant, so would a LA bother if it won't affect whether a LL chooses to take that tenant on.
The majority of LA referencing is useless.
Very few of them use LRS or tenantid; they only check 1 credit reference agency. not all 3.
How hard can it be for Tenants for £6.00 to obtain their statutory reports.
I think it clearly needs to be stated to the tenant that the LA is representing the LL and has been tasked by the contract that he has with the LL to look after the LL's best interests.
Yes there has also to be a duty of care towards the tenant from the LA but ultimately the LA interest should ALWAYS be in favour of the LL.
If this means the LA doesn't make as much money as he likes then that's tough!
It should be the same way of thinking by the LA as an estate agent.
Too many LA seem to think the LL is to be stitched up with spurious charges.
I think your offer or 6 months free letting service, certainly has merit.
Few LL if you have proven your efficacy are likely to go to Fred over the road once you have proven your competence and complete probity.
Pointing out to the LL your circumstances compared to Fred over the road; would I belive convince most LL to stick with you.
I would hope that the majority of LL would recognise that the value of services offered far outweighs the actual cost, even if it is more than the services of Fred over the road.
One of the continual issues I hear from prospective tenants is the amount of fees they have to pay upfront; for what I consider to be totally unecessary work. 
If I like the tenant I will carry out the reference work or I will instruct the La to carry out the work with my suppliers, not who the LA has a cosy relationship with.
Only if the LA could convince that his checking circumstance were better and more cost effective would I consider allowing a LA to to do that work
Is there any letting agent out there who for £99.00 can check and obtain RGI for one year on a tenant or their guarantor/s?.
NO thought not!
And I would use LRS and tenantid.....would most LA
NO thought not!
As you can see the La very rarely may better what a LL may obtain in the marketplace for himself.
Indeed I am attaining tenants with tales of woe about LA charges who now know I am a private LL that does NOT charge silly charges and I am also getting tenant referrals which is saving me a fortune in LA fees and also the tenants.
Indeed my details are on the crew room notice booard at Stansted; put there by Ryanair staff themselves as they are fully aware of how I operate and are more than happy to commend me to their colleagues.
They like the idea of just paying rent and deposit monies.
The cost for me to attain exactly the same internet exposure is £99.00
mydeposits fee £30.0 RGI policy £99.00.
I appreciate I would not achieve tenant footfall leads; but am not concerned as most prospective tenants look online.
I pay these charges leaving nothing for the poor old tenant to pay.
Now perhaps my personal situation could be constued as  representative of a lot of LL; but I bet an awful lot of LL full into my category.
I think the poor old LA is up against it and is going to have to pull the proverbial rabbit out of the hat to come up with a more convincing business model to capture LL business.
Your 6 month suggestion is a good start.
More thinking outside of the box is needed; otherwise there will be the continuing drift away to online LA by LL.

10:46 AM, 3rd February 2012, About 11 years ago

With our online management system, landlords can choose to have paper or email statements or have access codes to view their statements online anytime, and it is very useful, for busy landlords or those that live abroad especially.
 
I think it is a great way for landlords to keep abreast of what is going where, when and to whom, ie when contractors are paid from their ledger etc.

Mary Latham

12:56 PM, 3rd February 2012, About 11 years ago

Roger I would be more than happy to meet you to talk
about this mary.latham@landlords.org.uk

Something that I have learned over the many years that I
have worked with Government and local authorities is that evolution is more successful
than revolution and this is the reason that I am supporting Marks campaign.  When Mark first suggested his idea I thought “that
not going to the nub of the problem” but having considered what Mark said on
this thread I can see that his little acorn would grow naturally because
Insurers are very good at reducing their exposure and once they realise that education
is the key to doing so they would be on side and a powerful ally.

The Landlords that I meet fall neatly into two categories

1.     Those
who know that they are Landlords

2.     Those
who think that they are passive property investors

The first category is split in half again

1.      
Those who want to remain in control of their
property management

2.      
Those who do not want day to day involvement but
want to retain control

Those who think that they are passive property investors are
the ones who worry me most because these are often people who hold down high
level jobs and have high disposable income. 
They are investing for the future and their only or main concern is the
return. When these people venture into residential property they do so  on the basis that they will use an Agent to do
everything.  Many of these people have
never seen their investment properties and this is why some high profile
companies were able to “scam” people out of £m’s before going OOB in recent
years. These are the most vulnerable Landlords because they do not even realise
that they are Landlords let alone the legal responsibilities that entails.

The second vulnerable group are those who  do not want the day to day involvement and
think that by using an Agent they can just make decisions about how much is
spent on repairs/replacements and the levels of rent and leave all the problems
to the Agent.

Those Landlords who want to remain in control are the ones
who usually attend my seminars because they are aware that they need to
understand legislation, regulation, documentation and communication in order to
reduce their work load and risk. Of course there are some Landlords in this
category who tell me “I have been a Landlord for 20 years I know what I am
doing” – they rarely know that legislation and regulation has moved on and that
we are now living in a litigious society where Tenants can access information
on Internet and use it against a Landlord.

My question is

How do Landlords know what to expect from Agents if they don’t
know what is expected from them and which parts of the job they can devolve and
which they cannot?

 

Mark Alexander - Founder of Property118 View Profile

13:37 PM, 3rd February 2012, About 11 years ago

WOW, what a fantastic post! This could have been a blog in its own right. What an amazing thread this is turning out to be 🙂

13:57 PM, 3rd February 2012, About 11 years ago

You left off, “landlords” that would rather not be landlords but are
forced to rent out a property they can’t sell.  It is very likely that most of these landlords only know what the few agents they had round to do a rental valuation have told them.  The sad fact is the often the agent that
claims the landlord will have the least responsibilities is the one that gets the contract.

How can this group be reached and provided with information?

14:01 PM, 3rd February 2012, About 11 years ago

We have to be very careful in how we define a “letting agent”  when calling for regulation, for example one of our friends that lives close to our flat has offered to do inspections for us and manage the maintenance when he is unable to do the job himself.

If we were to take him up on the offer but not have him do any of the
rent collection, it would be most unreasonable if he had to be a member of a regulation body.    Likewise for landlords that directly manage their own roperties and offers to help out a friend for a small charge.

So how should a “letting agent” be defined, such that all agents that should
be regulated come under the regulation but we don’t get lots of red tape that
revent people helping each other out?

Mark Alexander - Founder of Property118 View Profile

14:02 PM, 3rd February 2012, About 11 years ago

Every property that's been let over the last few years should have a Gas Certificate, an EPC and a Deposit Registration. If the Government was mindful to encourage best practice they could access all of these databases and offer advice, just as they do for other organisations such as HMRC.

Mark Alexander - Founder of Property118 View Profile

14:10 PM, 3rd February 2012, About 11 years ago

Hi Ian, I used the word regulation in the title of this article to capture attention. My proposals, however, are for compulsory licencing of agents as opposed to full blown regulation. It would only affect agent who handle client monies as an intermediary between landlord and tenant.

14:12 PM, 3rd February 2012, About 11 years ago

Good point Ian. We call them 'Reluctant' or 'Accidental Landlords'. Some go on to enjoy property, sadly many more get badly stung as they have little understanding of their obligations and are often caught out by a 'gentleman's handshake' approach. Sites like Property118 are a great way to offer them information.  🙂

Mark Alexander - Founder of Property118 View Profile

14:24 PM, 3rd February 2012, About 11 years ago

That's how I got into this business. Couldn't afford the mortgage payment and was in negative equity so I couldn't sell it. Couldn't afford to get reposessed as that would have prevented me from continuing in my career at the time which was Financial services. I let my property and rented something smaller. It only made a difference of £150 to my monthly outgoings but that's all it took for me to get through the crisis of the early 90's. I still own that property and it's trebled in value 🙂 When things picked up and I'd saved up (6 years later) I purchased some more. They when they increased in value I remortgaged and purchased some more. Then I made more money and I purchased some more. Then I got divorced but that's another story 😉

When the going got tough I started blogging and that's how Property118 was born.

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