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

14:34 PM, 3rd February 2012, About 11 years ago

Whenever I have used IT employment agents to find work, it has been very clear that they are acting for the client and hence I have never expected them to do anything for me as the candidate.   For example, I have never got a job offer on the paper headed with the employment agent’s name and logo only showing the employers name hidden in small print.

However in my experience as a tenant, all the letting agents branded the tenancy agreement with their logo and company name making it look like they are the provider of the property.    Likewise in adverts on RightMove and elsewhere the agents don’t make it clear they are acting only for the landlord.  (Property selling agents see to avoid a lot of these problems, as they get paid by the vendor not the buyer.   While renting agents are seen to be paid by the tenant with them then passing on what is left after the charges to the landlord.)

Hence it is very easy for tenants to believe they are the customer of the agent and that the agent should do what is best for the tenant.   Maintenance admin staff working for agents that spend all day answering phone calls from tenants with this mind-set can very easily be forgiven for developing the same mind-set themselves.  Saying no to a tenant is often harder than passing another bill onto the landlord.

I think tenants are more likely to talk to each other about the quality of property and repair service they have got var a local letting agents, then none local landlords are to talk each other.  So an agent must keep the tenants happy if they are to stay trading, regardless of the fact that they are required to “work for the landlord throughout”.

Due to having properties at a distance I only know one other landlord with a property close to one of ours.  (I have never seen the point in asking an agent for reference from landlords, as all agents have some happy small landlords and the service given to large landlords is unlikely to match the service given to a landlord with a single property.)

I am very glad that I am not the “pig in the middle” in this mess of conflicting expectations!

Mark Alexander - Founder of Property118 View Profile

14:44 PM, 3rd February 2012, About 11 years ago

Why thanks  a lot Ian !!!

"I am very glad that I am not the “pig in the middle” in this mess of conflicting expectations!"

Oink, oink LOL

Mary Latham

15:09 PM, 3rd February 2012, About 11 years ago

Ian I did not exclude accidental Landlords they fall into the same categories as those who make the decision to become Landlords.

In your second post you illustrate what I call the "yes but" mentality sometimes known as the "cake and the ha'penny". It is not about the legal relationship Landlords have with others who help to manage their properties it is about which parts of our jobs we are out-sourcing. Even when I am overseeing for my sister, who lives abroad, I am her Agent and would therefore need to be regulated.

Marks suggestion does not involve red tape, its simple and that is why it has a good chance of success.

Mary Latham

15:16 PM, 3rd February 2012, About 11 years ago

If a Tenant pays an Agent that Tenant is a customer.  When both the Landlord and the Tenant pay the Agent there is, in my opinion, a conflict of interest.

I know Agents who charge both the Landlord and the Tenant for the same services, Tenancy Agreement, Referencing and Inventory to name the three most common. Who is the Agent working for?

Mark Alexander - Founder of Property118 View Profile

15:20 PM, 3rd February 2012, About 11 years ago

There is a big different between paying for a service as a customer and employing a person to act as your agent. so long as the position is made clear I can't see why a Property Manager can't act as agent for a landlord and charge fees to customers which are tenants. I'm no expert on agency law but I do know enough about it to know this doesn't have to be a problem. The real problem is perceptions.

Mary Latham

16:41 PM, 3rd February 2012, About 11 years ago

If I use an Agent as a Landlord I do not "employ" him I pay for his services. If I use an Agent as a Tenant I also pay for his service. I cannot see any legal difference?

An Agent is, by definition, a "go between" and therefore he will have two clients. That Agent may charge each of those clients for the services that he performs ON THEIR BEHALF but not for services which are also being charged to the other client in the transaction.

An Estate Agent performs a similar service but charges the client who is selling not the client who is buying. A Solicitor would not be allowed to work for both the buyer and seller (it might cut costs if they could) because of conflict of interest.

I know several Landlords who charge an admin fee of around £150 and if the Tenant is prepared to pay that fee its fair enough. I heard of an Agent recently who charged £440 admin fee for a one bed flat shared by a couple on a joint AST. The cheeky monkey charged the same fee again to renew the AST for a second term and everything was done electronically and not very well. I wonder if the Landlord was also charged the renewal fee?

If I used an Agent I would be happy to pay for his services but not for him to charge my Tenants for the same services again. I would want to be clear that he has no confict of interest because he is being paid only by me.
 

Mark Alexander - Founder of Property118 View Profile

17:09 PM, 3rd February 2012, About 11 years ago

The difference Mary is that you would have a contract with your Letting Agent and that contract means that you are employing his services,  outside of the generally accepted conditions of employment law but well within the conditions of agency law. A tenant has no such contract as he's simply a purchaser of services. The morality of double charging is not what I'm questioning. That's another debate for another day. First things first, let's get Letting Agents who handle client money licenced, support the good ones and drive the real crooks out of the business.

17:25 PM, 3rd February 2012, About 11 years ago

Mary on top form again!!
You gonner have to start paying her soon MARK.... LOL!!

Mark Alexander - Founder of Property118 View Profile

17:29 PM, 3rd February 2012, About 11 years ago

Paul, if I know Mary, and I think I know her pretty well, she wouldn't take money even if I offered it. We are kindred spirits and we do what we do here for the love of our industy. Neither of us would compromise our integrity or independence for financial gain.

0:24 AM, 4th February 2012, About 11 years ago

Here, here!
And just as a matter of interest are there any let's say small and perhaps less knowlegeable LL out there that for whatever reason choose not to comment.
You have well informed individuals who post regularly; I am not including myself as knowledgable!.
It would be good if those with less lnowledge could post and perhaps learn a lot from responses from the more informed posters.
So they would not be considered as ignorant; but just genuinely eliciting information in perhaps obvious anwers to their genuine enquiries.
I have learnt an awful lot by making relevant responses.
It would be interesting to hear about other small LL and their experiences; problems and issues.
This as I am sure we can al learn from individual experiences.
You have massive newsletter circulation.
It would be interesting to hear from those landlords who may consider themselves amateurs and perhaps may feel intimidated by the expertise that presents itself on the site.
Perhaps there could be a sectrion for newbies of for those less sure of thenmselves where they could post without any concerns being shown for lessor knowledge than the usual poster.

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