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

Mark Alexander - Founder of Property118 View Profile

17:50 PM, 11th February 2012, About 10 years ago

It's not just landlords that feel this way Paul, tenants like to know who they are handing their money over to too.

18:05 PM, 11th February 2012, About 10 years ago

Yes hadn't really thought about it from that angle.
I think the problem is LL and tenants don't know how to differentiate between good and bad LA.
There is nothing particularly obvious to assure as to a LA probity which I think your insurance suggestion is the only way to go.

19:04 PM, 11th February 2012, About 10 years ago

I am  concerned that you are mixing up Letting Agents and the 'Lettings Industry'  I am a small private landlord specialising in 1 bed flats in the South West.  I do not use any Letting Agents: they are too slow to fill a void and feees are excessive for young first time tenants.  Before recent deposit protection legislataion we were able to agree deductions [if any - rarely] with the majority of tenants and re-imburse them on the day of departure so that they were not financially embarrased moving to a new tenancy.  Not so now.  I do not want some all-embracing carapce legislation to be brought forward which  further ensnares me and my tenants.  We  were very happy as we were.

Mark Alexander - Founder of Property118 View Profile

20:18 PM, 11th February 2012, About 10 years ago

Hi Chris, no mix up here. I've been a landlord since 1989 and I too have seen a change in the last 5 years. Deposit protection is simply a sympton of that change, the internet is the cause. People are better informed of their rights and it is easy for them to share their woes with the world.

I realise that I need to protect my deposits becuase there were too many shysters who saw them as their money. Like you I always played fair. I now have to pay £30 every time I create a new tenancy for deposit protection. I never used to charge letting fees but I now charge £150 to cover all the referencing and extra admin etc.. I'm better protected these days and so are my tenants but they are paying for that, not me.

22:28 PM, 11th February 2012, About 10 years ago

I am afraid that the Lettings industry and LA are inextricably entwined.
Your way of doing things is now passed it's sell by date.
It is a shame that this is now the case; but as Mark says the internet now gives information to all and sundry.
The days of a gentleman's handshake are long gone.
The county court system conspires against LL and savvy tenants can destroy a LL's  business if they are not on their game.
It is a terrible indictment of the way things have 'progressed'.
Now you have to make sure you have your a--e covered.
LA whether you like the idea of them or not are for some LL a vital adjunct to their business.
Personally I use DIY methods such as online LA to keep my costs low.
So I am with you here; we can manage our circumstances and make it a cheaper proposition for tenants rather than them going to a traditional LA.
Because of the amounts of monies involved ; whether we like it or not I think a sensible LA regulation system is needed.
I think Mark's ideas are probably a cost effective solution to these seemingly intractable LA issues.
In fact with the advent of the internet the costs for a private LL to let out a property have reduced massively.
Eg.
Tenant source via online LA
£50-£99
Credit check for an RGI policy
£10
RGI policy £89.00, no excess.
£30.00 mydeposits fee.
Comparison with a normal LA
50% of months rent if tenant source only!!
Plus charges for AST etc
95% of tenants look online now for rental property.
LL will continue to migrate to these methodologies so much so that LA are going to have to put a convincing case to LL to acquire their business.
The internet has been a great leveller and stopped restrictive practises in their tracks across all sorts of industries.
Therefore I don't think that this LA proposal will ensnare you or your tenants.
It certainly won't affect me and it shouldn't you.
If you choose later to use a LA then a LA  additional costings may be passed onto you in the form of higher fees.
If however ALL LA are regulated via Personal Liability insurance then you would be able to choose from LA who ALL have to subscribe to it and have set their prices accordingly.
It will then be a level playing field.
Unscrupulous LA will hopefully be eradicated.

9:36 AM, 12th February 2012, About 10 years ago

As a LA I fully agree with further legislation however I dint want it run by the local council as I am in the Manchester area and all the local council wants to do is charge silly fees for nothing. They made a mess of the selective licensing.
If all agents had to be a member of ARLA, they have to be in a deposit scheme, they have to have client accounts, PI insurance, training with the NFOPP and be members of the TPO. We also carry client protection money insurance. ARLA advertising so more LL and tenants are aware and maybe joining up with "safe agent" would be a way forward. Displaying there PL insurance or having to produce it to LL as requested to show that they have renewed it would also ensure that LLs can be reassured.
I do feel that a lot of LLs are to blame for the need of more regulation (which I welcome) because of there failure in carrying out correct DD before appointing someone who isn't ARLA registered

Mark Alexander - Founder of Property118 View Profile

9:43 AM, 12th February 2012, About 10 years ago

I agree that ARLA has a very robust framework and that all ARLA members should find it very easy to be licensed. However, if licensing was to insist on ARLA membership on day one other good letting agents might find the barriers to entry to difficult. Any initial licencing would need to be simple, I feel very confident that over time the insurers would encourage all agents to aspire to ARLA membership, if only to keep their insurance premiums affordable.

Mary Latham

11:14 AM, 12th February 2012, About 10 years ago

I agree that we don't want local authorities to control a scheme like this but neither do we want barriers that prevent small well run agencies continuing to grow and I am sure that Government would not go down that route anyway.  A simple licence is what Mark has suggested and this should be run through a national administrative centre like road tax.  It will be the insurers that will increase the regulation as they seek to reduce their risk and identyfy safe practice.

There is nothing to prevent ARLA or any other organisation bringing in more self regulation for those LA's who choose to joiin and can afford to do so.

Mark Alexander - Founder of Property118 View Profile

11:24 AM, 12th February 2012, About 10 years ago

That's a very good point Mary, I hadn't thought of it like that. A company called Capita run most licencing schemes like this, your TV licence being a good example. I have a few contacts there so I will get in touch.

18:13 PM, 12th February 2012, About 10 years ago

I agree with Mary that road tax is the correct model with the insurance
and MOT being checked before you get the road tax.  It has low admin cost and works very well.   I don’t like the ideal that a national agent
will need a different licence for each area they have a property in.

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