Rant About Scottish Letting Regulation

by John Gell

15:29 PM, 13th September 2013
About 5 years ago

Rant About Scottish Letting Regulation

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Rant About Scottish Letting Regulation

As the Scottish Government gets set to embark on the regulation of letting agents – regulation which is badly needed in my view – I fear that my worst nightmare may be about to become true.

Why? Well, let’s look at what’s happened already with Scottish renting legislation.

Landlord Registration has for the most part been startlingly ineffective in raising standards. In fairness, that perhaps was not its prime purpose (having been introduced under anti-social behaviour legislation) but the fact that we now have a national database of private landlords should allow national and/or local government to target those landlords with awareness-raising advice, invite them to seminars and so on. Those unfortunate tenants who suffer at the hands of malicious or, more likely unaware, landlords need that to happen. I’m fairly sure there must still be many landlords who are not yet registered. The fact that Scottish Government hiked the penalty for non-registration up from £2,000 to £50,000 must surely indicate that registration is seen as important. The requirement to quote registration numbers in property advertisements seemed a pretty good way of bringing all landlords into the system. Yet, how many adverts still appear with no registration numbers? How many unregistered landlords have been fined?

No. I see poor practice flourish aplenty and registration requirement ignored. I see responsible landlords pay their dues while the irresponsible carry on regardless. I see local authority Landlord Registration teams funded by those responsible landlords and, it seems, doing not a great deal to bring all within the net.

Why not simply legislate to make it a requirement that for any individual to rent out a property he or she must either use a regulated agent (when that’s in place) or achieve accredited landlord status (or commit to a time-limited accreditation path)? Overnight, poorly performing landlords would be outlawed.

Look at Tenant Information Packs. Of course it’s good practice to pass incoming tenants information and advice relative to their tenancy and their new property. Responsible agents and landlords have been doing so for years as a matter of course. So surely it’s good that all now have to do so?

In theory, yes, but from our perspective as a letting agency we now find ourselves managing a parallel process issuing the mandatory Tenant Information Pack (TIP) alongside our own one, as the mandatory one is so stodgy as to be a turn-off to most tenants, contains errors, and imparts nothing of substance about the property. The effect of this has been to sap resources, particularly time – our scarcest resource – and so impact negatively on our finances. So a highly responsible agency, regulated by RICS and licenced by ARLA is being forced to go through an ineffective process which hampers business efficiency while less regulated or less responsible agents who decline to do so, or are even unaware perhaps that they need to, sail on in the same old way. How many letting agents have been taken to task for failing to issue a TIP? How many who fail to do so, use a low-fee basis as a means of attracting clients? The answers to those questions are unknown, but I’m pretty certain the first is zero or we’d have heard about it.

Simply Let pays about £2000 per year in professional membership subscriptions and regulation levies. We do that because we believe in high standards, and in demonstrating that we hold that belief. We undertake continuing professional development. We do so because we need to be fully informed in order to serve our clients well. We cannot give our landlord clients and their tenants the service they deserve on a low fee basis.

If a landlord’s agent fails to fulfil one of his client’s statutory obligations, it will be the landlord who is held responsible. Are all landlords aware of this? How many agents are playing fast and loose with their obligations to their clients? Again I don’t have an answer to that. If an agent lands a landlord in trouble as a result of negligence or incompetence does that landlord have recourse to a complaints redress mechanism? If that agent goes bust or even runs off with the cash is the landlord’s money safe? Does the agent have client money protection? Unlike estate agents selling houses, a fairly straightforward one-off task, letting agents have on-going management responsibilities which require detailed knowledge of complex housing law. Currently anyone can set up as a letting agent without any qualifications or training whatsoever and without any insurance or external monitoring and take on responsibility for managing clients’ major financial assets and ensuring tenants’ safety in the home.

You can see then why we favour regulation of letting agents. With a level playing field, landlords and tenants could go about selecting an agent knowing that all agents had the basics in place. Why then do I fear, as I said at the beginning of this blog, that my nightmare is about to be realised?

In my nightmare, responsible and already regulated agents found themselves obliged to register and of course to pay a recurring fee for doing so. In my nightmare less responsible agents continued to operate without appearing on the register. The third strand of my nightmare is that nothing much else happened.

It’s turned out like that with Landlord Registration so it’s perfectly possible that Letting Agent Regulation will go the same way.

Why not simply make it a requirement that in order for any letting agent to practice he or she must have in place:

  • A minimum level of relevant knowledge
  • Professional indemnity insurance
  • Client money protection
  • A complaints redress mechanism
  • Evidence of continuing professional development?

All are currently available to any responsible agent.

The private rented sector involves the very basics of life: a tenant’s home and a landlord’s financial investment (and possibly pension plan). It is critical therefore that all who manage any part of that process, landlord or agent, have the knowledge and capability to undertake their role to a high standard and fulfil it in a professional manner. It is critical too that those who entrust their lot to an agent have the benefit of certain basic protections. So my plea to the Scottish Government, when it develops letting agent regulation, is to make it impossible for any agent who can’t deliver those five elements above to continue in practice. The country and its tenants deserve nothing less. Rant About Scottish Letting Regulation

John Gell MRICS



Comments

Mark Alexander

15:45 PM, 13th September 2013
About 5 years ago

As you know John, I'm a landlord operating very much South of the Scottish border but I share many of the same thoughts and concerns.

In many ways people can argue that housing law in England is inferior to that in Scotland because we can still charge fees to tenant. That's a whole separate debate though, as is whether all tenancy deposit protection schemes should be custodial.

My key fears are the same as yours though. We have several laws that go unenforced.

You've got me off one one now!

When was the last time we heard about a property sourcer being prosecuted under the Estate Agents Act 1979 for not belonging to a redress scheme or even having PI insurance which would qualify him to do so? As we know, there are several operating but only a very small fraction are compliant.

Why don't local authorities simply use their EHO functions to close down unsafe or over-crowded properties? Because it cost them money, that why! They don't want to take on the responsibility of having to re-house tenants either! So what do they do, they invent new licensing schemes to raise funds and then continue to do nothing. In fact, the scheme I've seen cost more to administer than they collect - what's the point of that? Jobs for the boys, that's what I think it is!

Thank heavens we don't have to provide those stupid Tenant Information Packs. TIP is a great abbreviation because that's where all that paper will end up, never having been read!

Your turn ......
.

Kirsty McGregor

16:22 PM, 13th September 2013
About 5 years ago

What a mess! And if anyone wants to tell me again that landlord accreditation is essential (rather than just a nice-to-have), just look north of the border - it doesn't work in most areas and doesn't differentiate to tenants who don't understand it or look for it. Anyway, that's for another post.

I'm not sure whether regulating letting agents will get rid of the problem. I know of countless situations where agents who are ARLA, RICS & national household names have time and again provided an appalling service - both to landlords and to tenants. And they are getting away with it because the market just puts up with it. On the whole, tenants are not aware of what they can do & what their rights are - the demographic is changing, granted. But an awful lot of tenants live in fear of their landlord telling them to leave and them losing their bond/deposit because they don't feel they have a voice that's large enough to fight.

We're back to increasing standards and education again (both of landlords & tenants). It's a combined effort. But the regulatory & professional bodies need to play a part in that too.

Mark Alexander

17:03 PM, 13th September 2013
About 5 years ago

Reply to the comment left by "Kirsty McGregor" at "13/09/2013 - 16:22":

Hi Kirsty

I think you are mixing up accreditation with registration.

Landlord Registration is compulsory in Scotland, Landlord Accreditation is not.

They are VERY different things, I'd liken it to registering the birth of a baby vs parenting.
.

Kirsty McGregor

20:18 PM, 13th September 2013
About 5 years ago

Isn't landlord registration the more mild form of landlord accreditation? Surely they are registering these landlords for some purpose...with a view to tracking them & increasing standards? Won't it evolve to an accreditation type process in due course (if they have their way)

Mark Alexander

20:24 PM, 13th September 2013
About 5 years ago

That's what you'd have thought, however, the Scots are beginning to realise landlord registration is a nothing more than a fundraiding con, standards remain unchanged.

Education based training is proven though, especially in established areas like the Midlands. Just ask Mary, Anon too perhaps? 😉

Kirsty McGregor

20:43 PM, 13th September 2013
About 5 years ago

well exactly, it's a waste of time!

John Gell

21:53 PM, 13th September 2013
About 5 years ago

Reply to the comment left by "Kirsty McGregor" at "13/09/2013 - 16:22":

Thanks for your comment Kirsty.

In my view the key to regulation being effective and working as planned is for tenants to be fully aware of, and assert, their rights. As you observe, it's often easier for a landlord to terminate a tenancy than fulfil his obligations, and so tenants are disempowered.

Alongside that, house hunting tenants seem more focused on finding their ideal home than on considering what the management regime will be like. They would be wise to stand back and ask a few questions. That's why we need effective regulation and a level playing field, so that all participants know that basic standards will apply. Tenants need then concern themselves only with the merits of the property they're considering, safe in the knowledge that it will be well managed, and landlords would know that their agent could be depended upon to safeguard their interests.

Kirsty McGregor

21:59 PM, 13th September 2013
About 5 years ago

Reply to the comment left by "John Gell" at "13/09/2013 - 21:53":

And that's the utopia that the sector has to try and achieve. I'll do the property grading (new product coming soon!). But the landlord accreditation and/or registration schemes need to sort themselves out! And don't get me started on the London Standard! A national approach is required. Ideally not by government intervention either. North or South of the border....who's going to do it?

John Gell

22:14 PM, 13th September 2013
About 5 years ago

Reply to the comment left by "Kirsty McGregor" at "13/09/2013 - 20:18":

It's the other way around Kirsty. Landlord Registration is compulsory in Scotland and seems to achieve little, whereas Landlord Acreditation through Landlrd Accreditation Scotland is highly effective in raising awareness and standards and in giving tenants a reliable renting experience.

Kirsty McGregor

22:22 PM, 13th September 2013
About 5 years ago

Oh they still have both in Scotland? Now I may be asking a silly question here...but why didn't they throw the (new) resources behind the existing Landlord Accreditation Scotland Scheme? If it was working so effectively...but just needed wider promotion? Or am I being too naïve now...and I don't expect you to answer the question lol!

And compulsory regulating of agents is another matter. It's only worth regulating them if they are answerable to their regulatory/professional body. Does that work where agents are already members of something. I'm afraid to say, not in my experience. Again, not the answer in itself. This needs to be a packaged deal...landlord accreditation/education, property quality (wider than H&S) and agents' standards....all with both a carrot & a stick approach. Simple?? Probably not in practice. But that's my theoretic perfect world.

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