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.
John Gell MRICS