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Government crackdown on managing agents

Thursday 26 October 2017

Considerable scrutiny of the property sector continues, with no signs of stopping as the Housing Minister has announced a Call for Evidence to address concerns around both letting agent practices and those of agents managing leasehold, generically referred to as 'property agents'.

Minister for Housing and Planning, Alok Sharma launched a consultation on proposals to regulate property agents, with the aim of addressing service charges for leasehold and privately rented homes and protecting consumers.

The latest consultation forms part of a bigger picture of regulation for the property sector that is being looked at by the Government including leaseholds on new build properties, the regulation of letting agents and the banning of letting agent fees.

It is estimated that between £2.5 billion and £3.5 billion a year in service charges are levied on the current 4.2 million leasehold homes in England. Research by consumer group Which? claims that up to £700 million of these costs are questionable, with the All-Party Parliamentary Group on leaseholds believing that the total volume of redundant charges could be much higher.

Speaking on 18 October, Alok Sharma said: 
"Tenants and leaseholders—even some freeholders on new-build estates—hand over their money and receive services in return, but have little or no say over which agent provides them or at what cost."

"Today, we are setting out plans for fixing the problems in property management. We are publishing a call for evidence which outlines the challenges facing the sector, proposes some possible solutions, and asks for the views of the people who know the market best, from those who work in it to those who pay the service charges."

"...We want to give power back to consumers, give agents a clear and consistent framework to operate in, and give landlords, renters and leaseholders the confidence they need to know that agents are complying with the rules."

What issues does the call for evidence address?

The consultation questions are loosely themed around four chapters:

  • The case for change
  • Minimum entry requirements and standards in order to operate as a managing or letting agents
  • What regulatory approach and enforcement should be put in place?
  • Empowering consumers through rights to choose and switch agents and to challenge service charges.

The six week call for evidence, ending on 29 November 2017, entitled 'Protecting Consumers in the letting and managing agent market' sets out to evidence whether a regulatory overhaul of the sector is needed, by asking respondents:

  • Which of the following options do you believe would have the greatest impact in driving up standards and increasing consumer confidence in the sector:
    a. Requiring all letting agents and managing agents to be members of a relevant professional body. This would require professional bodies or organisations to be approved by Government, possibly operating to one Code of Conduct.
    b. As above, but with oversight from a regulatory body, established or approved by Government.
    c. Government establishing or approving a new regulatory body, which agents are required to sign up to, with membership of a professional body optional? 
  • Should the Government establish a new regulatory body to cover all the issues within leasehold and private rented management, lettings and, potentially, estate agency? Or should separate bodies be established? 

Other measures to be considered include: what core elements should be covered in setting appropriate standards for agents and for property managing agents; whether leaseholders should have a greater say over the appointment of managing agents and how transparency can be increased in the system so that tenants and leaseholders know what they are being charged for and why.

Mark Hayward, Chief Executive, NAEA Propertymark and David Cox, Chief Executive, ARLA Propertymark commented:

“ARLA and NAEA Propertymark welcome this announcement; we have long called for greater regulation of the housing sector. It will give consumers greater control over who manages their property, create long needed transparency, and raise the bar for those wishing to work in the housing sector. However, it’s concerning that estate agents don’t fall under the Government’s initial scope – we urge ministers to widen the remit to include the whole housing market.

“We are committed to ensuring consumers receive the best level of service when looking to buy, sell, rent or lease a property. Our members are required to have deposit and client money protection schemes in place and undertake regular training. However this doesn’t stop some rogue agents from giving the industry a bad name. Blanket regulation is the right approach if we are to give consumers the confidence they deserve and reassurance that they will be treated fairly, no matter which agent they use.”

Have your voice heard

Propertymark have long supported regulation of the property industry, and the agents that work within it. We will be meeting with Government and responding to the call for evidence on behalf of NAEA Propertymark and ARLA Propertymark members.

Members should also respond directly via the online survey, but in addition we'd appreciate it if you could also send your views to Propertymark Policy and Campaign Officer, Tim Douglas so we can gauge opinion and gather evidence from across our membership base.