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Landlords escape red tape

publication date: Jul 16, 2010
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red tapeIf a week is a long time in politics, (as they say), four months is a lifetime. Not so very long ago, on 4 February 2010 to be precise, John Healey, the Labour Housing Minister, announced plans for major regulation for the Private Rented Sector (PRS), which included ‘full regulation’ (licensing) of letting and management agents, a national register of landlords, a new housing hotline offering free help and advice for private tenants, a ‘Trip Adviser’ style word-of-mouth website comparing landlords andf a requirement for written tenancy agreements in all tenancies. The plans for a landlord register were produced by the Rugg Report by York academic Julie Rugg. Labour had planned to take forward the plans despite criticism that they would be ineffectual and costly to the housing sector. Shortly afterwards, Sir Bryan Carsberg’s Review of Residential Property had also recommended a regulatory regime. Clearly, neither reports has struck a chord with the new government.

Nobody much liked the idea of a landlord comparison website or the housing advice hotline, both seen as Labour Party vote catching gimmicks. The requirement for written tenancy agreements was totally acceptable – a no-brainer.

Most lettings professionals agreed that licensing of agents was probably a good idea but they were also extremely concerned by the extra costs involved and the inevitable red tape. With the annual costs and paperwork already associated with running a lettings business; including professional body membership fees, tenancy deposit protection costs, ombudsman membership, training and qualifications fees, the outgoings before any money is actually earned can be quite daunting.

The professional bodies of course, were all for regulation, as the aims of the regulation were to make it very difficult for unregulated agencies to survive – abolishing the ‘cowboys’ has been a long held dream. But also, said some more cynical agents, because they stood to do rather well out of regulation – increased training requirements, increased examination applicants, increased memberships… resulting in a vast increase in business.

Then came the coalition cavalry favouring a lighter hand in managing the property industry, launching their new political regime with the much applauded scrapping of HIPs. Good news for most and then… the complete scrapping of all the planned Labour legislation for the PRS.

Grant ShappsNew Housing Minister Grant Shapps said that the sector was already governed by a well-established framework and that regulating letting agents would create red tape. “With the vast majority of England’s three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords,” Mr Shapps told Parliament.

The announcement came in response to a parliamentary question from Sunderland MP Julie Elliott about plans for future regulation of the private rented housing sector. Shapps said he “wouldn’t be taking forward any of the regulatory agenda” as he believed that the current balance between landlords and tenants rights was about right. The Minister was probably rather surprised by the response from the PRS as most commentators professed to be horrified. It seems that having spent the last 15 years complaining about overbearing legislation in the PRS, the industry is now upset that there will be no more.

And it wasn’t just the industry – the Citizens Advice Bureau said the move to scrap stronger regulation was a mistake. In a recent survey of 1,300 tenants, it found 73 per cent were unhappy with the service they received from their agent. However, using a logical thought process would indicate that the CAB’s clients would only be responding to the survey because they were, in fact, disgruntled in the first place. The truth is that most people are well looked after when renting through professional agents, and the percentage of those who are unhappy is unlikely to be anywhere near 73 per cent.

NALS was first past the post with its forceful criticism of Grant Shapps’ decision.
“Grant Shapps and the Coalition are abandoning the consumer with their decision to scrap plans for the crucial, planned regulation of the PRS. Why is this being abandoned just as more people are having to turn to the PRS for a home? There is plenty of evidence that consumers (tenants and landlords) are at risk because there is no compulsory regulation of the sector.

Caroline Pickering, NALS“As one of our members puts it, ‘It is all too easy for a rogue agent to fleece landlords and tenants of their money, to oversee the letting of properties that are in poor condition, anFd to damage local communities by leaving a trail of unpaid bills amongst hard working local trades people. This has to stop and the Government needs to take a lead here and deliver a framework that requires as a minimum that a letting agent be a member of one of the current schemes (NALS, RICS or ARLA). This will involve no public expenditure, puts the regulatory function out to the private sector, addresses local concerns and will protect consumers.’

“By ignoring the needs of the PRS – now at a time of economic instability – the Government is putting people at risk. We have seen a significant increase in agents misappropriating the monies of tenants and landlords, for those consumers with a licensed NALS firm they can claim back monies from the Client Money Protection scheme but not everyone is that lucky.

“Consumers – tenants and landlords – are giving their own money to unaccredited Letting Agents without realising that these agents do not have to have any insurance to protect their money. This trust can and is being abused.”

Chris HamerChristopher Hamer, The Property Ombudsman said that, “The decision by the Housing Minister potentially leaves landlords and tenants exposed to the rogue element in the lettings sector, particularly so in relation to client money protection. I will continue to contribute to the current debate amongst industry bodies seeking a joined up and consistent approach to redress along with clear standards of business, consumer protection and awareness being developed and I hope Mr Shapps supports this.”

The largest ‘trade organisation’, ARLA, was equally unhappy.
Ian Potter, Operations Manager of ARLA, said, “We are extremely disappointed with the Housing Minister’s decision to scrap the previous Government’s plans for the regulation of letting agents. This move risks seriously hampering the improvement oFf standards in the PRS, the sector’s reputation, and the fundamental role it plays in the wider housing market as well as failing to protect the consumer who has nowhere to go when there is service failure or fraud. A minimum requirement must be surely be consumer redress and protection of all funds taken from the public not just tenants deposits.

“We have long campaigned for the introduction of compulsory regulation of lettings agents, along the same lines as our own member-led licensing scheme launched last year. Currently, any person or organisation can become a letting agent. Until that is changed via national regulation, unprofessional, unqualified and unethical operators will continue to exist, to the detriment and expense of consumers and the market as a whole.

 David SalusburyHowever, it seems that landlords are, generally, happy! As the Minister made a “promise to good landlords across the country – the Government has no plans to create any burdensome red tape and bureaucracy, so you are able to continue providing a service to your tenants.” David Salusbury, Chairman, NLA, said, “We wholeheartedly welcome the reminder from Government that the vast majority of tenants are happy with the service they receive from landlords. Of course, from the outset, the NLA believed that a national register of landlords, although well-meaning, was flawed. Today, the Government has confirmed our stance.

“We are very pleased that the Government is rejecting previous attempts to introduce a register: it was the wrong way to go about raising standards in the private-rented sector and would not have rooted out rogue landlords. In fact, we believe the likely consequence could have been to penalise the law-abiding, while at the same time driving the worst landlords under the radar.”

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