Regulation of agents update

The government has completed its consultation seeking views on whether a new regulatory model is needed for agents in the lettings and leasehold sector. Our previous posts on this topic can be read here.

The response document published by the government runs to some 33 pages so we have a brief summary of the changes the government is committed to introducing following an analysis of the responses to the consultation.

  1. Regulation

The government is committed to regulating lettings and management agents. This encompasses letting agents and all types of managing agent including those covering short lettings as well as block managers. The government wishes to ensure that all agents in the lettings and leasehold sector are meeting minimum standards and complying with their legal responsibilities, and that rogue operators find it harder to trade.

Regulation will be overseen by an independent regulator. The government still needs to consider whether the regulator will be a new public body or whether there is an organisation that could be approved by the government to fulfil the regulatory role. The government will also consider whether the regulator will have a direct relationship with agents or whether there will be an indirect relationship with agents joining professional bodies and the regulator providing an oversight of them to ensure they meet minimum standards.

The powers of the regulator will include banning agents and landlords, imposing financial penalties, and inspecting properties. The regulator will also be responsible for providing information to help and inform tenants and leaseholders. This help and information will include publicity campaigns to alert tenants on risks to be avoided. It will also encompass an information and education role as well by warning agents of reputational risks associated with poor practices.

  1. Minimum entry requirements

The government is committed to introduce minimum entry requirements for lettings and management agents. Agents will need to meet entry requirements under a new regulatory approach which may include a fit and proper person test, continuing professional development and training requirements. It is intended that any qualification will teach agents relevant law, financial management, customer service and ethical conduct.

  1. Code of Practice

The government will develop a single code of practice which will set out basic expectations for how agents conduct their business. Other professional bodies will still be free to adopt their own codes of practice, but these will need to build upon the government’s code rather than replace it. The code will not be generic for both lettings and management agents recognising that the roles are different. It will likely have a general core with particular sections for both types of agents.

  1. Fees and Right to Manage

The government is proposing to simplify the process of leaseholders obtaining their own Right to Manage. Measures such as the power to veto a landlord’s choice of managing agent, periodically reviewing performance, and switching agent for poor service will also be considered.

Comment

Regulation is getting closer however prior to any implementation the government will need to introduce primary legislation. This means that agents will have a fair bit of time to make any changes required and obtain any qualifications necessary. There will of course be costs associated with this new regulatory framework for agents but what they are is not currently known and will not be clear until the regulatory model is decided on and the level of training needed is clearer.

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