Letting Agents Are Not Even Regulated!

July 11, 2013Tags: letting | agents

Did You know, Lettings Agents Are Not Even Regulated by the 1979 Estate Agents Act?

Anyone can set up a lettings agent and deal with large sums of cash and believe it not, unlike sales agents, don’t have to register for Anti Money Laundering.

It’s difficult for consumers to appreciate the myriad of accreditation in what is an unregulated industry. There are more badges in windows than at a Scout camp.  In fact, there are only 6 providers of client money protection insurance (CMP) in the UK. These are ARLA, the Law Society, National Approved Lettings Scheme, RICS,UKALA and NAEA. Unsurprisingly, many people believe that an agent who is a member of the Property Ombudsman Scheme offers protection. They do not. TPOS is a great organisation but it is a redress scheme and cannot do more than impose a fine, which is not much use if the agent concerned has ceased trading.

Why is This Issue So Important?

Even if your tenants deposit is registered in a custodial scheme, you may think you are protected. Was it properly registered on time? There is also rent to consider, payments for maintenance etc. Further, having CMP requires membership of a regulatory body which, by virtue of the common requirements, offers additional benefits. Member agencies will also have Professional Indemnity Insurance, have their clients account independently audited and subscribe to a code of Practice and be members of a redress scheme. Usually, a Principal, Partner of Director will be accountable for the actions of all their staff.

Additionally, an agent which has voluntarily increased their regulatory burden will be an agent who subscribes to set standards of compliance. Tenancy agreements will be current, notices served correctly and staff will have undergone training. If they get it wrong there will be a specific complaints procedure and should they not comply with the same, you can seek redress.

The Government will not impose regulation and instead have challenged industry to find a solution to protect the consumer and raise awareness following a spate of lettings agents going bust and clients losing substantial sums. All too often, I have been asked for advice from Landlords whose agent has closed owing thousands of pounds. They are astounded to discover that regardless of the reason, it is the Landlord who must repay the tenant and further, may be the subject of further penalties if the deposit is not properly registered. In most cases, when asked, the Landlords concede that the reason they chose the rogue agent in question, was because they were cheaper.

Often agents who chose not to nail their colours to the regulatory mast operate without keeping pace with the constant changes to legislation. Continuing Professional Development is at the core of many regulators requirements as is the need to clear terms of business where costs are flagged at the commencement of the relationship.

If an agent is not a member of one these regulatory bodies, a landlord or tenant must ask themselves ‘Why not?’

In most cases it’s because it simply saves money and red tape, but increasing numbers of prosecutions are revealing a more worrying trend. Deprived of bank facilities from overdrafts and loans, increasing costs and pressure on cash-flow with suppliers being less patient for payment, a client’s account has proved too tempting to resist. Incredibly, there are no checks on this money as it not a company asset. Some companies say that they don’t need regulation as they have been trading for years without any problems. RBS said similar.

Simply, Cheap Fees From an Unregulated Agent Is a Gamble

ARLA is at the forefront of the campaign for all agents to be regulated and to raise consumer awareness of the pitfalls which currently exists.  We are proud to be members and support this campaign.

by Eric Walker - RMD of Your Move - South East. With over 25 years’ experience, 16 of which were in London, Eric has worked in all aspects of the business and was previously Group MD of the highly respected Bushells.  A regular contributor at industry forums, Eric was a founder member of the SAFEagent scheme which has received widespread support from many including the Mayor of London, Trading Standards, The Property Ombudsman as well as being highlighted in both Houses of Parliament.