Friday, 1 October 2010

Letting Agents join the campaign for greater regulation of the private rented sector

Association of Residential Letting Agents
Briefing for Graham Jones MP: Regulation of the private rented sector

Executive Summary
- There is currently no mandatory licensing scheme for letting agents or landlords in the UK, despite 95% of consumers believing there should be one in place

- The previous Government announced that it would create an independent regulator for letting and managing agents, and a national register for landlords – policies that ARLA welcomes. To date, the new Government has not given any indication of whether this important policy will be taken forward, and we would appreciate clarity on this issue
Graham Jones: It is clear that the public, Councils, NGO's, professional bodies and charities want greater regulation of the private rented sector. Grant Shapps, Housing Minister must take notice of the vociferous volume calling for positive action.
ARLA's backing shows this isn't a landlord verses resident issue but a matter of spiralling national concern.

1.  Letting agents & landlords in the UK

As it stands, there is no mandatory scheme for the regulation of letting agents or landlords.  Scotland does have a mandatory registration of landlords, and many local authorities have a voluntary accreditation scheme for landlords although the standards operated by these schemes are extremely diverse and many landlords choose not to belong. There are bodies which provide a form of self-regulation for agents and again many choose not to belong.  Selective licensing powers are available to some local authorities and are used to deal with the worst areas of that authority’s Private Rented Sector.

ARLA believes that there are many difficulties suffered by tenants from rogue letting agents, which include:

  • Loss of funds through a lack of client money protection;
  • No professional indemnity insurance in place to protect a consumer from a serious error;
  • Loss of monies due to the unlicensed agency holding the funds going into administration and the clients funds not being ring fenced.;
  • Poor advice to landlords, for example about their legally-required deposit protection responsibilities, which can result in loss of the deposit for tenants and/or a fine for landlords;
  • No commitment to best practice or any form of independent redress scheme for when things go wrong.

ARLA has recognised for over a decade that there is an urgent need for further regulation of the private rented sector.  We believe that full mandatory government regulation is the quickest and most effective method to eliminate unprofessional, unqualified and unethical agents from the rental market.  In the absence of a government run scheme, ARLA introduced a licensing scheme for its members, which we believe offers the most effective protection for consumers that is currently on offer.

2.  The ARLA Licensing Scheme

ARLA introduced a licensing scheme for all its members in May 2009 which ensures the highest standards of service for those who use members of the scheme.  The introduction of that scheme was supported by a wide variety of organisations, including Trading Standards, Shelter and the National Landlords Association.

A survey carried out by ARLA showed that 95% of consumers revealed that they believe letting agents should be licensed and it is a shock for many to learn that there was previously no scheme in place at all and still no mandatory scheme.

The scheme delivers higher standards of service for tenants by ensuring that licensed members abide by the relevant Codes of Practice and Rules of Conduct, hold recognised qualifications and are covered by Professional Indemnity Insurance; a recognised client money-protection scheme and an independent redress scheme.  The licensing scheme also has many other facets to improve service, such as ensuring that all members undertake at least 12 hours of Continuing Professional Development each year.

James Plaskitt MP tabled an Early Day Motion in support of the scheme in the last Parliament, which attracted 45 signatures.

3.  The current political situation

The previous Government issued its response to the Rugg Review, which was commission by the Labour Government, of the private rented sector which set out several proposals for professionalising the industry, including creating an independent regulator for all letting and managing agents.

The proposals included the creation of a national register for landlords, an independent regulator for all letting agents, and an improved complaints and redress procedure for tenants.

ARLA has been calling for greater regulation of letting agents for over a decade, and overall, welcomed the previous Government’s proposals.  Currently it is estimated that only around half of lettings agents belong to a professional body and so some form of compulsory regulation is necessary.

However, to date, it is unclear whether this policy will be taken forward by the new Government.  ARLA would welcome further detail on whether this vital policy will be taken forward, including what form the independent regulator will take and what powers it will be granted.

ARLA believes that one solution the Government should consider is expanding the remit of the Property Standards Board (PSB) to create a new independent regulator for letting agents.  The PSB brings together various stakeholders from across the property spectrum, including property professionals such as ARLA and the voluntary ombudsman schemes, which are mandatory for property sales.  The aim of the PSB is to promote the interests of consumers in residential property by improving standards and ensuring a joined-up approach to standards and information-sharing.  They look at Sales, Lettings and Block Management.

ARLA believes that extending the remit of the Property Standards Board could include making the PSB the oversight body which the previous Government envisaged, providing that it works in consumers’ interests, and with input from property professionals such as ARLA.  The advantages of regulation are clear; independent scrutiny would add credibility and improve professionalism by working in consumers’ interests to drive up standards.  Any new regulatory structure must also be supported by the Government to have any credibility.

About ARLA

ARLA was formed in 1981 as the professional and self - regulatory body for letting agents in the UK.  Membership of ARLA is achieved only by agents who demonstrate that they have a thorough knowledge of their profession and that they conduct their business according to current best management practice.

The National Federation of Property Professionals (NFOPP) is the collective name for a number of property related membership organisations including the Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA), and has a combined membership of just under 14,000.  The ARLA and the NAEA are the UK’s leading professional bodies in the sales and letting sectors of the property market.

For further detail please contact Ian Potter, Operations Manager, ARLA.
Direct Line: 01926 417350 – Email: