New mandatory code of practice for letting agents

Government plan also includes regulator with tougher powers

As everyone sat down to enjoy their Easter eggs, the Government threw a surprise announcement at the industry. On 1st April, the Ministry of Housing, Communities & Local Government detailed their initial proposals for a mandatory code of practice for letting and managing agents. This will be supported by a new independent regulator.

The government foresees any agents that transgress from the new regulations will be banned from trading. Meanwhile, serious breaches of the code would lead to potential criminal sanctions.

Further to this, agents will be required to obtain a nationally recognised qualification in order to operate. At least one person in the organisation will need to have a higher qualification.

Other proposals, include:

• New system to help leaseholders challenge unfair fees, including service charges
• Help for leaseholders to end relationship with a managing agent that performs poorly or breaks the terms of the contract
• All agents to undertake continuing professional development and training, in order to trade

As part of the announcement, Housing Minister, Heather Wheeler said:

“Most property agents take a thorough and professional approach when carrying out their business, but sadly some do not. By introducing new standards for the sector, we will clamp down on the small minority of agents who abuse the system so we can better protect tenants and leaseholders who find themselves at the end of a raw deal.”

The details of the new code of practice will be fleshed out by a working group. This will comprise of representative letting, managing and estate agents, as well tenants and experts on regulations. The group will be formed as quickly as possible, with its final proposals being made to the government in 2019.

As part of its remit, this working group will also investigate unfair additional charges levied against freeholders and leaseholders. These includes restrictive covenants, leaseholder restrictions, admin charges. The expectation is that these fees would be either capped or banned.

Purple Frog are in favour of any changes to the marketplace that make it harder for unscrupulous agents to exploit tenants and landlords. We’re looking forward to finding out more about the working group and their proposals.

Chief Executive of industry body ARLA Propertymark, David Cox, said: “This is a huge step towards creating a level playing field across the industry, and we look forward to working with the Government on this.”

Mandatory Client Money Protection

Also announced mandatory Client Money Protection (CMP) schemes for letting agents. Currently, membership of CMP is voluntary, with approximately 60% of agents signed up. Purple Frog has been a member of a CMP scheme, since July 2017.

Industry estimates that £2.7 billion in client funds are currently held by letting agents. Mandatory membership of a CMP means landlords are reimbursed if agent is fraudulent or goes bankrupt.

This news followed the news that deposits could be capped at five weeks rent, following a report from a Parliamentary Select Committee.