MPs are today set to approve rules that are hoped will banish rogue lettings agents, forcing them to sign up to schemes that provide victims of unscrupulous practices with compensation.
After years of calls for regulation of the lettings industry the Government is set to bow to pressure to implement rules, via an amendment to the enterprise bill, that will compel agents to repay tenants and landlords they have cheated.
While estate agents already abide by a strict set of rules, this will mark the first time that the lettings industry has seen statutory regulation after years of self-regulation.
What's the problem?
There are two redress schemes currently run in the UK - The Property Ombudsman (TPO) and Ombudsman Services: Property - but they are voluntary only.
Trade bodies such as the Association of Residential Letting Agents (ARLA) and the UK Association of Lettings Agents (UKALA) are covered by these redress schemes and have their own forms of insurance protecting tenants and landlords, but again membership is not compulsory for agents.
Many small agents are reluctant to hand over subscription fees to the trade bodies so will not have access to the schemes.
Most of the major lettings agents, often attached to estate agent companies, will be members of these bodies and offer these protections. However, it impossible to say with any accuracy what proportion of agents are signed up because anyone can start a lettings business without any form of registration or licence.
There are 4.7million households in the UK private-rented sector and particularly in areas of growing demand - such has London - it has led to a rise in the fees and charges that renters and landlords have to hand over on top of hefty deposits and exorbitant levels of rent.
In some cases charges for things such as credit checks, inventories and 'administration' can total as much as £540, which are levied on tenants even before a deposit is laid down.
And sometimes agents sneakily double-charge fees, with tenants and landlords being hit with charges for the same work.
The ombudsman services also rule on complaints about poor service, repairs and maintenance, security deposits and unfair business practices, but cannot do anything currently if the agent in question is not signed up with its scheme.
In 2012 TPO receive 8,334 lettings complaints - a rise of nine per cent on 2011 - but some 2,121 were about agents unregistered with the service.
What will the rule change mean for tenants and landlords?
When implemented - although it will first have to go through a consultation process - it will mean all lettings agents would have to be part of a Government-approved redress scheme.
Currently they only have to join voluntarily and as such hundreds, and maybe thousands, of agents are not subjected to any form of self-regulatory body.
It will mean that any tenant and landlord that has fallen foul of unscrupulous practices, exorbitant and unfair charging, and poor service can complain to an ombudsman who, if they find fault with an agent's actions, can order them to provide financial redress.
What happens to agents who fall foul of the rules?
Approved ombudsman services will be able to order agents compensate tenants and landlords they have wronged.
In more serious cases orders can be made banning someone from engaging in lettings agency work or property management work.
What's more, criminal offences will be created to tackle anyone who breaches their orders. Those found not to have signed up to a redress scheme will also be banned from operating.
Does it go far enough?
The Office of Fair Trading (OFT) has previously called on rules that force lettings agents to reveal a breakdown of their fees and charges to prospective tenants and landlords, but there is no mention of this in the amendment to the bill.
That is not to say it will not follow, with the National Landlords Association (NLA) telling This is Money that details of the implications of the amendment are yet to emerge.
The Advertising Standards Agency (ASA) has taken a stand on this issue recently, last month rapping Your Move for not making clear that non-optional fees and charges would be added to a quoted price.
The ASA said that although the law had not been changed, advertisers would have to make it clear in quoted prices if there are compulsory fees and charges.
Will the changes work?
Which? executive director Richard Lloyd said: 'With renting now the only housing option for millions, we're pleased the Government will now give tenants and landlords access to a complaints scheme. Our research revealed an alarming lack of consumer protection in this market so it's vital the Government puts these plans into action as soon as possible.'
Chris Norris, head of policy at the National Landlords Association (NLA), said: 'The Housing Minister’s announcement that the Enterprise and Regulatory Reform Bill will be used to provide a basis for future, specialised regulation of letting agency standards is very welcome as it will provide the best means to ensure that landlords and tenants who choose to use professional letting services receive adequate protection.'
Caroline Kenny, of the UK Association of Letting Agents (UKALA), said: 'At UKALA, we have long been of the opinion that a bespoke solution was needed to address the issue of accountability and transparency within the lettings sector and that a poorly devised regulatory approach could do great damage to the sector at a time when it’s growth is essential to providing a healthy housing market. We must not forget that the vast majority of letting agencies are small and medium sized businesses which will face greater hardship complying with additional burdens.
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