New protection for tenants and leaseholders

The government wants to prevent tenants and leaseholders being exploited by agents, says Emma Lunn.

896_MW_P22_inv-prop_top
Tenants should soon have less to worry about

The government plans to set up a new regulator that will oversee the activities of letting agents and managing agents of leasehold properties, in an effort to protect the almost nine million households in England's privately rented and leasehold sectors.

Under the proposals from the Ministry of Housing, Communities and Local Government, a new mandatory code of practice will impose a minimum standard of behaviour on letting and managing agents, with sanctions imposed on those who fail to adhere to the code. At the moment anyone can set up a business as a property agent, regardless of their qualifications or experience although since October 2014 letting and property management agencies have been required to be members of an approved redress scheme, which can provide an independent assessment of complaints against the agency. (Note that housing policy in the UK is devolved, so different approaches apply in Scotland, Wales and Northern Ireland.)

Although the new regulator has been tasked with overseeing both letting agents and managing agents, the problems in each sector are obviously different. On the lettings side, both tenants and landlords often complain that agents charge extortionate fees for simple administrative tasks such as credit checks, obtaining references, and arranging for tenancy agreements to be signed. Moreover, during the tenancy some letting agents omit to arrange repairs where necessary, or fail to pass on tenants' rent to landlords.

Meanwhile, in the leasehold sector, leaseholders often find themselves on the receiving end of eye-watering bills for repairs and maintenance, with managing agents awarding contracts for work with little regard for cost control. The new code of practice will include a system to help leaseholders challenge unfair fees, including service charges, and support for leaseholders to switch managing agents where they perform poorly or break the terms of their contract. The regulator will also look in greater depth at unfair additional charges levied on leaseholders and on homeowners who own the freehold to their house. These include restrictive covenants, leasehold restrictions and administration charges.

Under the government's proposals, both letting and managing agents will be required to undertake continuing professional development and training and obtain a nationally recognised qualification to practice. Additionally, at least one person in every organisation will be required to have a higher qualification.

The new regulator will be given strong powers of enforcement for those who break the rules. Letting and managing agents who fail to comply with the code will not be permitted to trade, while the worst offenders could face criminal sanctions. A working group comprising letting, managing and estate agents, as well as tenants and regulation experts, will be established to draw up more detailed proposals that are expected to be finalised sometime in 2019.

In the meantime, the government's pledged ban on tenant fees and cap on deposit amounts, as well as legislation requiring letting agents to be part of an approved client money protection scheme, which protects tenants and landlords in the event that the agent goes bust or acts fraudulently, are also set to come into effect in spring next year.

Recommended

Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021
Frisby’s forecasts – what does 2021 have in store for investors?
Stockmarkets

Frisby’s forecasts – what does 2021 have in store for investors?

Dominic Frisby gazes into his crystal ball and makes his predictions for the markets in the year ahead.
6 Jan 2021
Will Britain’s 2020 house-price boom continue in 2021?
House prices

Will Britain’s 2020 house-price boom continue in 2021?

House prices in the UK were hardly cheap going into this year. Yet now, despite the Covid-19 pandemic, they are rising fast. Can it continue into 2021…
2 Jan 2021
House prices boomed this year: but will that continue in 2021?
House prices

House prices boomed this year: but will that continue in 2021?

Despite everything, it’s been a good year for UK house prices. John Stpeek looks at what’s been driving the rise and asks if that will carry on into 2…
24 Dec 2020

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021
Free 6 issue trial then continue to