At last someone is taking the bull by the horns and attempting to provide some form of regulation or the UK lettings market. Today the Association of residential letting agents (ARLA) is introducing its own licensing scheme for its members as well as a general code of practice for letting agents. Prior to the scheme being introduced, tenants from across the UK, have complained of poor behaviour by rogue letting agents, who have failed to listen to their complaints and concerns regarding the standard of their rented accommodation. There has been little recourse for people renting buy to let accommodation in situations where letting agents have not carried out their duties professionally. There are literally hundreds of thousands of properties in UK that fall below the government’s own ‘decent homes standard’. Typical, tenants complaints include problems such as broken doors, damp, leaking roofs and peeling paintwork and dirt and grime. Quite simply tenants do not have a real voice and as much power as landlords.
Therefore, the purpose of the scheme is to improve the overall standard of letting agents care towards tenants and landlords. Despite the fact that the scheme is entirely voluntary, the move by ARLA goes some way to embarrassing the government’s lack of activity, in introducing formal regulation, to mitigate the impact of cowboy letting agents. To qualify for a new license, members of the new ARLA scheme must:-
- Undertake a professional qualification in relation to lettings management;
- Participate in including continuous training;
- Must provide evidence that they have taken out a professional indemnity insurance policy;
- Have plans in place to protect any money they are holding on half of their clients;
- Have an annual independent audit carried out on clients funds.
The collapse of property prices has forced many letting agents out of business, still owing thousands of pounds to their landlord clients. The new scheme will go part way to protecting clients funds in these circumstances in the future. The National Association of Estate Agents is also planning to introduce its own scheme along similar lines, later in 2009. Both ARLA and NAEA have both commented that the government really needs to introduce this type of rigorous regulation at the earliest possible opportunity. The ARLA scheme may form the test bed and a basis for any potential government regulation in the future.
Timed in parallel to this announcement, a new government National landlord registration system is planned to be introduced along similar themes, to protect tenants. The proposals being considered by the government would mean private landlords will have to be registered for being allowed to let out their residential properties to tenants. The new registration scheme would involve private landlords in England and Wales paying a £50 fee to register with a new national body. Landlords would be expected to upkeep of their property or face having their licence revoked and their ability to rent out removed, by being struck off the landlord register. The proposed reforms will be outlined in a Green paper submitted to parliament in the next 10 days. This would then be followed by an independent review into the private rented sector, initiated by the Department of Communities and Local Government.
The new system would be monitored by an independent body to make rulings on tenants complaints. Any upheld complaints may mean landlords losing their licence to rent out property.
Cynics have pointed out that the lack of formal regulation will mean a simple registration fee does little to oversee poor behaviour by private landlords. Those even more cynical might argue that by allocating a licence number to all private landlords in the UK, the Inland Revenue will now be able to very easily chase up at tax revenues accrued from property letting activities. There are over 2.6 million rented properties in the UK and a very large government debt black hole to fill.
The aims of the government proposals are clearly noble and well-intentioned and a pain to ensure landlords maintain and repair the properties to a fair and reasonable state for their tenants. Many commentators have questioned how effective this new legislation will be in preventing rogue landlords or letting agents from behaving badly. Any voluntary schemes mean that the crooks simply don’t bother to register or continue to treat tenants badly, in the absence of any complaints from any tenants fearful of being evicted.
The importance of regulation cannot be underestimated with over one million buy the property is currently making a huge volume of the UK housing stock. As the buy to let boom mushroomed in the late 1990s, many amateur landlords bought second homes for letting purposes. Today, the property market is on a downward spiral and many people trying to sell the properties who cannot find buyers, are alternatively choosing to rent out their properties instead. Both these groups will have to pay the new registration fee proposed.
