Plans to introduce a mandatory code of practice for letting and managing agents have been announced by the Ministry for Housing, Communities and Local Government (MHCLG).
The MHCLG is taking steps to address rogue agents and allegations of deliberately vague bills or poor quality repairs. The code aims to professionalise letting and managing agents and to stop rogue agents from flouting the law.
The code is to be developed by a working group consisting of letting, managing and estate agents, tenants and regulation experts.
It has been proposed that the code will include:
- A new independent regulator to be set up which will be responsible for overseeing the working practices of agents. Agents who fail to comply with the code will not be permitted to trade and criminal sanctions could also be introduced for agents which severely breach the code.
- Letting and managing agents will be required to obtain a nationally recognised qualification in order to practice. In addition, at least one person in every organisation will be required to have a higher qualification.
- A new system is to be introduced which will help leaseholders challenge unfair fees, including service charges.
- Support is to be given to assist leaseholders to switch their managing agents when they perform badly or break the terms of their contract.
- Letting and managing agents will be required to undertake continuing professional development and training.
The working group is also to consider whether additional charges such as administration charges should be capped or banned entirely.
The working group is expected to draw up the final proposals for the code in early 2019 and we will provide you with further updates in due course.
Government response on mandatory client money protection scheme for property agents
The Ministry of Housing, Communities and Local Government (MHCLG) has published its response to the consultation seeking views on the implementation of mandatory client money protection schemes (CMP schemes) for letting and managing agents in England.
At present, CMP schemes are voluntary. They give landlords and tenants confidence that their money is safe when it is being handled by a letting or managing agent. If an agent is a member of a CMP scheme a landlord or tenant can recover any money held by the agent on that persons behalf if the agent fails to repay all or part of their money.
For example, if a letting or managing agent goes in to administration or misappropriates the money a landlord or tenant can recover the funds through the CMP scheme.
The MHCLG has concluded that regulations will be created that introduce privately-led CMP schemes which will be subject to government approval. This is similar to the tenancy deposit protection schemes that currently operate. If agents fail to comply with the CMP schemes they will be liable for a civil penalty of up to 30,000.
The government will provide agents with further information in due course.
Banning order offences and database of rogue landlords and property agents
Local housing authorities have been granted powers and duties concerning banning order offences following the making of the Housing and Planning Act 2016 (Commencement No 8) Regulations 2018 (SI 2018/393) (the ‘Regulations’). The Regulations bring various provisions of the Housing and Planning Act 2016 in to force as of 6 April 2018.
In short, the Regulations grant local housing authorities:
- A power to apply for a banning order against letting agents or landlords where they have been convicted of a banning order offence.
- A power to require information from letting agents or landlords where they have been convicted of a banning order offence.
- A duty to add an entry in the database of rogue landlords and property agents concerning a banning order against a person or them committing a banning order offence.
Banning order offences include a failure to comply with an improvement notice, letting a property to someone disqualified from renting because of their immigration status and fraud under the Fraud Act 2006. These will only apply in relation to offences committed after 6 April 2017.
A banning order must last for at least 12 months but may include exceptions to the ban for some or all of the period to which the order relates.
Ellisons’ Property Litigation team can advise agents or landlords on the effect of banning orders or the new powers granted to local housing authorities. For more information please contact Joe Brightman or Craig Marshall.