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Regulated businesses

 

Letting Agents and Property Managers
see also Estate Agents

This page contains:


Introduction
Self-regulation
England and Wales
  Redress schemes for residential lettings agents and property managers
  Accommodation agencies
Scotland

Introduction

There is no UK wide legislation regulating letting agents and property managersare not regulated as such in the UK. See however the related activities of Estate Agent.

Self-regulation

Lettings and property management agents who join the The Property Ombudsman scheme subscribe to the Code of Practice for Letting Agents.

The National Federation of Property Professionals (NFoPP) describes itself as the “Legal entity umbrella” for the National Association of Estate Agents (NAEA), the Association of Residential Letting Agents (ARLA), the Institution of Commercial Business Advisors (ICBA) and the National Association of Valuers & Auctioneers (NAVA).

NFoPP’s stated aim is to promote the highest standards of professionalism and integrity among those working within the property industry, and to encourage members of the public to proactively seek out our members when involved in any kind of property transaction. The Organisation has a sister company which is the awarding body for its own property related qualifications and is regulated by Ofqual, the Office of Qualifications and Examinations Regulation, for a number of its examinations and diplomas.

The Association of Residential Managing Agents (ARMA) is a trade association for firms that manage private residential leasehold blocks of flats in England & Wales. ARMA promotes high standards of leasehold management by providing advice, training and guidance to its member firms of managing agents. ARMA also produces guidance materials for leaseholders and Residents Management Companies.

The Association of Residential Lettings Agents (ARLA) is the professional and regulatory body for residential letting agents in the UK. It claims nearly 6,000 individual members, representing 3,500 member offices throughout the UK. ARLA’s umbrella body is the National Federation of Property Professionals (NFoPP)

England and Wales

Redress schemes for residential lettings agency work and property management work

Background

The Enterprise and Regulatory Reform Act 2013 (ss.83-84 et seq.) empowered the Government to make regulations whereby persons who engage in lettings agency work or property management work must be members of a redress scheme for dealing with complaints in connection with that work.

The policy background to this legislation is usefully summarised in the Explanatory Memorandum to the Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013 (see Approval of Redress Schemes below).

The redress schemes seek to provide tenants with a cheaper complaints system against agents who are unclear about their fees and other charges. There are existing Ombudsmen schemes, which approximately 60% to 70% of all lettings and property management agents in England have joined on a voluntary basis. The Government’s intention is to ensure that all agents are required to belong to a redress scheme that has been approved by the Secretary of State or is administered by or on behalf of the Secretary of State. The intention is that there will only be approved schemes although the Secretary of State may choose to set-up a government administered scheme if the approved schemes are unable to offer a place to every agent who would be subject to the duty to belong to a scheme.

Redress scheme: a ‘redress scheme’ is a scheme which provides for complaints against members of the scheme to be investigated and determined by an independent person.

Lettings agency work: ‘lettings agency work’ means things done by any person in the course of a business in response to instructions received from:

(a) a person seeking to find another person wishing to rent a dwelling-house in England under a domestic tenancy and, having found such a person, to grant such a tenancy (‘a prospective landlord’); and

(b) a person seeking to find a dwelling-house in England to rent under a domestic tenancy and, having found such a dwelling-house, to obtain such a tenancy of it (‘a prospective tenant’).

However, lettings agency work does not include:

(a) publishing advertisements or disseminating information;

(b) providing a means by which a prospective landlord can, in response to an advertisement or dissemination of information, make direct contact with a prospective tenant or vice versa.

Lettings agency work also does not include things done by a local authority; and any things excluded in the regulations.

Domestic tenancy: ‘domestic tenancy’ means:

(a) a tenancy which is an assured tenancy for the purposes of the Housing Act 1988 except where the landlord is a registered provider of social housing, and where the tenancy is a ‘long lease’ (defined in s7 of the Leasehold Reform, Housing and Urban Development Act 1993, e.g. a lease of more than 21 years); and

(b) a tenancy under which a dwelling-house is let as a separate dwelling and which is of a description specified in the regulations.

Property management work: ‘property management work’ means things done by any person (A) in the course of a business in response to instructions received from another person (C) where:

(a)  C wishes A to arrange services, repairs, maintenance, improvements or insurance or to deal with any other aspect of the management of premises in England on C's behalf; and

(b) the premises consist of or include a dwelling-house let under a ‘relevant tenancy’.

However, property management work does not include things done by a person who is a social landlord for the purposes (as defined in Schedule 2 to the Housing Act 1996), and things specified fin the regulations.

Relevant tenancy: ‘relevant tenancy’ means:

(a) a tenancy which is an assured tenancy for the purposes of the Housing Act 1988;

(b) a tenancy which is a regulated tenancy for the purposes of the Rent Act 1977;

(c) a long lease other than one to which Part 2 of the Landlord and Tenant Act 1954 applies (broadly, business tenancies);

(d) a tenancy of a description specified in the regulations.

Approval of Redress Schemes

The Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013 came into force on 13 December 2013. This order empowered the Government to call for applications to be submitted for the approval of redress schemes.

Comment: there are existing voluntary Codes of Practice applicable to letting agents and managers of residential property, such as the Code of Practice for Residential Letting Agents administered by The Property Ombudsman.

Implementation of the redress schemes

The Government will make the Order making the redress schemes compulsory once the scheme approval process has been concluded.

What’s new item on this topic [see What’s new page or archive for full item]:

03/04/2018 Government to introduce further protections against rogue landlords

The Government has made a series of consultations relating to the housing market in England and Wales, including the business practices of letting agents and managing agents. The term “letting agent” refers to persons who provide letting and management services in the private rented sector; the term “managing agent” relates to persons who provide block management services in the private leasehold sector.

In October 2017, the Secretary of State committed to the regulation of letting agents who will be required to satisfy minimum training requirements and to follow a Code of Practice. The Protecting consumers in the letting and managing agent market call for evidence ran from 18 October until 29 November 2017 looked at whether managing agents should be regulated. The Government has responded to the evidence provided and has announced that it will extend regulation to managing agents. It proposes a legally enforceable Code of Practice covering both letting and managing agents.

The Code of Practice will set minimum standards for transparency of potential conflicts of interest and financial commitments to which clients are asked to agree, service charges, communication and customer service, handling of clients’ money and dispute resolution. A Working Group will be established to develop the new regulatory model.

 

07/07/2014: DCLG guidance for letting agents applying to join approved redress scheme

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The Department for Communities and Local Government has issued guidance outlining what information letting agents need to provide in applications to become member of a government-approved redress scheme. The Department is now accepting applications for letting agency and property management work seeking this approval and applications must be received by 28 February 2014. The results of the process will be announced in April 2014.

Accommodation agencies

The Accommodation Agencies Act 1953 prohibits the taking of certain commissions in dealings with persons seeking houses or flats to let and the unauthorised advertisement for letting of houses and flats.

Illegal commissions and advertisements: an offence is committed (Accommodation Agencies Act 1953  s.1(1)) by any person who:
(a) demands or accepts payment of any sum of money in consideration of registering, or undertaking to register, the name or requirements of any person seeking the tenancy of a house;
(b) demands or accepts payment of any sum of money in consideration of supplying, or undertaking to supply, to any person addresses or other particulars of houses to let; or
(c) issues any advertisement, list or other document describing any house as being to let without the authority of the owner of the house or his agent.

It is not an offence to demand or accept any payment in consideration of the display in a shop, or of the publication in a newspaper, of any advertisement or notice, or by reason of the display or publication as aforesaid of an advertisement or notice received for the purpose in the ordinary course of business.

Case law: if an agent takes a deposit or fee, refundable on demand, where the deposit is not in respect of any particular property, an offence is committed (McInnes v Clarke [1955] 1 W.L.R 102).

On the other hand, where an agent asked clients to sign an agreement under which a fee would become payable if and when they took accommodation found for them by the agent, it was decided that the payments related to the finding of suitable accommodation and not for the supplying of an address, and no offence was committed (Saunders v Soper [1974] 3 All ER 1025).

Enforcement

Civil enforcement: the 1953 Act does not provide for recovery of illegal commissions paid. Legaleze comment: the normal rule is that money paid under an illegal contract is not recoverable. However it seems likely that a person who paid such a commission should be able to recover it under the exception which allows innocent parties to recover illegal payments, particularly as the Act’s purpose is presumably to protect such persons.

Criminal enforcement: any person guilty of an offence is liable on summary conviction to a fine not exceeding level 3 on the [standard scale] or to imprisonment for a term not exceeding three months, or to both such fine and imprisonment.

 

Scotland

Self-regulation

The Property Managers Association Scotland Limited exists to promote the interests of Property Managers in Scotland and high standards of Property Management.

Property Factors (Scotland) Act 2011

In Scotland, legislation which came into effect on 1 October 2012 requires property managers or "factors" who manage residential property to be registered  under the Property Factors (Scotland) Act 2011 ("the Act") and to comply with the Property Factors Code Of Conduct.

The Code is made under powers contained in the Act and is designed to create a framework which will provide increased protection for homeowners who use the services of a property factor.

The Act has three main elements:

* a compulsory register for property factors;
* a Code of Conduct with which all registered property factors will be required to comply; and
* a new statutory dispute resolution mechanism, to be known as the Homeowner Housing Panel.

Homeowners may make applications to the Panel if they believe their property factor has failed to comply with either their factoring duties or with the Code the Code of Conduct.

What is a property factor?

A “property factor” is defined in the Act but in summary means : (a) a person who, in the course of that person's business, manages the common parts of land owned by two or more other persons and used to any extent for residential purposes; and (b) a local authority or housing association which manages the common parts of land used to any extent for residential.

Applications for registration

The Scottish Ministers must register a person on the property factors register if they are satisfied that the person is fit and proper. Detailed criteria are set out in the Act. At the time of writing, details of the application process are not available.

Appeals: there is a right of appeal from refusal to register or removal from the register to the Sheriff and a final appeal on a point of law only to the Sheriff Principal.

Tacit consent: at the time of writing it is not clear whether <tacit consent> will apply to an application for registration.

Enforcement

Civil enforcement: a homeowner may apply to the homeowner housing panel for determination of whether a property factor has failed to carry out the property factor's duties or to ensure compliance with the property factor code of conduct. The president of a panel must decide whether to refer the application to the homeowner housing committee or to reject the application. A homeowner housing committee may make an enforcement order following such an application.
There is a right of appeal on a point of law only to the sheriff from a decision of the president of the panel or of the committee. The decision of the Sheriff is final.

Criminal enforcement: a person who gives false particulars in an application for registration, or who fails to comply with an enforcement order of a homeowner housing committee, is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the <standard scale>.
A person who operates as a property factor without being registered without reasonable excuse is guilty of an offence and liable on summary conviction to fine not exceeding level 5 on the <standard scale> or to imprisonment for a term not exceeding 6 months or both. There is provision for <director’s criminal liability>.

Further information:

For further information, see the Scottish Government site.

and information on the RICS site.

What's new

22/12/2016: Letting Agent Registration (Scotland) Regulations 2016

SSI 2016/432: From 31 January 2017 provision is made about the registration of letting agents, including setting out information which must be included in the register of letting in addition to the name and address of the person entered in the register which is required by the Housing (Scotland) Act 2014.

26/08/2012: Ban on charges on tenants
The Scottish Housing Minister Keith Brown has stated that letting agents should not be charging a range of upfront fees to private tenants. Currently, under the Rent (Scotland Act) 1984, landlords and their agents can legally charge rent and a deposit only when granting a tenancy.
However, the legislation is not explicit about the legality of additional charges such as reference checks, credit checks and inventory fees. The law is to be clarified so that all tenant charges, other than rent and a refundable deposit, will be deemed illegal. It is estimated that there are around 500 letting agent businesses in Scotland involved in around 150,000 private lettings per year. Reform is due to come into force later this year.
Update: Private Rented Housing (Scotland) Act 2011 (Commencement No. 4) Order 2012: this Order brings into force the provisions of Section 32 of the Private Rented Housing (Scotland) Act 2011 with effect from 30 November 2012. Section 32 of the 2011 Act amends Section 82 of the Rent (Scotland) Act 1984, which has the general prohibition on premiums. In essence, the only real change as a result of the bringing into force the remaining provisions of this section is that the definition of “premium” is extended to mean:
'Any fine, sum or pecuniary consideration, other than the rent, and includes any service or administration fee or charge”.

Accommodation agencies

The Accommodation Agencies Act 1953 (see under England and Wales above) applies to Scotland (prohibits the taking of certain commissions in dealings with persons seeking houses or flats to let and the unauthorised advertisement for letting of houses and flats).

[Page updated: 09/01/2017]

 

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