For landlords and property investors, one of the big attractions for running their property professionally is to utilise the services of an agent, but are letting agents regulated?
While that appears to be a simple question – the answer depends on where your property and agent are in the UK because different rules apply in different countries.
The answer for England is that letting agents are not regulated but in Scotland, all agents have to be registered since October last year to carry out work.
Not being registered is a criminal offence if someone is carrying out letting agency work there.
Along with being registered, letting agents in Scotland need to undergo training, and there’s also a new letting agent code of practice which extends to agents and those managing property which sets out the standards that agents must meet in delivering services and how their client’s money is handled.
Landlords and agents managing property
The situation in Wales is also highly regulated with all landlords and agents managing property needing to be licensed under laws there.
The Rent Smart Wales scheme sets out the minimum criteria for a letting agent, which includes their having professional indemnity insurance in place so the landlord can be compensated should their agent be negligent.
They must also ensure that they protect their client money so the landlord is not left out of pocket should they go bust.
In Northern Ireland, agents are not regulated currently but there are proposals in place for big changes to the private rental sector, including agent regulation and the banning of charging tenants letting agent fees.
The proposals are currently in a state of flux because the Northern Ireland government has collapsed, so no action has been able to be taken.
Legal structure for letting agents
In England, there’s no legal structure for letting agents in place, though the government has announced that it is looking to introduce letting agent redress at some point in the future. This means that agents will be operating under a scheme similar to that seen in Scotland.
The new proposals could see:
A code of practice being introduced
This code of practice will see an independent regulator being given the powers to deal with agents that break the rules and help prevent rogue agents from flouting the law.
Letting agent qualifications
The proposals will see letting agents having to obtain a nationally recognised qualification for them to practice. Also, at least one person in each letting agency will need to have a higher qualification which, the government says, will help professionalise the sector.
Client money protection
This is an area that’s been a cause of concern for several years because should a letting agent go bust or they misappropriate a landlord’s money then the landlord will receive compensation under the Client Money Protection (CMP) scheme.
Currently, letting agents sign up voluntarily to a CMP scheme and the new compulsory client money protection legislation will bring peace of mind to investors and landlords alike. The new CMP rules in England will come into effect from 1 April 2019.
Government-approved redress schemes
However, all letting agents have needed to be a member of one of three government-approved redress schemes since October 2014.
This means they must agree to work by a code of conduct which will boost protection for the landlord and investor. And failing to register with a scheme or practising against the scheme’s requirements means that the agent faces financial penalties.
So, when you decide to sign up with a letting agent, you’ll need to ask them which body they belong to, or you can also check on the body’s website as to whether they are a member.
You can also check whether they are part of other schemes, including the National Approved Letting Scheme which has strict guidelines that members have to follow and Arla Propertymark which is a professional membership body with members abiding by a code of practice.
More importantly, agency staff have to do undertake an exam before they can to use the Arla logo.
Should you encounter a letting agent that isn’t a member of one of the approved schemes, then you should get in touch with your local authority who will investigate and potentially prosecute the letting agent who may be facing a fine of up to £5,000 per branch.
Use a letting agent
But why use a letting agent that is registered to a particular scheme?
There are two crucial reasons why all landlords should sign up with a registered letting agent and the main one, as mentioned earlier, is that they will be obliged to abide by a code of conduct so, in theory at least, they will deliver a better level of service.
Should a landlord encounter an agent delivering a poor level of service, they can complain to the scheme which will investigate. There’s no charge for doing this and it’s likely that any issues will be resolved.
For any landlord investor wanting to use a letting agent, the vast majority of them in the UK offer a professional service that will find suitable tenants and will also manage the property responsibly.
Agents also have knowledge of the local market, including the type of properties tenants are keen to rent and the prices they are prepared to pay.
The agent will also manage and conduct potential viewings which will be a boon to those landlords and investors who do not live close to their investment property.
Using a quality letting agent
Ultimately, using a quality letting agent will provide a landlord client with advice and guidance to make a success of their property investment and sometimes this advice can be priceless.
So, while the picture for the regulation of letting agents in the UK is a mixed one currently, the entire sector is moving towards professionalism and accountability which will deliver the reassurance and profitability that landlords and investors are hoping for.
If despite all of this you’re still considering going alone, you’ll want to read our guide to finding tenants without a letting agent.