Government calls for evidence to help improve the leasehold & property management system

The DCLG asks the industry if a new independent regulatory body is needed – and if separate bodies should be established for both leasehold and private rented management, and letting agents.

The Communities Secretary Sajid Javid has announced a government plan to invoke new measures designed to “create a fairer property management system that works for everyone” in England.

The aim is to “drive down costs and protect consumers from the small minority of rogue agents”.

A Call for Evidence has been initiated to get the ball rolling, with government asking the property industry to share opinions and experiences on:

  • whether regulatory overhaul of the sector is needed
  • measures to protect consumers from unfair costs and overpriced service charges
  • ways to place more power in the hands of consumers by giving leaseholders more say over their agent

The government will consider changing the law so that all letting and management agents, across both the private rented and leasehold sectors, must be qualified and regulated in order to practice

The call for evidence, called “Protecting consumers in the letting and managing agent market”, will last for six weeks from today (Wednesday 18 October 2017). Get involved here.

The government will consider changing the law so that all letting and management agents, across both the private rented and leasehold sectors, must be qualified and regulated in order to practice.

Measures to be considered as part of the call for evidence include:

  • how consumers can be empowered in the market, including whether leaseholder tenants should have a greater say over the appointment of managing agents
  • how transparency can be increased in the system so that tenants and leaseholders know what they are being charged for and why
  • ensuring fairness and openness around relations between freeholders and agents
    looking at what qualifications are needed by agents to practice and how regulation can be improved

This is a big segment of the property industry, affecting many millions of households. Official data indicate that there are currently over 4.2 million leasehold homes in the UK, with service charges reaching between £2.5bn and £3.5bn a year. Alongside that, the DCLG says that around 4.5 million tenants in the rental sector may also be being over-charged for repairs and services.

Research by consumer group Which? claims that unfair practices can lead to as much as £700m of unnecessary service charges being paid each year, and others such as the All Party Parliamentary Group on leaseholds believe the total could be as much as £1.4bn.

Letting and management agents have been required to belong to a redress scheme since 2010, but new, more toothy measures are now on the cards to clamp down on the minority of bad eggs in the industry.

While the sector is partly self-regulated – through professional bodies such as the Association of Residential Managing Agents (ARMA), ARLA Propertymark and the National Approved Letting Scheme (NALS), which have a code of conduct – other property agents operate outside of any system, and some have been letting the side down.

This latest Call for Evidence is part of a bigger plan to support “Generation Rent” in England. In summer 2017, the government launched a consultation into creating a more transparent system for homebuyers. Plans include banning new-build homes being sold as leasehold as well as restricting ground rents to as low as zero.

Earlier this month the Secretary of State also announced measures requiring all letting agents to be regulated, and there’s ongoing talk of creating a new Housing Court – a specialist court with the aim to save time and money resolving housing disputes. Government has also confirmed it will legislate to ban letting agency fees to tenants.

Communities Secretary Sajid Javid: “This is supposed to be the age of the empowered consumer – yet in property management, we’re still living in the past.

“Today we are showing our determination to give power back to consumers so they have the service they expect and deserve, as part of my drive to deliver transparency and fairness for the growing number of renters and leaseholders.

“Our proposed changes to regulate the industry will give landlords, renters and leaseholders the confidence they need to know that their agents must comply with the rules.

The DCLG has published a few anecdotal bits of evidence of poor property management to help focus responses to the Call for Evidence:

  • a group of leaseholders charged ten times the market rate to have a new fire escape fitted – with the £30,000 contract handed to the freeholder’s brother 
  • one landlord charged £500 by his agent for repairing a shower door
  • a London-based property agent who tried to charge a leaseholder almost £5,000 to transfer ownership of a parking space to other leaseholders

Call for evidence: Protecting consumers in the letting and managing agent market

Full transcript of Secretary of State Sajid Javid’s speech to the Association of Residential Managing Agents (ARMA) conference