Regulation of property agents: government shake up on the horizon

A recent report could lead to fundamental changes in the standards required of both estate agents and property managing agents. The report is designed to improve support for home buyers, sellers, landlords and tenants.

At present, anyone can operate as a property agent without any qualifications or professional oversight. Although many agents sign up to voluntary standards of practice, there are others who do not and this can lead to dissatisfaction. The Regulation of Property Agents (RoPA) working group was tasked with advising government on a new regulatory framework for property agents. The intention is to provide a mandatory and more comprehensive set of guidelines and regulations, as opposed to the piecemeal rules which govern the industry at present.

About RoPA:

RoPA is emerging as the key body for considering reform of the housing industry. The group was chaired by Lord Best, who has extensive experience from his years working across the housing sector.

Other members included experts from across the property sector and a number of key industry organisations: Royal Institution of Chartered Surveyors (RICS), Association of Residential Letting Agents (ARLA Propertymark), National Association of Estate Agents (NAEA), National Trading Standards (NTS), Professor Christopher Hodges (Oxford University), Institute of Residential Property Management (IRPM), National Landlords Association (NLA) and Leasehold Advisory Service (LEASE), Citizens Advice and Ombudsman Services.

Areas for review:

The working group undertook to:

explore fees, charges and the ability of leaseholders and freeholders to choose a managing agent;
advise government on the creation of an independent property agent regulator;
develop a single, mandatory and legally enforceable code of practice for property agents; and
develop a system of minimum entry requirements and continuing professional development for property agents.

Key proposals:

The key proposals of the working group include:

Transparency of service charges: The group has recommended mandatory disclosure of commissions and management fees and the use of standard service charge cost codes in accounts to enable consumers to compare items of expenditure more easily. There are also suggestions for broader reforms to the leasehold and freehold charges regime, including more use of sinking funds.
New codes of practice and regulator: The group considers there should be enforceable codes of practice to set clear standards of behaviour for all property agents, as well as a single regulator empowered to take action against those who fail to comply. Penalties available could include ordering remedial actions, issuing warnings and revoking licences. (The government has already committed to a code of practice for letting agents but the group considers that these standards should be extended more widely.) It is clear that the new regulator will need to work with other bodies such as Trading Standards and it is suggested that the regulator should be able to appoint appropriate organisations to undertake certain functions on its behalf, e.g. monitoring training compliance, imposing fines etc.
Addressing poor managing agents: The group considers that the new regulator should take over the power for leaseholders to block a landlord’s choice of managing agent and suggests that the government should simplify the existing process for replacing an under-performing managing agent mid-contract.
Licensing and qualifications: To confirm appropriate qualifications and credentials, the group has recommended that property agencies and qualifying agents should be required to hold and display a licence to practice from the new regulator. The group would also like to see agents required to have minimum standards of qualification (according to seniority and responsibilities) and ongoing training.

Scope/timetable:

As well as reviewing the rules needed to govern traditional residential estate agents and property managing agents, the group’s recommendations cover those who trade as auctioneers, estate agents selling property overseas, property guardian providers and online agents. (It did not review the work of agents handling commercial property). Moreover, it has recommended that legislation introduced to regulate property agents should allow for future extension in its scope – to extend to landlords and developers, as well as retirement housing managers and Right to Manage companies.

Whilst the government presently has a lot on its plate, there appears to be a strong drive for the proposed reforms to end up as legislation - although they are unlikely to come before parliament until spring 2022 given the current focus on Brexit and other priorities such as the NHS. However, the review is regarded as being a genuine attempt by the government to act on suggestions for regulation and training advocated by the National Association of Estate Agents and ARLA Propertymark.

This article was written by Emma Humphreys. For more information please contact Emma on +44 (0)20 7203 5326 or emma.humphreys@crsblaw.com.