Opinion: We need clear regulation on letting agents

The thing is, from a strictly legal perspective, he was right. There was nothing in UK law to stop him charging whatever he wanted for his contract-altering services, and the fact that the tenants who needed to change their contract did not choose the letting agent meant that there was remarkably little they could do about it. So they moved out.

This was an extreme case (most letting agents, I’m sure, would never be so shameless). But the group of people at the mercy of largely unregulated property agents – not just tenants, but leaseholders and landlords – has been growing larger and noisier by the year.  

So, belatedly, the government has acted. Last year it passed a bill banning most letting fees and capping tenancy deposits. In October 2018, it appointed a group, chaired by the crossbench peer Lord Best, to examine the regulation of property agents. Its recommendations – which include an independent regulator, minimum education requirements and a mandatory and legally enforceable code of practice – duly appeared in July 2019.

But there the matter seems to have rested. The government is still, officially, considering its response, but has not moved to implement any of this. In what may or may not be a coincidence, a new prime minister appeared in July 2019, too.

Now other organisations are taking matters into their own hands. In July 2020, RICS teamed up with The Property Ombudsman, the independent dispute resolution service, to announce a new steering group to develop that code of practice. The consultation, led by Baroness Hayter, is still under way but the expectation is that it will result in a high-level set of principles applicable to all residential property agents, as well as more detailed sections covering specific sub-sectors such as sales, lettings and management.  

This code would be voluntary; until ministers pull their finger out, there’s nobody to make firms sign up to it or to punish them via any means worse than public shaming if they fail to abide by its rules. But it does mean that, if the government eventually does decide to implement Best’s recommendations, it will have a code of practice ready to go.

And even a voluntary code will improve standards, argues Mairead Carroll, associate director of residential standards at RICS. At the moment, bad practices are more profitable, so “in some ways, the good guys are losing out”, she says. “A voluntary code means we can say: ‘These are the people you should be going with and who have your best interests at heart.’”

It is undoubtedly positive to see industry bodies leading the way to highlight good practice and stamp out bad; a little noticed subplot of that viral news story in 2014 was the number of other lettings agents who were noisily furious at the damage this behaviour does to the reputation of their industry. But a voluntary code will only get you so far. If a property is only accessible via a bad letting agent, and if a management company chosen by the freeholder sticks leaseholders with excessive charges, then it is hard to see what redress this code will provide to consumers.

If we are truly to stamp out bad behaviour from rogue property agents, the sector will need comprehensive regulation of the sort proposed by the Best Review: a mandatory code of practice, enforced by an independent regulatory that’s big enough and scary enough. Much of the industry can see that. So why can’t ministers?

Read and comment on RICS’ and TPO’s draft code of practice for regulation of property agents.