Is there an alternative to Regulation of Lettings Agents?

Jan. 31, 2013 - PRLog -- Liverpool City Council has signed a statement of support for Shelter’s national campaign to stamp out rogue landlords.

The problem is that real rogues aren’t simply going to say “Oh, alright then”. Their tenants are often the most vulnerable and are less informed of rights and how to address problems.

We all know that the Government won’t regulate the lettings industry (although it will be interesting to see what happens to the amendment proposed this week by Baroness Hayter which would bring lettings agents into the scope of The Estate Agents Act).

However, right now, lettings agents can effectively operate outside the law in a way sales agents cannot. This is clearly wrong and contrary to what anyone would consider decent consumer protection or indeed common sense.

Whilst licensing remains voluntary, only those already compliant or well intentioned will subscribe to any form of redress. Landlords who fail in the basic requirements of best practice are often those who avoid paying tax, don’t confess to buy-to-let mortgages and even sometimes rent out their council-provided home.

Voluntary regulation is designed as a war of attrition against rogue agents but can only work if consumers get the message that low risk is more important than low fees. Often, consumers only learn this lesson when it’s too late.

With the various regulators all vying for the mantle of consumer champions, confusion abounds. To their credit, SAFEagent has worked hard at a welcome attempt to generate a single message and find common ground to remove confusion over CMP.

Nevertheless, there is arguably little doubt that voluntary regulation creates a dichotomy where rogues are driven further underground whilst the reputable agents and honourable regulators fiddle and consumer protection burns.

They do so with the mantra of ‘don’t look at me, we are compliant’ rather than consider the damage to the industry as a whole. Newham Council has been forced to extend the deadline for its blanket licensing proposal due to the slow take up – and that is just the compliant landlords! Their concept is fundamentally flawed for many reasons which have been discussed on LAT recently.

The reason rogue landlords and agents prevail is simple – there is nowhere and no one to whom wronged tenants can turn where an unregulated agent or landlord behaves badly.

I have dealt with many customers astonished at the lack of avenues beyond expensive and often futile litigation. To whom do they address complaints regarding issues such as deposits?

Likewise, landlords who are not receiving rents or where payments are being constantly delayed, a fact often indicative of cashflow issues where Tenant Paul is repaid from robbing Landlord Peter. Even when there are misappropriated funds, sanctions are hardly punitive and as Peter Bolton King so rightly said ‘send out no meaningful message’.  ARLA’s Ian Potter is also correct in highlighting the fact that this issue will become increasingly under the spotlight with increasing demand.

Complain to Trading Standards about a garage, illegal booze or cockroaches in a sandwich and you unleash hell on the supplier. Complain that you haven’t received rent or your deposit and you are met with silence and then a suggestion to phone the TDS, ARLA or TPOS.

OFT can’t deal with individual complaints, TSI refers issues to the TDS provider who often hasn’t received membership fees, TPOS aren’t regulators so can only impose fines – regulators can only deal with member agencies. You would think that the natural authority to which you should report theft would be the Police, but I know from anecdotal evidence, that is easier said than done. By the time someone takes action, it is too late.

Hippocrates said prevention is better than cure. Of course, complete prevention is impossible, but early warning of potential issues couple with a real deterrent would be a start. Perhaps we could take a radically different approach. Instead of trying to police those intent on avoiding regulation, why not allow those who suffer at their hands to have the power to act?

To this end, I would love to see an organisation with teeth be created as an independent consumer watchdog perhaps under the OFT, DCLG or even FSA umbrella.

Imagine an apolitical lettings police or ‘Crimestoppers’ with the co-operation of all regulators, government and local authorities with the power to investigate issues and create an early warning to other organisations. A tenant who is being treated unfairly has access to a resource detailing their rights and a hotline or email where they can report issues and where such complaints can be collated to identify trends before they spiral out of control.

Imagine a consumer who is being ignored or stonewalled having the power to say, “If you don’t treat me fairly and lawfully, I will tell the lettings police”. A determined rogue will always be a rogue, but empowering potential victims rather than relying on voluntary compliance would be one solution in an unregulated world. Supplier-led regulation is not as powerful as effective consumer redress.

This would further benefit the existing regulators. Instead of advising a wronged party that there is nothing they can do as the agent isn’t a member, they could provide a useful contact which could help.

The lettings problem is getting bigger as the market expands. Early warning is key and in the absence of primary legislation and compulsory regulation a dedicated body with cross-industry support and the ear of the OFT and TSI would act as both consumer protection and a significant deterrent.

Yes, I appreciate funding will be an issue, but think of how many organisations it could benefit, from Deposit Scheme providers to insurers, and regulators to local authorities. Newham Council, for example, are reported to be spending over £330,000 on their patch alone. There are 468 local councils. The cost of regulation, licensing and enforcement would not be cheap.

That said, no system will ever work unless the courts get tough. Stupid kids grabbing trainers from an open window during the riots found themselves at Her Majesty’s pleasure for months. A letting agent stealing thousands of pounds or failing to protect deposits frequently goes unpunished. Some of the latest cases have been mitigated by prosecution ‘not being in the public interest’ or because the agent ‘made no personal gain’.

Bits of paper won’t help. The only people who really care about illegal activities are those who suffer – so give them a mechanism to act.