Sean's Blog: April 15
So, we are all being gripped by election fever. The current Government has now dissolved and MPs are scurrying back to their constituencies to garner the votes they need to keep their jobs and persuade us of their vision for the future. I will leave the speculation and politicking to others but, in the meantime, the property sector will continue to be a major part of the social and economic climate, come what may.
What is important is that you as Members know where you stand and are compliant with the new legislations that were hurriedly ushered through Parliament and now form part of the legal framework against which the industry will be judged. I will run through the general gist of the changes a bit later in this post, but first I want use this opportunity to review the last few months since compulsory redress has been on the statute books - what has been achieved and what the future holds.
As the new kids on the block, it was always going to be the case that the Property Redress Scheme would be expected to ensure the legislation bedded in and became a natural part of the compliance regime for Letting and Property Management Agents. From a standing start, we set the target of gaining a viable and credible market share and ensuring that as many Agents as possible got themselves legal and joined a scheme. The other two schemes were already established and, as such, had existing customer bases, laid down membership criteria and links to the accreditation organisations that hitherto were battling to raise standards in the sector. There would be little motivation for the existing schemes to open their door to those Agents that did not have links to regulatory bodies and so the onus was on us to take the lead in reaching out to this part of the market.
As somebody who had been heavily involved in launching the tenancy deposit protection scheme my|deposits, a legislatively backed scheme in the letting industry, I knew the challenges of getting such a venture working and into the position of operating as the law intended. It was marvelous to have the backing of Hamilton Fraser Plc (who administer my|deposits), however, as a totally standalone venture, it was up to my team to get things up and running. To do this, we embraced three principles:
1. Be the easiest and most straight forward scheme to join. To this effect, we ensured that the criteria for joining the scheme were strictly those required by the law. We did not impose our own code of conduct but instead chose to follow the Private Rented Sector code approved by the Government; supplemented by the best practice codes offered by ARLA, RICS and NALS. We do not require members to purchase any insurance as a prerequisite of joining (though we may recommend they hold it) and finally on this point, we allow all members to join on an equal and level footing.
2. Be affordable and provide a choice of model to suit all types of business and organisation. Agents are able to select the ‘Entry Model’ which is a pay as you go structure where the Agent pays a smaller application fee and then pays per complaint should I have to make a binding decision. Alternatively, organisations are able to opt for an all-inclusive model that covers both their application and annual complaint requirements. This flexibility allows all Agents from start-up to multiple branch chains to choose a membership model that suits them.
3. Be proactive in handling complaints and ensuring that members are empowered to take control of their complaints and to learn from the experience. We understand that, whilst we are not regulators, we have a duty to educate and raise standards in the market and help improve consumer protection and trust within the industry.
The challenge when we set out was to identify who needed to comply with the legislation, inform them of their obligations and present ourselves as the best option for meeting that requirement. This was made particularly difficult as there was no cast iron figure for how many Agents there actually were in England and who were not members of a voluntary scheme. Our estimates, however, showed that there were a huge number of potential Members that we needed to reach out to. We therefore engaged in a systematic campaign to reach out to these Agents and get them on board. By mid-October 2014 we had blown through our initial annual target of 2,000 members and are currently well on our way towards 4,000.
Is this it? Has every agent in England now complied? I very much doubt it. There are a significant number of Agents out there who either through ignorance or willful defiance have not signed up to a scheme. We are therefore working with local authorities to ensure the law is enforced as vigorously as possible. It is still, in my view, the duty of the industry to help police this legislation and I have spent a lot of time talking to and encouraging Agent organisations and Landlord groups to identify and report Agents that have failed to comply.
Complaints have also started to come in and we are expecting these to increase as awareness of the scheme becomes more widespread. Thanks to our proactive complaint handling and the work of my case assessors, the number of final adjudications that I have had to make is relatively few. As the scheme matures, we will start to see what trends develop and what recommendations can be made to improve best practice. Interestingly, certain patterns are already emerging that indicate there are two areas that Agents should be consciously aware of - documentation and communication.
Clear and unambiguous documents, in particular those that relate to terms and conditions, charges and management agreements, are essential to ensure that the customer is fully protected. This also protects the Agent, defines the business relationship and manages customer expectations.
Communication is also essential and Agents should ensure that they do everything to keep the channels open even when the relationship is breaking down. Not doing so inevitably leads to the situation getting worse and by the time of scheme involvement, the consequences have moved far beyond the initial dissatisfaction. Do not assume the customer is trying it on, is wasting your time or will go away if you refuse to engage with them. Treat the complaint seriously and professionally and above all learn from your mistakes. Even if you have so far avoided a serious complaint, whether it be by luck or judgment, do look at our library of case studies and see if there are lessons you can learn to help prevent the damage a badly handled complaint can cause.
As promised I now return to the recent legal changes that Agents should be bringing themselves up to speed with. The Deregulation Act 2015 contains welcome and important changes to Tenancy Deposit Protection (TDP) legislation that attempts to clarify the issues created by the court cases of Superstrike vs Rodrigues and Charalambous vs Ng. All of the deposit protection providers have provided guidance to assist you with any queries you may have - you can also visit our website here for further details.
New regulations have also been published that will require most Landlords and Agents to install smoke alarms and, where appropriate, carbon monoxide alarms in rental properties. The regulations are expected to come into force in October 2015.
Rules as to how and when a Section 21 no-fault eviction notice can be served have changed quite dramatically. These changes have been brought in to combat so-called retaliatory evictions and Agents should be aware of the how the process works in order to safeguard their Landlord customers and advise their Tenant. A very helpful leaflet has been produced by ARLA in association with FixFlo and is available on our website here. If you have any queries on section 21, organisations such as Landlord Action are very experienced in dealing with the issue of tenant eviction.
Finally one of the biggest developments is the provisions set out in the Consumer Rights Law with regards to transparency of fees. These regulations were brought in as an alternative to the proposal made by a lot of Tenant groups that the government should follow the lead of Scotland and ban Tenant fees all together. The regulations require that you display both Landlord and Tenant fees in a prominent position in your office or anywhere you engage with a customer face to face and on your website. You must clearly display all fees inclusive of VAT (if an insurance IPT) and explain the breakdown of your fees in a way the customer understands. In addition, you must also prominently display and inform your customer which redress scheme you have joined and whether you have Client Money Protection Insurance. If you do not currently hold CMP insurance and would like more information, you can visit CMProtect.
Your local authority will enforce this law and have power to fine you up to £5000. Remember the important word in the legislation is prominent - if the weights and measures inspector makes a visit to your office and your fees list is obscured then you are probably in trouble. We would like to remind our members to display our window sticker and certificate of membership in their offices and place our logo on their website linked through to www.theprs.co.uk. If you have lost your Property Redress Scheme logo, certificate or window sticker, please contact us and we will arrange to resend them to you. Positive promotion of your PRS membership will encourage transparency and make your customers feel reassured. It is worth you looking at the Consumer Rights Act in general as it clarifies a lot of issues relating to unfair clauses in contracts and also how you engage with your customers online.
I appreciate that there are a lot of legal matters to absorb so we will be producing guides and newsletters to help you get to grips with the changes over the coming months. When I next speak to you, the election will be done and dusted and a new government will be in the process of forming. Whether there will be further changes to the letting industry is open to speculation, however, you can rest assured that we at the PRS will continue to work with you to build your business and help you understand how new legislation effects you.
Best wishes
Sean
