Tough Talk in Tough Times
March 27, 2012
Bill McClintock, Chairman of The Property Ombudsman, takes a look at the changing lettings sector.
It’s half a century since I first got involved with the residential sales and lettings sector and I’ve seen a few national financial ups and downs in the intervening years.
Back in the early 60s, when I was a junior negotiator, both residential sales and lettings were part of the job.
So it has always struck me as strange that when the Estate Agents Act, 1979, was implemented somehow lettings activity appeared to be omitted from the definition of an estate agent. The Act’s definition is acquiring or disposing of an interest in land, apparently leases or tenancies have not been thought to constitute to such an interest. The act contemplates a lease with a capital value but perhaps nowadays that might include short leases.
THERE IS ALMOST NO LEGISLATION RELATING TO THE BEHAVIOUR OF LETTING AGENT
With the growth of the lettings sector after the recession of the early 90s, and again this time round, perhaps some legislators wish that the definition had definitely extended to lettings. But there’s little appetite among the politicians to do anything about it now so we seem to be stuck with the status quo for a long time to come. In effect, whilst there are many legal requirements about what a let property must have in it, there is almost no legislation relating to the behaviour of letting agents. This is very strange and unsatisfactory.
In 2006, it was decided by The Property Ombudsman that we should embrace lettings agency and with thanks to NAEA and ARLA, who required the majority of their members to join a redress scheme, we expanded into this field.
The big change came about on June 1 that year. We started from zero as far as lettings were concerned and by December had a grand total of 1,241 offices covering both sales and lettings and 424 with lettings as a standalone enterprise under our jurisdiction.
90 PER CENT OF CONSUMERS ARE SATISFIED OR VERY SATISFIED
Contrast that with the situation today. TPO now covers more than 14,000 offices of which 11,500 deal with sales and more than 8,500 offer lettings. By anyone’s standards, that represents a major advance.
If all we did was to right wrongs then that would be a negative approach. TPO has two robust Codes of Practice, one each for sales and lettings and both of which now have OFT approval. It has taken far too long to reach that stage with the lettings Code – a full three years – and we still await second stage approval of the lettings code which would permit the OFT logo to be used by letting agents.
Of course, waiting for the OFT was not an option, so our lettings members have adhered to a Code of Practice since day one in 2006. All the while we have been expanding into other areas of operation and now cover some commercial and international transactions and chattels auctions, too. Spreading our costs in this way, when there is a finite number of estate agents able to join, ensures we remain affordable and retain membership whilst widening the areas in which consumers can have access to redress
The Codes of Practice demand certain professional standards are met, impressing upon estate agents how they should behave in their everyday activities. Most do an excellent job and our satisfaction and sales compliance surveys show 90 per cent of consumers are satisfied or very satisfied with the service they receive. Bearing in mind how stressful moving can be, this is a remarkable achievement.
A considerable amount of my time, and that of the Property Ombudsman, Christopher Hamer, is spent in discussion with sales and lettings agents to help them understand what we expect. The Ombudsman is also very quick to spot developing trends that are giving rise to more consumer complaints and advising the industry accordingly.
WHILE POLITICIANS DITHER, TPO WILL CONTINUE TO GUARD AGAINST THE OPPORTUNIST
It’s a justifiably proud boast that since Christopher Hamer became Ombudsman at the end of 2006 the seriousness of sales complaints has apparently diminished, reflected in the roughly halved value in the average size of awards that he makes.
An ambition is now to achieve the same with lettings agents, which may take a longer time although I’m confident we will get there. It’s important for consumers, and that term covers both landlords and tenants, that lettings agents are at the top of their game when it comes to standards. There are anecdotal tales about lettings agents making off with the rent or tenant deposits. I would suggest that if you don’t want to have such a readymade after-dinner or post-work pub tale to tell then you should seek out a TPO lettings agent when you need to let or rent a property yourself. Better still, use an ARLA, RICS, NALS or SAFE agent and check that they have client money protection.
The London lettings market is vibrant because so many have to live here and a large number cannot afford to buy at current prices. The decline in availability of local authority and social housing means many tenants are driven to taking property in the private sector where they need the support of a good lettings agent to ensure fair play and honest dealing.
The big issue for me is how to deal with those agents who do not feel the need for membership of anything. It’s a sad fact that anyone can set up as a lettings agent today and make off with rents or deposits. At least with a sales agent it’s impossible to operate without at first signing up to an approved redress scheme. There are only two and we were the first to get OFT accreditation – now I estimate more than 90 per cent of UK sales agents are with TPO.
This requirement makes it more difficult to be a here today, gone tomorrow operation. With lettings that potential stumbling block to fast entry and even faster exit does not exist. Having said this, only a tiny handful gives the industry a bad name.
We would like to see Professional Indemnity and Client Money Protection Insurance as mandatory for all letting agents. Currently this would mean all agents belonging to a professional body such as RICS, NFoPP, NALs or SAFE. With a push, it might be that CMP could be provided within PI insurance and this is an opportunity a broker reading this may like to explore.
In these times of great consumer awareness, it astounds me that so little protection is offered to consumers in such a vastly populated market as lettings. One would imagine that politicians of all hues would see that as a vote winner because an increasing number of people rent properties they live in rather than own them, but apparently not.
This is a very driven business, with television programmes showing individuals charged up and chasing deals every minute of the day. But the sector is populated by some very measured and excellent professionals, too.
Perhaps lettings is the harder business to be in. People who want to buy a property normally have some idea what they can afford and shop accordingly, tinged with a little optimism that they can make an offer on something out of reach and win the day.
With lettings there are many potential tenants who find affordability difficult, if not impossible. I’m glad I’m not the person who has to deal with them, disappoint them, and desperately help them search for a home they can afford.
This recession is tough, and with the Eurozone crisis has become far tougher than many of us predicted, even in our wildest moments. It has brought undoubted opportunity for many estate agents to swap from sales to lettings and now, for the first time for many years, there are more lettings transactions than sales. The older established sales agents, who know their locality well, can contribute much that’s positive to the lettings sector. But while politicians dither, here at TPO we will continue to guard against the opportunists.
This may appear a somewhat gloomy summary but in fact there is so much more to my half century in estate agency, which has passed quickly and left me feeling there is still much to do. It is my great hope that those with vision for the future will take the industry to new heights.