Letting agents have never been more under the spotlight. From next year, all have to belong to an approved redress scheme or be deemed illegal.

Currently, the two redress schemes are The Property Ombudsman (TPO) and Ombudsman Services. However, the Government is currently weighing up whether this is sufficient before implementing the rule, which will apply in England only.

Some agents already belong to one of these schemes, either voluntarily or because it is a condition of membership of a trade body. TPO, by far the larger of the two schemes, has 10,000 lettings offices registered but reckons that still leaves 40 per cent outside a redress scheme.

Other changes are likely. As reported in our last issue, the CLG Select Committee has made a variety of recommendations on the private rented industry. These will be very hard for the current government to reject, partly because this is a cross-party committee and partly because the committee presented its case in Parliament in a way that had both the housing minister and his shadow in agreement.

Regulation

The committee has recommended robust regulation of letting agents, meaning they could be banned from the industry, just as sales agents can be. It has also proposed that both Professional Indemnity and Client Money Protection (CMP) insurances are mandatory.

This would revolutionise the industry. Currently, letting agents do not even have to keep client money – ie, tenancy deposits and rents – in separate accounts, let alone insure them. Even TPO does not make CMP a condition of membership.

However, incident after incident has shown how essential it is for landlords and tenants that their agents possess this insurance. Recently, a letting agent in Norwich collapsed owing landlords and tenants money: because it had been an ARLA member and ARLA insists on CMP, all should get their money back.

In contrast, letting agents with no CMP which have gone bust have simply taken clients’ money with them, including tenants’ deposits which were in the agent’s own account, albeit ‘insured’ with a scheme.

Such a situation leaves the landlords legally obliged to make good their tenants’ cash.

The two tenancy deposit schemes that allow agents to use them even if they do not have CMP are Capita and Mydeposits. The TDS, which runs DepositGuard and which is recommended by the RLA, insists on CMP.

Yet another straw in the wind is that letting agents have not been bound by theProperty Misdescriptions Act. This only applies to sales agents, meaning that letting agents can be imprecise in their descriptions of rental properties. This is all changing, because the Act is being replaced by the Consumer Protection from Unfair Trading Regulations. This applies to letting agents as well as to sales agents.

Importantly, it penalises agents who misdescribe properties, and also agents who leave out material features – for example, anti-social neighbours or proximity to a noisy pub. Going back to the select committee, it also made recommendations on property standards and safety, including mandatory electricity checks every five years. Estimates vary as to how many landlords use agents, but ARLA puts it as 60%. It is worth underlining that tenants have little choice of agent, as they choose a property, rather than who is marketing it. However, landlords do – and the wisdom of basing a decision entirely on cost is foolhardy. A cheap agent may be cheap for a reason – it cuts corners, has no CMP, and is using clients’ money as cashflow for its own business.

Ask the right questions

Given that agents can cost you 10-15% to look after your property, it is worth choosing with care and asking the right questions.

• What are your fees? What are they for and when are they payable?
• What are your fees to tenants? (A subject under much scrutiny.)
• How will you advertise and market the property? Do you list properties on both Rightmove and Zoopla? Do you have a database of waiting tenants who are emailed/texted whenever a suitable property comes up.
• On average, how long does it take you to let a property, and when do you start marketing it once the tenant gives notice? (You want to avoid an empty property between tenancies on which you may have to pay full council tax.)
• Do you do credit checks? What are your referencing procedures? Can I see the references? (Some agents will argue that you can’t, for data protection reasons, but it could mean they haven’t done the checks in the first place.)
• How often do you visit properties? (Three months is normal, but some agents check after the first month. Some, including Belvoir, take colour photos at each inspection to pass to the landlord.)
• How do you handle emergencies? Do you have an out of hours line for tenants to call?
• How do you handle maintenance and repairs, and do you have trusted contractors?
• Do you belong to a membership body? Do you belong to an ombudsman scheme? Do you have CMP, and can I see proof?
• How do you handle tenancy deposit protection?
• How do you handle emergencies? Do you have an out of hours line for tenants to call?
• How do you handle maintenance and repairs, and do you have trusted contractors?
• Do you belong to a membership body? Do you belong to an ombudsman scheme? Do you have CMP, and can I see proof?
• How do you handle tenancy deposit protection?