Letting Agent Regulation - Good or not so good?
The Letting Agent Code of Practice (Scotland) Regulations 2016 will come into force next year. The draft Code of Practice is currently the subject of consulation, and can be viewed here.
What it's all about?
In response to evidence of significant levels of poor or indeed unlawful practice amongst Scotland's Letting Agents, The Housing (Scotland) Act 2014 introduced a framework for the regulation of letting agents practicing in Scotland. This includes:
- a mandatory register of letting agents;
- an associated ‘fit and proper’ person test;
- a mandatory requirement for training;
- a statutory code of practice which all letting agents must follow;
- a requirement to have Client Money Protection arrangements in place;
- a requirement to have Professional Indeminity Insurance in place;
- a mechanism for landlords and tenants to resolve alleged breaches by letting agents of the statutory Code of Practice, through a new specialist First-tier Tribunal instead of the Sherrif Courts;
How does this affect Simply Let?
In short, it's likely to be pretty academic for Simply Let.
As a firm of chartered surveyors, Simply Let is Regulated by RICS, and has been since its inception in 2004. This provides Client Money Protection backed by RICS and places a requirement on John as a director which is at least equivalent to the Scottish Government's "fit and proper person" test. We are also Licensed by ARLA, which places a similar requirement on Kathleen as co-director. RICS Regulation also requires the firm to have professional indemnity insurance in place. We voluntarily choose to pay a hefty annual fee to be regulated by RICS because it's important to our business model to evidence our reliabilty and professionalism. Our RICS regulation requires RICS to monitor our policies, processes and accounts, and enables RICS auditors to visit our office to examine those processes and accounts in order to ensure that the interests of our clients and their tenants are safeguarded and that RICS reputation as the hallmark of professionalism is not predjudiced.
We have a policy which requires all our staff to undergo professional training in order to attain competency in lettings managment in Scotland. The directors have a mandatory requirement by RICS and ARLA respectively to undertake Continuing Professional Development, as do the staff through their individual ARLA memberships. The new statutory requirement is less onerous.
As chartered surveyors we are obliged, and by inclination want, to work to a strict code of ethics and to run our business on transparent and business-like lines. We are already operating practices at least equivalent to those set out in the draft Code of Practice.
So, in short, the new statutory requirements won't require anything further of us, other than a requirement to pay a fee, the size of which is yet to be announced. Already paying in excess of £1500 per year to be Regulated by RICS and Licensed by ARLA to a standard higher than is now planned for by government, we will not be best pleased if this further fee is anything other than token.
How will it affect letting in Scotland?
It should vastly reduce poor and unlawful practice by letting agents and offer considerably enhanced protection to landlords and tenants. It's perhaps not generally realised that at the moment anyone can set up as a letting agent with none of the above requirements in place, and then assume responsibility for management of assets worth perhaps millions of pounds in total (assets possibly representing individual clients' most significant chunks of wealth) and in a field where legislation is extensive and complex. Unless adequately enforced however, the improvement government seeks, and the improvement we all need to see, may not come about. (We're aware of firms practicing letting management in the Highlands who are still charging unlawful fees to tenants and, in the absence of enforcement, getting away with it)
Some firms, who don't want the hassle and disciplne compliance will entail, may decide to give up, and so we're likley to see some coalescence in the sector. This will leave fewer firms, but these are likley to be operating more professionally.
Much will depend on the degree of monitoring and enforcement, and we're not particularly confident that will prevail. So, putting our cynical hats on, we may see a Scotland where all agents on the register could place a notice in their window - "Registered Letting Agent" or "Regulated by the Scottish Government" - what confidence that could inspire in potential clients - but, in the absence of enforcement, would such confidence be justified?
It should help "level the playing field" but, in the absence of enforcement, will that levelling essentially bestow on poor performers an illusory respectabilty to the disadvantage of the truly professional firms?
Time will tell. As the market inevitably comes into play individual landlords will work out which agency best fulfills their requirements.
What do you think? We'd love to hear your views.