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What is today's blog about?
Jane Forsyth BA (Hons) MRICS, FIRPM outlines the recommendations of the Final Report of the Regulation of Property Agents Working Group, on the regulation, training, and licensing of agents, and the sweeping changes suggested for the leasehold sector.
Jane is a Chartered Surveyor, a Fellow of the IRPM and a qualified (non-practising) solicitor with a wide range of expertise in the leasehold and lettings sectors. She is also a consultant to Property Elite providing support on the residential and valuation pathways for both the RICS APC and AssocRICS assessments.
Essential reading for AssocRICS and RICS APC candidates.
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What is the Working Group?
The Government has proposed independent regulation, mandatory qualifications and a code of practice for “Property Agents”. The Working Group was tasked with examining options for implementation, to raise standards and protect consumers.
Chaired by Lord Best, the group is made up of sector experts, including the RICS, the Institute of Residential Property Management, the National Association of Estate Agents and the Association of Residential Letting Agents.
What proposals has the Working Group published?
The Working Group has published its Final Report, with key recommendations including:
A new independent regulator, accountable to the Secretary of State for Housing, Communities and Local Government be appointed to lead a public body with oversight of the new regulatory regime
Licensing and regulation of firms carrying out a list of reserved activities
Licensing of individuals working in the sector, who will also need to be suitably qualified
A new statutory code of practice, which will be the responsibility of the new regulator, and which may be binding on agents in some areas of work
A syllabus for the qualifications required for individuals working within regulated firms, to be the responsibility of the new regulator
A regulator-led system of enforcement and redress
Publication by the regulator of an annual progress report on raising standards, based on key performance indicators, including customer satisfaction
Funding of the new regulator by regulated firms and individuals
Who will the proposals apply to?
According to the Report, the Working Group’s proposals should apply to estate agents across the UK, and to letting and managing agents in England.
The Report recommends the inclusion of auctioneers, rent-to-rent firms, property guardian providers, international property agents, and online agents, but excludesproperty portals such as Rightmove, and the short-term lettings sector e.g. Air BnB.
Local authorities acting as letting or managing agents will not need to be regulated under the recommendations, but their staff will need to be suitably qualified.
In future, regulation may extend to landlords, freeholders, developers, and Right to Manage companies.
What is the status of the report?
The Final Report provides recommendations for change. These changes will need to be implemented, requiring new legislation. It is, therefore, not guaranteed that they will be brought in, and the exact form of the changes will be a matter for Parliament.
However, leasehold is a political hot topic at the moment and it seems that the changes are likely to be implemented, potentially in around two years time. There is also likely to be a transition period to phase-in changes, enabling firms and individuals to prepare for compliance.
Will I need to become qualified?
Experience alone will not be enough to become a licensed individual – experienced, but otherwise unqualified, individuals will need to gain suitable qualifications. Technical knowledge, ethics, and consumer relations are all expected to play their part.
What if I already have a qualification?
It seems that those already suitably qualified should not need to undertake further training.
The key is in ensuring training is suitable, as the Report proposes that the new regulator should approve qualifications.
However, with the RICS and the IRPM, and other industry bodies all involved in the Working Group, it is hoped that qualifications gained from these (and other) organisations will satisfy the new regulator’s requirements. Where they do not, it may be possible to undertake suitable top-up CPD.
What else does the report say?
The Report also tackles wider leasehold issues, suggesting that:
The consultation threshold for major works under Section 20 of the Landlord and Tenant Act 1985 (as amended) be increased from £250 to £350 as an average, and index-linked, or otherwise the regulator be granted power to review the threshold. This is a significant development for leasehold management, as the £250 threshold has not increased since 2003 and can add to the financial and administrative burden associated with major works. Procedures for consultation may also be reviewew
Measures should be considered to improve transparency and the protection of client money, where service charges and sinking funds are held by an agent
A prescribed list of administration charges, with a fee tariff, be implemented
Sinking funds become mandatory, to assist with budgeting and to avoid leaseholders receiving large one-off bills for major works
Client money protection insurance should be extended to cover leaseholders and freehold homeowners
The powers of Recognised Tenants’ Associations should be extended, and leaseholders should be empowered to veto the appointment of a managing agent, or to switch managing agents
Where can I read more?
You can read the Report’s wide-reaching recommendations in full online.
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N.b. Nothing in this article constitutes legal or financial advice. This is also not a full summary of the Working Group Final Report.