Over the past few years, we have seen some significant changes to UK property legislation. For example, we have seen changes to the requirements for HMOs back in 2018, introduction of the How to Rent guide, legislation around tenant fees, electrical safety inspection requirements for all rental properties and most recently the proposal to make all privately rented properties at least EPC C rated. Not to mention all the temporary changes relating to COVID-19.
Whilst these changes aim to make things much better (and safer) for tenants, it can be difficult to keep up at times. It will therefore probably come as no surprise that the Government is proposing an even more significant change. One that will dramatically affect the whole buy-to-let market and this is the regulation of all property agents (along with probably landlords).
So, what does this actually mean and what impact would there be to landlords?
What Does the Regulation of Property Agents Mean?
The working group report, which was published back in July 2019, made five recommendations:
- All agencies operating a residential property business should be licensed and licensing should include a fit and proper person test for company directors.
- All staff delivering ‘reserved activities’ employed within the residential agency business should be licensed and adhere to a Code of Practice.
- All staff delivering ‘reserved activities’ employed within the residential agency business should hold a qualification at Level 3 or above.
- All company directors and managing agents should be qualified to a minimum of Level 4.
- A new regulator to be appointed to oversee compliance with an overarching Code of Practice.
This is a massive change and, whilst it does go as far as seeking to recognise managing agents as a profession - along the similar lines of, say, a lawyer or other regulated profession - it is crucial that it is implemented in the right way.
It doesn’t appear that every employee at a lettings agency will need to be qualified (e.g. admin staff), however, I will keep an eye on this. The regulations initially apply to those who are:
- Conducting viewings
- Conducting market appraisals
- Negotiating with, and on behalf of, clients
- Signing contracts
- Providing direct advice to clients
- Instructing contractors to undertake works
- Collecting or handling client money
- Having responsibility for the health and safety compliance of a property
- Involved in rent-to rent transactions
This is a huge change and there is no set date for it to come into effect, however, it will have a tremendous impact on the industry when it does!
What About Landlords?
It is my understanding from reading the report that this initially applies to managing agents. However, the report does leave the door open for self-managing landlords to be included (and it would not surprise me if this will be the case!).
The exact wording from the report is:
“We recommend that the new regulatory model we propose in this report is flexible and could therefore be extended to other areas, covering freeholders, developers and private landlords (including new Build to Rent providers).”
The ARLA goes further to explain that the report has a very strong recommendation that this should be extended to landlords as well as agents.
Provided this is implemented properly, we believe the change is a positive one. Rogue landlords will continue to exist, but hopefully the new regulations will help improve the overall standard of rental accommodation and the service that is provided.
It will not surprise me if this change coincides with the implementation of a rental property register where landlords will be required to upload items such as EPC and EICR certificates.
We could also see a surge in landlords moving the management of their properties to professional lettings agents, however, is it unclear whether landlords would still need to be qualified.
Whilst all these changes are, at face value, good ideas, they could lead to further rent increases due to the increased cost to landlords. This may see an improved standard of living, but the cost of renting would increase for the tenants themselves!
It will be interesting to see how this is launched over the coming years and we will certainly be keeping you posted on any significant changes that occur.