Do We Need Agent Regulation?

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Do We Need Agent Regulation?

During the passage of the Leasehold and Freehold Reform Bill through the House of Commons the Labour party tabled amendments requiring that all property agents be qualified to specific levels. These calls have been echoed in the House of Lords and it may be that further amendments are sought in the Bill at that stage.

There has also been a long-running programme regarding the Regulation of Property Agents (RoPA) which produced a working group report in 2019 which the government suggested it would take forward. This working group proposed:

  • an independent property-agent regulator;
  • a Code of Practice for property agents;
  • a system of minimum entry requirements and continuing professional development for property agents.

But is all of this really necessary? Property agents are already quite heavily regulated. They are subject to compulsory redress schemes and in lettings agency are required to be members of a client money protection (CMP) scheme. Estate agents and higher value letting agents are also required to register for money laundering supervision with the HMRC, while the CMA has taken action to deal with price fixing. So, in principle at least, there is quite a lot of requirements already in place. Is there any real value in requiring a regulator which simply adds costs to the business model.

There are two things actually missing from the structure of agency regulation.

The first, and in my view, most important is training. At the moment a great many agents have little or no training and they frequently give advice to their clients and others which is, at best, misguided and, at worst, downright wrong. Improving training in the sector would lead to better outcomes from all those using it and would also contribute to better business management and employee retention. The costs would not be substantial as there are already a number of different providers operating in different ways and businesses would also receive benefits from better trained and motivated staff which would offset some of the expenditure on training.

The second thing missing is enforcement. As the recent HMRC penalising of over 250 estate agents has shown there are serious failures to comply with existing requirements. Some of these appear to be borne of ignorance and so might addressed via training. But enforcement is largely non-existent right now apart from the recent HMRC drive. There is nobody effectively looking at letting agency fees to landlords, CMP membership, and redress scheme membership. What enforcement there is, is sporadic and confined to a very few local authorities. Given that they have consistently stated they need more powers to regulate the PRS it is unfortunate that the powers they have are so poorly utilised. That said the total lack of funding for this from central government places local authorities in an impossible position.

What is not needed is another regulator. It is notable that the main organisations calling for this are clearly intending that they will be the regulator. Creating jobs is not the reason to regulate and there needs to be a far better reason for lumping more costs into the sector for a regulator that probably is not needed. A regulator may do some of the enforcement for local authorities but they will then need to enforce a failure to join the regulator so there is little overall benefit. The idea of a Code of Practice for agents is not likely to lead to much improvement either. The one proposed by the working group was positively dangerous and led to an erosion of the duties of agents by giving them liabilities to both parties. A code or practice that directly conflicts with the existing legal duties we place on agents is a recipe for confusion and payments to lawyers.

Agents who are calling for more regulation should be very careful what they wish for. Increasing costs without actually improving the sector and removing rogue agents is not a benefit and a more limited intervention to improve knowledge is likely to be more beneficial.

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