Expert Kate Faulkner discusses changes within the industry.
What a difference an Easter Break makes. I often say that if you’re buying or selling a home, or indeed are a landlord, one of the worst mistakes you can make is to ever go on holiday!
And this Easter Break was no exception. On Easter Sunday, no less, the government announced a number of changes to the way the lettings industry will work in the future – including the introduction of a redress scheme for landlords.
Some of the changes are major and some minor, but all of them will affect you as a landlord, so it’s important you know about and understands what’s happening.
Changes to the lettings industry
The government plans to set up an independent regulator to increase the professionalism of letting agents and managing agents, such as those who look after blocks of flats, as they believe this will help protect both leaseholders and freeholders.
Alongside this regulation, a Code of Practice for letting and managing agents will be created, which will be ‘mandatory and legally enforceable’.
Thirdly, letting and managing agents will have to have a ‘recognised qualification to practice’ and will be required to undertake ongoing professional development. This really is essential in a market that continues to go through a series of unprecedented changes and it’s something that’s already done by the best agents, i.e. those that are members of industry organisations and bodies such as ARLA, NALS, NAEA and RICS. From your perspective as a landlord, this requirement to be qualified and properly trained will give you - and your tenants – confidence that your agent really knows what they’re talking about.
Next, although a huge amount of legislation has been heaped onto the lettings industry over the last 25 years, there has been a serious lack of enforcement, which has allowed the rogues to continue to take advantage and give the industry a pretty bad name. However, the good news is that the government appears to be recognising this by pledging that ‘criminal sanctions will be imposed on agents who practice despite not meeting minimum standards’.
Next, the government intends to ensure every letting agent has Client Money Protection (CMP) - something that all Belvoir agents have had for many years. This is an insurance policy taken out by the agent that pays out to you or the tenant if someone runs off with the company’s cash (e.g. rental payments) or the agent goes bust. Although this doesn’t happen very often, when it does, it can cost landlords and tenants dearly.
Most responsible agents already have CMP, but landlords using agents that don’t should be aware that there may be problems ahead. One insurance company that provides client money protection recently said that, in their opinion, there could be thousands of agents who won’t be able to secure CMP because their finances aren’t in good enough order.
So check with your agent and ask to see a copy of the insurance. If the agent doesn’t have it, it’s worth seriously considering moving your property or portfolio away from them.
As well as letting agents and property managers, estate agents will also be required to hold a professional qualification, and the government intends to strengthen the National Trading Standards Estate Agency Team that handles complaints against agents when enforcement is required. They already have the power to ban an agent from trading; this additional government support should simply make it easier for them to take action.
Changes to leasehold property regulations
Included in this set of announcements, it was also indicated that leaseholders will secure more power versus freeholders. So if you live in or own rental properties that are flats, you should know that the government aims to give you more powers. They propose:
· Allowing you to switch managing agents if they perform poorly or break their contract terms
· Making it easier to secure your own ‘Right to Manage’ a block if you and other leaseholders wish
· That information provided to leaseholders by freeholders should be at a set fee and to an ‘agreed timetable’
· Curbing ground rents if a property is a new leasehold flat or household.
For more detail on these changes, visit https://www.gov.uk/government/consultations/protecting-consumers-in-the-letting-and-managing-agent-market-call-for-evidence .
And if this wasn’t enough change to take in, just a week later - on another Sunday - the government made yet more major announcements about changing the way we buy, sell and secure information on properties, both leasehold and freehold.
Proposed changes to the buying and selling process
If you have ever been affected by gazumping, you’ll be pleased to hear that the government is considering introducing ‘voluntary reservation agreements’ to reduce the likelihood of this happening and of sales falling through.
And if you’ve ever been frustrated by local searches taking months, particularly when some local authorities seem to manage to deliver them in a matter of days, the good news is that the government is looking to ensure the process takes no longer than 10 days. This change alone, if successful, could make a fundamental difference to the total time it takes to buy and sell in areas where searches are currently a real problem.
The list of changes goes on and on, with sellers having to collate information about the property (such as guarantees or planning permission) prior to selling, while buyers will be encouraged to get an agreement in principle from a lender before looking at properties, to prove they have the funds to make an offer.
Other proposed changes include:
· Any fees agents earn from referrals to legal, finance or other companies will need to be transparent
· All those involved in ‘completion’ will be consulted on how to improve the process of releasing and confirming receipt of funds on moving day
· More work will be carried out to understand how we can improve the provision of information required to buy and sell a house from a technology perspective
· Finally, just as we have a ‘How to rent’ guide, the government is now going to consider publishing its own ‘How to buy’ and ‘How to sell’ guides too.
While the individual changes on their own won’t make a massive difference to the way we own, buy, sell or let a property, together they should bring about a substantial industry shift, which will hopefully make things better for everyone.
What do the changes mean for you?
Overall, they are pretty good news for landlords. If you don’t receive it already, you should be able to expect a more professional service from your agent in the future. And when you come to expand your buy to let portfolio, you will be able to access information about a property you want to buy or lease more easily, and should find the whole buying and selling process quicker and smoother – not like pulling teeth!
However, there still remains one change we really do need and haven’t had for many years: some consistency in the government minister in charge of housing. Sadly, the latest changes to the cabinet have resulted in us losing a great driver of change in the housing market, Sajid Javid, so who knows what will happen next to the property market. Hopefully, Mr Javid’s legacy will remain intact and the proposed changes will continue to be pushed through because every one of them is a valuable step forward.
House image Photo by Toa Heftiba.