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Working group recommends major changes to estate agency regulation

  1. 02 August 2019
  2. By Andi Michael

The recent recommendations from the Regulation of Property Agents working group could have a transformative impact on estate and letting agency as we know it.

In mid-July, the property industry finally got wind of the proposals that could lead to the biggest shakeup in estate and letting agency regulation ever seen.
The Regulation of Property Agents (RoPA) working group, chaired by crossbench peer Lord Richard Best and with representatives from across the sector, released its wide-ranging proposals for root and branch reform of the agency sector in an extensive 54-page document.
What, though, was actually announced, what was the industry’s reaction and what will the new ‘world of regulation’ mean for the property market?

Ground-breaking new proposals 

The RoPa working party, formed last year by the Ministry of Housing, Communities and Local Government, has put forward recommendations which will drastically alter the way estate and letting agents are regulated, trained and licensed.
MHCLG is understood to have already signed off the proposals, which are anticipated to be the backbone of new legislation in the near future.
However, the pace of change could be quick, with Lord Best telling property trade publication Estate Agent Today that one of the main recommendations – for a new regulator to oversee a new regulatory regime for property agents – could be a reality within two years.
The proposals state that this new regulatory regime would be binding on companies, and certain individuals, that act ‘as intermediaries to property transactions’. Additionally, those who are regulated will also have to be licensed by the new regulation, while there will be an overarching Code of Practice that agents must adhere to, with different factors binding on agents depending on their area of work. 
Furthermore, the working party recommended a new ‘modular’ approach to qualifications, which individuals within regulated companies would need to meet.

A well-regulated sector 

A new regulatory framework will be created to cover estate agents in the UK and letting and managing agents in England only if the proposals are transformed into new legislation.
This is designed to make sure that every person working in the industry is properly qualified, licensed and adhering to a strict code of practice, which will help to further professionalise the sector, raise standards across the board and eradicate bad practice where it exists.
As a result, all agencies operating a residential property business will need to be licensed, with the licensing process including a fit and proper person test. Meanwhile, all customer-facing staff working within a residential agency business will also be required to be licensed and obey the new Code of Practice.
What’s more, all customer-facing staff working within a residential agency business would need to hold a qualification at Level 3 (equivalent to an A-Level), with directors preferably qualified to Level 4.

What did the industry say?

There was mostly a positive reaction from trade bodies – perhaps not surprising when you take into account many were involved in the working group itself.
Sean Tomkins, chief executive of the Royal Institution of Chartered Surveyors (RICS), said: “Ensuring consistent minimum standards across the sector for agents is vital to upholding the public interest. That’s why the RICS congratulates Lord Best, working group members and the Ministry for these sound recommendations.”
David Pilling, head of lobbying and policy at redress provider Ombudsman Services, the only redress firm to be involved in the working group, also welcomed the recommendations contained in the RoPA report, saying they ‘have the potential to make a significant and positive difference to consumers’.
“We think the proposed regulatory body could play a key role in fostering a culture of openness, transparency and accountability across the property agent sector – ultimately raising standards and improving outcomes for consumers,” he added.
The National Landlords Association (NLA), which was also part of the working group, backed the RoPA proposals too. It also noted that the report included provisions that suggest the new regulator’s scope should be extended to cover self-managing private landlords, and potentially tenancy deposit and client money schemes in the future, once it is fully established and functioning at its maximum.
“Landlords are as much consumers of property agents’ services as tenants, so we’re pleased to have represented their views in the Working Group, and to have made an effective contribution to this report, which represents a broad consensus across all parties involved in the sector,” Richard Lambert, chief executive of the NLA, commented.
He added that the NLA hoped the proposals outlined in the report would drive forward the professionalisation of the private rented sector, ‘making it a better place for those who live and work in it’.
The two biggest trade bodies for estate and lettings agents, NAEA and ARLA Propertymark, meanwhile released a joint statement from chief executives Mark Hayward and David Cox which largely endorsed the working group’s recommendations.
“This is a significant moment for those in the property industry and a huge leap forward in stamping out bad practice,” that statement said.
“We have long called for government intervention to ensure everyone in the industry is licensed, adheres to a strict code of practice and holds at least a Level 3 qualification (A-level). Following the extensive considerations by the working group, it is now for government to create the structures for a properly regulated industry, whose professional knowledge and skills are trusted and respected by all.”

The statement also warned, however, that agents will need to prepare in advance for a much more regulated sector.

“These are substantial changes which will require agents to start making preparations now to ensure that they are well placed for when these proposed qualification requirements are introduced.”

Will the change in Prime Minister have any impact?

After Boris Johnson took the reins of No 10 and carried out a ruthless reshuffle, the makeup of MHCLG suddenly became very different, with James Brokenshire (Housing Secretary) and Kit Malthouse (Housing Minister) replaced by Robert Jenrick and Esther McVey respectively.
While there is a chance that these new faces in the department could have different ideas and reject the RoPa working group’s recommendations, it seems unlikely that they would row back on proposals that were a long time in the making and have broad industry support.
More likely is the conversion of the proposals into legislation will be held up and delayed by a government and Parliament still heavily preoccupied by Brexit.

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