The Property Ombudsman scheme has taken legal advice on how letting agents could be compulsorily regulated, saying that voluntary bodies are not the regulators 'some imagine them to be'.
There were also criticisms of the lack of uniformity in the way client money is protected - where, indeed, it is regulated at all.
Bill McClintock, chairman of the Ombudsman’s board, made the revelations in a response to LAT after questions about Leeds letting agent The Property Showroom.
McClintock said: “There is no regulation for lettings agents, whereas there is some regulation for sales agents. Despite TPO pressing the Government over several years, politicians have not been prepared to support regulation, much of which could have been done by a small amendment to the 1979 Estate Agents Act or other means available to the Government.
“We have recently been seeking legal advice on this very matter, and the view is that the Estate Agents Act 1979 needs to be amended, which can be achieved, while new and more vigorous legislation for the sector is prepared.
“TPO works hard to influence agents and governments to increase such protection.
“However, consumers also need to take a degree of responsibility in the choices they make about the businesses they deal with.
“They might be helped considerably in this if there was a standard level of CMP offered across the industry rather than a mix of bond or insurance schemes, some with very limited total amounts for each incidence of claim.
“We have reached the stage where this can no longer be left to industry goodwill or voluntary membership bodies which are not, and never have been, the regulators that some imagine them to be.
“Consumer protection is not a function of TPO but raising industry professional standards is core to our Codes of Practice (each requires separate client money accounts), which is why we put so much energy into this topic.”
The Property Showroom – to be the subject of a creditors’ meeting on Thursday – had displayed the Ombudsman logo, although it was not clear whether this covered both sales and lettings.
McClintock confirmed that it belonged to the scheme for both. Asked whether agents who carry the Ombudsman logo should also be made to carry a disclaimer so that members of the public know that the scheme is not a regulator and has nothing to do with protecting their money, he said: “TPO Ltd has been considering the matter of CMP for some time.
“We are considering making a Code amendment such that letting agents who do not carry CMP must disclose this to their clients.”
He went on: “TPO is a redress scheme and has never suggested it is a regulator or that it offers CMP.
“Sir Bryan Carsberg clearly defined the differing roles of Redress and Regulation in Chapter Three of his review published in June, 2008, when he stated: ‘Although regulation and redress are often linked in the minds of consumers, their aims and methods are distinctly different and they should be carried out by separate bodies. Regulation is intended to change the pattern of behaviour of firms in general and to improve the working of markets, often by undertaking measures that affect an industry at large in a broad kind of way. Redress is intended to provide compensation for customers who have suffered from unacceptable behaviour, including cases of financial detriment. It deals with individual cases and looks at events that have happened...
“‘... I believe that letting agents and managing agents should also be required to join redress schemes...’”
McClintock added: “With regard to The Property Showroom, whilst trading, the business was registered with TPO for both sales and lettings, and displaying the old OEA logo, whilst not being up to date, was not in itself misleading.
“It appears the firm was not a member of ARLA or NALS and therefore did not have to comply with those bodies’ requirements for client money protection.
“However, their registration with TPO means that complaints about potentially misappropriated monies could have been considered against Section 13 of the Code of Practice for Residential Letting Agents, which requires agents to keep client money in a separate designated account.”
There are some informal briefings at government level that if the pressure is maintained, housing minister Grant Shapps might be persuaded to rethink his refusal to regulate letting agents.
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Comments
I don't understand a word of what you said but it seems Robert has either popped round to see you or he is trying to get sick out of his keyboard.
Robbie baby, darling sweety I doubt very much that anybody 'follows' anyones posts on here or am I on Twitter, I'm not sure who's confused now!
Posting under you're real name helps with my addiction but try posting your home/work address and see how many followers you really will get; you sure this isn't Twitter, NURSE!
Honey this song isn't about you but do keep us all up to date on that 'public challenge you' laid down.
Don't sober up Rob I look way better with beer goggles on now shut up and kiss me!!
If you have followed all my posts it ought to be apparent that I am using this story and others to coach the industry to a position where it has no option other than to do what is in its best interest.
Rather than adopt a foetal position I am more than happy to post under my real name and discuss the points that come back as a result of my posts. How many other posters on EAT or LAT do likewise.
Blissfully ignorant post? Think about it. Is it really or have I just laid down a public challenge to the stakeholders to question me further? If you were collecting Tax and VAT From Agents, Tax from Landlords, If you were setting out your stall as a champion of Client Money Protection or responsible for Money Laundering and someone claims that it is possible to regulate your individual nemesis out of the industry wouldn't you want to find out what they are banging on about?
It is interesting that you have used the alcoholics analogy, very apt. We are all sat here in the same bar apparently enduring the same issues, yet the one person who is suggesting we ought to sober up is considered the one with the problem? Perhaps I am the only one to recognise that we might all have an issue.
P.S Thank you for your love.
Every industry has it's criminal element, even the government itself is prone to fraud. You can't create Utopia just from 'stakeholder' buy in's.
Before you assume the foetal position, this isn't a troll attack but I'm just amazed that you read that article and (a) that was all you got from it and (b) that such a presumably intelligent member of our industry should post a blissfully ignorant throwaway comment like that.
Like an alcoholics sponsor I won't give up on you Rob, I love you man!
"can we really regulate the criminal element out of our Industry?"
Yes! but it needs buy in from all the stakeholders.
Prevention is better than cure but can we really regulate the criminal element out of our Industry? The financial sector still suffer immensely, their losses far greater and more significant than ours, all the while regulated to within an inch of it's life.
I agree we need governance but of greater concern is client protection. Insured loss (CMP) is limited in addressing this by the very nature of it's restricted access.
DPS is legally mandated to accept deposit payments so why not a similar entity to accept rent? Tenants pay into a RPS (Rent Protection Service) account where funds are allocated accordingly and then paid out to landlords and agents. An independent government approved bank account with all the facilities, accounting and otherwise of our current software package.
It's just an idea....
Where would we find such a rare beast?
It already exists and has good support, SAFEagent isn't profit motivated is i?
A few tweaks to SAFEagent, a small employed staff and the foundation of such an organisation is a reality
As you pointed out elsewhere, I have had a few prods and personal attacks over the past couple of weeks, I expected that from what I set out to do and that is to encourage the industry to think about its own problems before someone slaps legislation or regulation on us that is as well thought out as TDS.
I don't think that anyone should be allowed to profit from legislation or regulation and can understand why government would resist regulation that would benefit a private company.
You are right that a Government Secretariat is not the best vehicle for this either, the lack of practical experience of the processes involved is best demonstrated with TDS. The practical compromises necessary to handle Holding Deposits differently from Tenancy deposits provides an opportunity for those that choose to do wrong. A regulator needs to have a working understanding of Agency to provide a framework that is achievable by those faced with every day challenges.
There is a huge benefit in having a regulator but the problem will come from getting buy in from those with considerable vested interests in an industry that is unregulated and to some extent un-monitored.
@ Robert May
Theres the crux of the problem. A non profit making regulator. Where would we find such a rare beast?
Do we want a repeat of the shoddy legislation that went with the deposit scheme? probably not so that rules out the govenment running it.
We need a strong lobbying force from the people on the ground. The existing bodies all have their own angle on it, and rarely seem to agree with each other in public and are weak because of that.
Maybe a campaign for honest agents to lobby their own MP's for change in the law?
@ Ray Comer I agree we should welcome a single regulatory body with no allegiance to anyone. That is non profit making?
One that sets and enforces an agreed code of practice on agents and all supplied services
Perhaps insist that anyone dealing with Clients money has an NVQ or equivalent qualification in practical and relevant Mathematics?
@HertsAgent, there is no technical reason why client accounts should not be Martini checked (any time, any place, any where) and not just annually, a code of practice could standardise audit routines and allow real time notification of problems to the Agent Principals and the regulator.
A regulator should be seen as a support for all stakeholders, not just agents or their clients
@ Ray Evans, we are finally getting to the axe I want to grind.
@ Herts Agent
Well said.
Whilst we are members of RICS, ARLA and NALS, we would welcome a single regulatory body with no allegiance to anyone. Licensed agents and landlords would go a long way to resolving some of the issues in the industry.
Educating the general public is the problem area; the only people who can do this effectively is Government - I know that sounds like an oxymoron but its true - as RICS, ARLA etc have not got the finances to run extensive national campaigns.
It seems that I have a little band of trolls who are desperate to discredit and twist anything I say so I am fairly sure one of them will be able to twist the following question.
(A question is not a statement of fact or personal opinion)
To end up with a liquidators meeting, something has gone wrong at The Property Showroom. Intended or not clients and tenants (according to LAT) are likely to lose money paid to the Hamilton Smiths. The Property Showroom was a member of the Ombudsman scheme who will not repay any of the money potentially lost or missing.
The Property Ombudsman will say it was not their job to spot that The Property Showroom was having issues with their client account.
NFoPP and NALS were not on the scene, nor were SAFEAgent so it wasn't their responsibility either. So the question is; who can Agents turn to when things start to go wrong, or are discovered to have gone wrong?
Obviously the crooks and criminals will not want to get advice from anyone and will only benefit from things remaining undiscovered for the longest possible time, but it seems to me there is nowhere for any innocent agent to get help and advice that will avert situations escalating out of control.
Providing ABTA style insurance against loss of clients' money will benefit Clients and Tenants in situations like those reported but surely before that additional Financial burden is placed on ALL agents Innocent or Crooked, it is the duty of someone/something to review the whole process of clients money and put safeguards in place that will identify the crooked; Landlords, Tenants or Agents, at an earlier point but will also provide a support system that will benefit everyone even if it does reduce the premium payable on the CMP insurance.
I agree with the principle, however I feel what is needed is simply one regulating government body who checks agents on a yearly basis.
I have run my agency for over 15yrs now and have never been a member of ARLA or any of the other bodies.
Our clients money is kept in a seperate client account and all transactions are done with a very visible papertrail.
Education is the main downfall of most agents.
To be a surveyor you study with RICS. To be a letting agent you study google.
Beter more affordable education for agents is required alongside a stand alone regulator.
Then all you need to do is educate the general public on what is a good agent.
But while people are still able to rent their properties out privately then you will also have a grey area.
What stops a professional landlord operating as a letting agent if he helps a fellow landlord to rent out his flat?
Seems to me like Bill did not like Eric's comments and this is a dig at SAFEagent.
"There are also calls for it to be made mandatory to make it clear what the Ombudsman logo actually means as far as consumers are concerned.
Eric Walker, of London agents Bushells, believes there should be an obligatory ‘Your money is at risk’ warning displayed with it.
He suggests that a suitable disclaimer could read: “TPOS offers a redress scheme only and does not offer any financial protection in the event an agent ceases trading. Client Money Protection is only available through regulated members of NALS, ARLA, NAEA, RICS or Law Society. Your money is at risk if you use a non-regulated agent.” "
TPOS can not really claim to have much of a finger on the pulse if one of their member agents can attract comments like;
"One said that they had used the business to manage their property since January 2009: “Rent was rarely paid on time and as of February 2012, the business has gone into administration and/or ceased trading, and the telephones are not being answered.”
Another, apparently a tenant, says that they have been chasing them for over a year for money, but that the firm has not returned their deposit."
Did all the dissatisfied customers of the Property Showroon simply ignore the TPOS stickers and did not call TPO?
Were they ignorant to what TPOS does and so did not call TPO?
Or did unhappy customers make calls to TPO which were ignored or was TPO ineffectual in resolving that particular situation?
Perhaps Ros could put another call in to Bill to find out!
Until TPOS can defend its position I think Eric has a point!
One would have thought Mr Shapps and Mr Osbourne would pay a little more attention to this particular revenue stream
With tax on rents, tax on agent's fees and vat on fees HMRC arguably have a 39.2% stake in the Residential property rental market. (assumes Higher rate tax)
That is about £10,715,712,000 of government income that is down to the honesty of the Landlords and Agents to hand over.
Compare that with stamp duty, agent tax and VAT at roughly £3,120,000,000 which is more coherently collected, one has to wonder if the failure to regulate the industry is anything more than negligent.
Guessing at 15-20% commission on insuring that level of Client money it is no wonder there is a right old scrabble to get a proverbial snout in the trough. About £214,000,000 annually for convincing government that Agents can’t be trusted,…. nice work if you can get it?
I agree, a revelation indeed!
'Consumer protection is not a function of TPO'
'TPO is a redress scheme and has never suggested it is a regulator or that it offers CMP'
Doesn't sound like they are trying to step into the breach to me, more like they are trying to force the governments hand.
'We have reached the stage where this can no longer be left to industry goodwill or voluntary membership bodies which are not, and never have been, the regulators that some imagine them to be'
No argument there so whats gives?
The Property Ombudsman seeks to push through regulation we all say our Industry needs by seeking legal advice on how to force the government to act and yet we still see things that aren't really there...
http://www.estateagenttoday.co.uk/News/Story/?storyid=3799&type=news_features
I would not let a Fox look after my chickens
TPO Ltd. A private limited company. There to take your money. Who is actually regulating who?
it is now “Appropriate Deity” Ray
It is quite simple. LICENSE. The government does not want to do this as they do not want to be blamed for an agent going bad and are also concerned that it will put fees up. However, lets be clear, TPO is a money making scheme for its shareholders. Is it really a good idea to have a profit making company running the regulation systems?
We have now reached a atate where quangos seek to produce quangos. God (can I still say that?) help us.
Never mind the old gimmers at the TPO empire building again, the problem is there is no legal requirement for all client funds to be held in a separate bank account and ring fenced.
That's all that needs changing.
Please could someone from the PO scheme just clarify what is meant by "Voluntary Bodies"
Is PO just referring to; Safeagent, The guild, NHN etc or is this sentence a thinly veiled swipe at NFoPP and NALS?
If PO is lobbying to become “The Regulator" which is my take on this story please can we have site of their proposals for CMP?
The whole subject of Clients money is a hot one right now bought into focus by cases such as Weston, Hussain and now the Hamilton-Smiths. It seems a shame that some seem to be focusing and jockeying for pole position on what is the commercially lucrative insurance game of CMP rather than looking at legislated framework for Client accounting that would negate the need for CMP.
Government should consider regulating both Agents and Landlords, the NLA often get left out of these discussions but in fact account for a very large proportion of rented properties, but someone needs to start by assessing how NFoPP, NALS et all have delegated their responsibilities as "Professional Bodies" to their individual members and the commercial companies that supply them. The result is chaos but no-one really wants to admit that.