Letting agents have responded with enthusiasm to the government’s announcement over the Easter weekend that the industry would in future have to abide by a mandatory code of practice and individuals would have to achieve a nationally-recognised qualification.

The government caught some sectors of the industry by surprise when it revealed on Sunday that  criminal charges would be brought against those letting and managing agents who break the code, and said that a new regulator will be set up to police the code.

Agents failing to comply will be barred from trading, while those who commit serious code breaches will face prosecution.

Former RICS residential faculty chairman Jeremy Leaf said on Twitter: ”Excellent long overdue news which should compromise rogue operators and enhance customer confidence, but must be properly enforced.”

But he added: “We need firm dates for delivery as all a bit wishy washy in that regard at the moment.”

Kristjan Byfield of London agency Base Property Specialists also took to social media to say: “In principle this is good news … How this is legislated, funded and enforced will be pivotal. However, with it taking 18 to 24 months for the government to configure a letting fee ban this could be a slow task.”  

ARLA was also supportive with David Cox, chief executive, saying in a statement: “We are hugely supportive of these proposals. After 20 years of campaigning, the government has finally listened to our call for proper regulation of the industry. For the last two decades, successive governments have passed significant amounts of complex legislation on landlords; none of which have been properly policed or adequately enforced.” 

He continued: “These announcements demonstrate a very sensible shift towards focusing on the root cause of the issues affecting the sector rather than trying to find legislative solutions to individual problems. For landlords, their rental property is usually their biggest asset after the home in which they live; and for tenants, it’s their home.

He continued: “These announcements demonstrate a very sensible shift towards focusing on the root cause of the issues affecting the sector rather than trying to find legislative solutions to individual problems. For landlords, their rental property is usually their biggest asset after the home in which they live; and for tenants, it’s their home.

“It must be the right of every landlord and every tenant to have a letting agent who knows what they are doing, is professionally qualified and the money they entrust to their agent is protected. This is a huge step towards creating a level playing field across the industry, and we look forward to working with the government on this.”

NALS also backs the measure, with chief executive Isobel Thomson saying: “We welcome the government’s recognition of the current contribution that lettings and management firms play within the Private Rented Sector. Creating a level playing field will eliminate the poor practice and dishonesty that currently tarnishes the sector and ensure a safe and fair experience for tenants and landlords. Agents who already submit to self-regulation should have nothing to be concerned about.”

The government’s announcement reads: “With thousands of renters and leaseholders suffering at the hands of rogue agents every day from unexpected costs, deliberately vague bills or poor quality repairs, a new mandatory code of practice is proposed to stop managing and letting agents from flouting the law.

“To further professionalise both sectors, letting and managing agents will be required to obtain a nationally recognised qualification to practice, with at least one person in every organisation required to have a higher qualification.

“A new independent regulator responsible for working practices of agents will be given strong powers of enforcement for those who break the rules – and agents who fail to comply will not be permitted to trade. Criminal sanctions could also be brought in for those who severely breach the code.”

Housing minister Heather Wheeler says: “Most property agents take a thorough and professional approach when carrying out their business, but sadly some do not. By introducing new standards for the sector, we will clamp down on the small minority of agents who abuse the system so we can better protect tenants and leaseholders who find themselves at the end of a raw deal.”

Other proposals to be brought in under the code include:

– a new system to help leaseholders challenge unfair fees including service charges;

– support for leaseholders to switch their managing agents where they perform poorly or break the terms of their contract;

– a requirement for all letting and managing agents to undertake continuing professional development and training. 

The new code will be developed by a working group comprising representatives of letting, managing and estate agents, as well as tenants and regulation experts. The government says the group will be established as soon as possible and is expected to draw up the final proposals early next year.

The group will also look in greater depth at unfair additional charges for freehold and leaseholders and whether they should be capped or banned. This includes the use of restrictive covenants, leasehold restrictions and administration charges.

The government has also published its response to its consultation on the introduction of mandatory Client Money Protection schemes for letting agents, with legislation to be brought forward to introduce privately-led schemes and civil penalties of up to £30,000 for agents who fail to comply with the scheme.

According to industry estimates, £2.7 billion in client funds is held by letting agents at any one time. 

“Making this scheme mandatory is vital to ensure every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve, and will mean they are reimbursed if their letting agent is fraudulent or goes bankrupt” says the government’s statement.