Regulate property agents with sweeping reforms, says working group

Property agencies should be regulated by a new independent property-agent regulator and made subject to a code of practice, an independent working group has said.

Solicitors and other lawyers should be required to report evidence of illegal behaviour on the part of property agents to the new regulator, it recommended.

The Regulation of Property Agents Working Group, chaired by Lord Best, was tasked in October 2018 with advising government on a new regulatory framework for property agents; and has considered options to drive up standards in the property agency sector.

This has led to far-reaching proposals for a new regulatory framework.

The working group agreed “a new approach” is needed and said “regulation will provide the opportunity to prevent bad practice and drive cultural change within the industry”.

In its final report just published, the working group said the scope of the new regulator should extend to both individual licensed agents and to regulated agencies as firms.

Furthermore, the regulator should have the power to vary licensing conditions if necessary. It should also be able to consider complaints about property agencies from all sources.

The working group called for all those carrying out property agency work to be regulated, including auctioneers, rent-to-rent firms, property guardian providers, international property agents and online agents; but regulation should not extend to property portals such as Rightmove, which do not perform agent functions, local authorities who act as letting or managing agents, or AirBnB and others in the short-term let sector.

It also recommended a mandatory and legally-enforceable “overarching” code of practice for property agents with additional “regulatory” codes specific to various aspects of property agent practice which would be binding only on agents providing these types of services.

It said this “overarching” code should be based on key principles, for example, agents must act with honesty and integrity and declare conflicts of interest.

It also called for minimum entry requirements to become a property agent and a requirement for continuing professional development.

Extra charges imposed on buyers are also the target of reforms with the working group recommending the regulator should be legally required to ensure transparency around additional charges.

It recommends the processes and charges for leaseholders should be clarified, including that the first-tier tribunal cedes power to the new regulator to block a landlord’s chosen managing agent where the leaseholders have reasonably exercised a veto.

It also wants the new regulator to play a role in enforcing compliance with any new requirements for managing agents and have the power to appoint a single ombudsman for property agents if necessary to improve standards.

The new regulator should have a range of options for enforcement action, from agreeing remedial actions and issuing warnings to licence revocation and prosecutions for practicing without a license, depending on the seriousness of the infringement and how regularly it occurred.

It should also have the option to publicise infringements and the enforcement action taken.

Law Society president Simon Davis said: “Solicitors are a highly regulated profession and we have long maintained that property agencies should be subject to greater regulation.”

Acknowledging that property agencies are not going to be held to the same standard as solicitors, he stressed it is important for consumers to be given more protection, adding: “They deserve to feel confident any property professionals involved in their purchase - and while they are living in the property - are properly regulated.”

Davis said: “The call for greater transparency around additional charges is very much welcomed. Many buyers enter purchases unaware that their new property might come with leasehold or freehold charges and then struggle to afford these payments.”

Proving the information early in the process will, he said, allow them to make informed decisions.

The Society, the profession as a whole and other stakeholders will be watching to see how government responds to the report.

Davis said the Society is keen to see “how any obligations on solicitors and other professionals to report evidence of possible illegal behaviour by agents to the regulator might work”.

The working group includes industry and consumer experts such as the Royal Institution of Chartered Surveyors, the Association of Residential Letting Agents, the National Association of Estate Agents and National Trading Standards.

Read the Regulation of Property Agents working group report here.