When a tenant paid his initial one month’s rent in addition to a tenancy deposit in exchange for the keys to his new rental property, he did not expect a few weeks after moving into the flat to be contacted by the landlord wanting to know where his money is.
When it materialised that the letting agent had not passed on his deposit or initial rent payment to the landlord, the tenant issued a worthwhile complaint to The Property Ombudsman (TPO) which was upheld by the Ombudsman, who ordered the letting agency to pay the money owed to the landlord totalling more than £4,000, together with £250 compensation to the tenant.
However, to make matters worse, the London-based company failed to pay the award, despite the fact that TPO members are required to comply with any award and direction given by the Property Ombudsman and accepted by the complainants.
Failure to pay an award, “however large or small”, is a serious breach of an ombudsman’s terms of reference, according to Sean Hooker (pictured), the head of redress at the Property Redress Scheme (PRS).
“Agents must not assume that the complaint will go away if they remain silent and refuse to engage with the scheme,” he advised.
Failure to pay the fine subsequently resulted in the agency’s expulsion from the residential agency ombudsman, which means that the company in question cannot legally trade as a letting agency, because it is mandatory that all letting agents and property management agents register with one of three government-approved redress schemes, none of which will allow previously expelled agents to join. Failure to successfully register with a scheme is a criminal offence and could result in a fine of up to £5,000.
Although in most cases disputes are resolved without a formal referral, these government approved schemes, run by The Property Ombudsman (TPO), Ombudsman Services Property and the Property Redress Scheme (PRS), provide fair and reasonable resolutions to disagreements between members of the public and property agents, ensuring that tenants and landlords have a straightforward option to hold their agents to account when required.
Significant rise in complaints
With more sales and letting agent branches than ever before now signed up to redress schemes, partly because it has been a mandatory requirement for all letting agents and property management agents to do so since October 2014, there has been a 32% rise in complaints against residential agents over the past year, according to the latest report by the TPO scheme.
Almost all of these were resolved in favour of the complainant, resulting in record payouts for the consumer by estate and lettings agents in the wrong.
The average sales award was £374 and the average lettings award was £522 but the largest was over £16,000 for one particular letting dispute.
The Property Ombudsman, Katherine Sporle (below), said: “The number of agents joining TPO has grown by 82% in the last five years. 35,374 offices are now signed up and following our approved codes of practice.
“Importantly, these figures show that more and more consumers are able to access TPO to have their disputes resolved.
“Last year, out of 16,265 enquiries, 3,304 complex complaints required formal review and, a high percentage [83%] of those complaints were supported. Overall, this is good news for consumers and redress, but not so great for the reputation of agents who collectively paid out over £800,000 in awards.
“My message for agents is simple: pay more attention to the codes of practice and raise your standards.”
Miscommunications and repairs
The sharp rise in the volume of consumer complaints suggests that there is a general lack of trust and respect between letting agents, landlords and tenants, with one of the largest areas of dispute surrounding miscommunications and repairs.
It has been more than 12 months since the Deregulation Act was introduced requiring agents to get their repairs processes in order, and yet 10% of agents are still unaware of what is required to provide a statutorily defined ‘adequate response’ to a tenant repair request, according to the latest report from Fixflo, one of the UK’s leading repair reporting software providers.
Those agencies that fail to provide an ‘adequate response’ in writing to a tenant repair request, leave themselves open to litigation and to reputational damage as tenants take advantage of their operational failures to successfully defend a Section 21 notice.
Rajeev Nayyar (pictured), Managing Director of Fixflo, said: “The demands on property management continue to increase with the legislation that has come through the door over the past 12 months. These mounting tasks, that are time consuming to perform on a daily basis, are difficult to deal with correctly.
“With 40% of maintenance issues being reported outside of office hours by an increasingly diverse tenant base, property managers really are the unsung heroes of the industry.”
It is even more startling to note that 8% of agents surveyed by Fixflo were completely unaware of any changes to the Section 21 process.
There is now a raft of prescribed documents that must be provided in a legally compliant manner to each tenant, meaning it is more difficult than ever for a landlord to regain possession of their property at the end of a tenancy, if the correct procedures are not followed.
David Cox, managing director of ARLA, commented. “Homes that are well maintained and professionally managed benefit landlords, tenants and agents alike, and this [Fixflo] report demonstrates how important it is for agencies to have robust procedures in place for property repairs and maintenance.”
While the number of memberships to redress schemes has increased in recent years, the Fixflo report, which analysed data from over 250,000 repairs through the Fixflo system over the past 12 months, as well as in-depth survey responses from more than 300 lettings agency branches across the UK, does suggest that more needs to be done to make agents aware of their legal duties.
“It is worrying that almost a year after the legislation [Deregulation Act] came into force, one in ten agents are still unaware of the changes to possession proceedings and highlights how vital is it for both landlords and tenants that they use a properly trained and qualified agent,” Cox (left) added.
Another common cause for disputes relate to the fees charged by agents, particularly letting agents.
Citizens Advice report that that an increasing number of people, especially renters, are contacting the charity with questions and complaints about letting agents, and in particular about the fees that they charge.
It received 6,500 calls about the sector in the year to the end of June, up from 6,200 in the corresponding month last year, and 5,700 the year before that.
Previously, many tenants had complained about delays in getting basic repairs completed or in fixing properties that were so damp or cold, but increasingly they now relate to agents’ fees, Citizens Advice said.
But this is also an issue that could be better addressed if letting agents complied with their legal requirement to publicise details of their fees, as Reading-based Hamlet Homes recently discovered.
Display of fees
Hamlet Homes last month lost its appeal against a £5,000 fine for failing to comply with the Consumer Rights Act 2015, which requires agents to state whether or not they are a member of a client money protection scheme, give details of which government approved redress scheme they have joined, and to advertise its fees.
To help ensure that all agents are clear and transparent in their dealings with consumers, which includes displaying their fees, demonstrating to consumers that they are operating to a high standard and complying with the law, the TPO has launched a new national campaign with the Chartered Trading Standards Institute (CTSI) to tackle letting agents that are breaking the law by not displaying their fees.
The joint campaign is initially targeting agents operating in Swansea and Dorset, who are required to provide TPO with photographic evidence to demonstrate they are complying with the law by displaying their fees in both the branch and on their company website.
Any agent that fails to submit evidence will be referred to for further investigation by Trading Standards, who have the powers to impose fines of up to £5,000 on any letting agent that fails to display its fees.
Gerry Fitzjohn (right), TPO’s board chairman, commented: “We want our agents to lead from the front. There can be no excuses. Letting fees are under the spotlight and firms would be well advised to get their house in order to ensure they comply with the law.
“Our aim with this campaign is to raise awareness among consumers so more landlords and tenants ask about fees before they choose their agent.”
The CTSI represents Trading Standards professionals across the UK, and runs the Consumer Codes Approval Scheme, which has approved TPO’s Sales and Lettings Codes of Practice.
Adrian Simpson, the CTSI’s business education and consumer codes expert, said: “Agents signed up with The Property Ombudsman scheme have shown that they are willing to commit to the highest levels of consumer protection by following the scheme’s CTSI-approved Code of Practice.
“We fully support TPO’s efforts to improve industry compliance and any agent that has failed to display their fees up until now must act. We are aware of Trading Standards Officers taking serious action against those that fail to comply.”
Greater regulation needed
Despite the introduction of various pieces of legislation that deal with many aspects of the property sector, many industry professionals still bemoan the fact that agents are not regulated by the government and that, for example, anyone can set up a letting agency, with no experience, knowledge of lettings law or client money protection in place.
eMoov founder and chief executive Russell Quirk (right) last month launched an online petition calling for mandatory licensing of estate agents, which he believes is required to improve “poor” standards in the industry.
He said: “The public tend to move home very infrequently, have limited detailed knowledge of the ins and outs of moving and often encounter a protracted, problematic and stressful experience which can be exasperated by those unprofessional agents that display little support, poor communication and, at worst, bad advice and even dishonesty.”
Quirk’s petition has so far only received 54 signatures, and yet a petition on the parliament website requires 10,000 signatures to even warrant an official response from the government, and needs 100,000 to be considered for a parliamentary debate. But until that happens, a government approved redress scheme remains the fairest and most impartial service for dealing with unresolved disputes between residential agents and consumers.
The Property Ombudsman
The Property Ombudsman, formerly, the Ombudsman for Estate Agents (OEA), established in 1998, charges £195 + VAT per office (all branches trading under the same company or brand name are required to join). There is also a one off joining fee of £50 + VAT
Ombudsman Services charges agents an annual fee per company, in addition to a case fee. But the redress scheme refused to tell us specifically how much the service costs. A spokesperson said: “I can’t share actual cost information because it’s commercially sensitive. Agents can have those discussions with Ombudsman Services if they wish to join the scheme.” But members of certain trade associations may find that some costs relating to the scheme are included in their subscription fees.
Property Redress Scheme
The Property Redress Scheme offers two annual membership fee options: A fee of £199 + VAT per branch with no individual complaint fees, or £99 + VAT per branch and a complaints fee of £120 + VAT, which is reduced to £80 + VAT for any agency that is a member of a body with client money protection insurance.
*Marc Da Silva is Estate Agent Today and Letting Agent Today Features Editor. You can follow him on Twitter @propertyjourno