AGENT REDRESS SCHEMES
From 1st October 2014 letting and managing agents must be a member of a redress scheme. The purpose of these schemes is to deal with complaints made by tenants or landlords about agents. Essentially these are Ombudsman Schemes.
Who must join a scheme
Anyone who engages in either Lettings Agency Work or Property Management Work must be a member of a redress scheme. This will be a legal requirement. There are certain exemptions from this requirement - see below.
When required, you as an agent must be a member of one of two schemes if you are not already -
A third ombudsman scheme, Ombudsman Services Property, did exist until August 6th 2018. Agents who were a member of this scheme must sign up to one of the other two schemes if they have not done so already.
What is Lettings Agency Work?
Lettings agency work is defined as things done by any person, in the course of a business, in response to instructions received from a person seeking to find another person wishing to rent a dwelling house in England under a domestic tenancy and having found such a person to grant such a tenancy (the "prospective landlord"). Property finding services where agents work for a prospective tenant to find a property are also covered.
What is Property Management Work
Property management work is defined as things done by a person (the Agent) in the course of a business in response to instructions received from another person (the Client) where the Client wishes the Agent to arrange services, repairs, maintenance, improvements or insurance or to deal with any other aspect of the management of premises in England on a client's behalf and the premises consist of a dwelling house let under a relevant tenancy.
What tenancies are covered?
For lettings agency work essentially letting premises on assured shortholds and assured tenancies generally are covered; whereas with property management work the definition is wider as it includes not only lettings under an assured tenancy (including assured shortholds) but also where there is a long term tenancy in place (such as a flat held under a long lease by an owner/occupier).
It is to be noted that these activities must be carried out in the course of a business. The question arises whether people acting as "informal" agents are covered, e.g. a father letting/managing a property owned by his daughter or a retired surveyor who manages a property for a friend. Likewise, it is uncertain whether an arrangement between two landlords who each cover for the other when one of them is on holiday are covered. Further guidance is awaited.
Lettings agency work does not include things done where an employer is letting to an employee/worker so that the employee/worker is the prospective tenant. There are further exemptions in the regulations for universities and social landlords as well as lawyers.
The local authority is enforcement action. There is a civil penalty of up to £5,000 for breach of a requirement to belong to a redress scheme. There are rights of appeal against a penalty.
Who can complain to a scheme?
Tenants, including prospective tenants can complain to a scheme. Most landlords (not just smaller consumer or 'accidental landlords') can now also access the two schemes if they wish to complain about lettings and managing agents that are members of any of these redress schemes.
- The Property Ombudsman - landlords with a turnover of [£3.4million] can access the scheme.
- The Property Redress Scheme - Landlords have access to this scheme.
Please check with each redress scheme on their individual terms and conditions for making a complaint.
What rules apply?
The particular rules applied which agents must comply with vary from scheme to scheme. In all cases any Government approved code of practice in effect underpins the scheme and the consumer protection legislation outlined in the Competition and Markets Authorities Guidance to Consumer Protection will be relevant. Ombudsman schemes have to have regard to the law but can also apply principles of fairness. The Property Ombudsman have detailed rules as well which must be observed by agents. The Property Redress Scheme does not have a code of practice but bases its decisions on its membership conditions and the industry standard practices
What can a redress scheme do?
If a complaint is found proven then schemes have a number of options:-
- Require an apology
- Issue a reprimand
- Order compensation
- Fine a member
- Expel a member
As regards compensation, the amounts payable are capped at £25,000 and if an aggrieved party wishes to claim more they have to proceed via the Courts; rather than the Ombudsman Scheme. Members of the Scheme are bound by the Scheme decision but complainants do not have to accept the decision. They can go to Court instead if they are not happy with the outcome.
If an agent is expelled then they are likely be refused access to membership of the other scheme so effectively they could not then legally operate if no scheme will accept them into membership.