Head of Redress report

It is safe to say that 2019 was a momentous year in the housing sector. The uncertainty over leaving the European Union followed by a snap general election, made things difficult for agents and the market.

Despite this, the industry remained strong and generally optimistic. The underlying strength of the market, especially in lettings, remained evident as demand still outstripped supply.

This was reflected in another year of growth in the Property Redress Scheme membership, with many new entrants in to the sector and few leaving it.

There was however a lot of food for thought for agents to digest during 2019 and plenty of new rules and regulations to get their heads around. I outline some of these below.

What is clear is that property is becoming a more regulated and controlled sector and it has risen up the political agenda. Whilst this will place new burdens and obligations on property professionals, they will raise standards, increase trust and confidence in the market and lead to a safer and more secure sector in the long run.

Of course in the short term, there are inconsistencies, enforcement issues and unforeseen consequences to overcome and some agents will struggle to cope with this. The Property Redress Scheme along with the other parts of the Hamilton Fraser family, are here to help and support all parts of the property world and help it to continue to thrive.

What happened in 2019 and what can we expect in the future?

January

Voluntary disclosure of referral fees by estate agents

Following a working group set up by the Government, including the Property Redress Scheme, National Trading Standards, estate agent trade bodies and the Property Ombudsman, guidance was published along with a template form for estate agents to be transparent if they receive payments for recommending other services to buyers and sellers such as surveyors, conveyancers, removal firms or insurance. This trial was to last for a year after which the Government was to review whether to make the disclosure mandatory or to consider a ban. They will announce their conclusions later in 2020.

March

Homes (Fitness for Human Habitation) Act went live!

Following the passing of what is known as the Homes Act 2018, the first tranche of compliance with the law came into place in March 2019. This meant that all new tenanted properties were subject to minimum condition and repair standards and if they failed to meet these standards, a tenant could directly undertake legal action against their landlord. Previously, it was down to local authorities to take the action and apply the standards. Whilst it is anticipated that this will currently only affect a few tenancies, the law has been extended in 2020 to include all existing properties and I anticipate the number of actions against landlords and their agents will increase as tenants get access to help and support from legal and other organisations.

April

Client money protection became mandatory

This welcome piece of legislation was enacted in April 2019 and required all letting agents, who hold money on behalf of their landlord clients to have client money protection insurance in place. This is to protect landlords against misappropriation of rent payments and maintenance funds, or in the event of a company failure, the money is unavailable or lost. The protection also kicks in to protect tenants' deposits if the tenancy deposit schemes are unable to pick these up.

This law was a result of a long campaign by the industry to ensure that consumers had the protection they needed in the rare event that client money went missing and was misappropriated.
The Property Redress Scheme was proud to support this move and it was our very own Lord Monroe Palmer, Chairman of the Property Redress Scheme Advisory Council, who was joint head of the working group set up by the Government to set up the framework for the law.

The Hamilton Fraser Group also sought, and were granted, a licence to run an authorised scheme called Client Money Protect, which we had set up to complement the Property Redress Scheme five years ago. Agents who are not members of a trade body can now access fully compliant protection.

Agents were given a year in which to comply, however due to teething problems for some agents in finding suitable bank accounts, this has now been extended by another year.

June

The Tenant Fees Act 2019 went live!

June 2019 saw the ban on tenant fees. This controversial piece of legislation will have wide ranging consequences and fundamentally change the way letting agents operate. It also has effected a change to the holding deposits taken to secure properties and also tenancy deposits, both of which are now capped.

The Property Redress Scheme, along with the other Hamilton Fraser brands, spends a good deal of time, helping and educating our letting agent members to prepare and understand the effects of the legal changes. A further extension of the law to existing tenancies has taken place in 2020 and has changed the landscape permanently in lettings. Wales has also followed suit and a similar ban has now also been applied there.

What does 2020 hold?

A number of measures have already been introduced in 2020 These included:

The extension of ‘Money Laundering Regulations’ to certain letting agents. High end rental properties and their landlords will need to be checked by letting agents, who will also have to be on the Treasury’s Anti Money Laundering Register.

All existing let properties will have to comply with the Minimum Energy Efficiency Standards or have the relevant exemption. This will mean no property lower than an EPC rating of E can be let.

Electrical safety checks every five years will also become mandatory.

Fire and building safety in high rise residential leasehold properties is also on the agenda. This follows the Grenfell tragedy and will impose strict rules on safety checks and building managements.

What does the future hold?

As referred to above, further requirements to bring existing tenancies into line with the Homes and Tenants’ Fees Acts are also coming into force.

In addition to these measures for 2020, the peculiar circumstances of first a change of Prime Minister and then a general election, led to a whole host of announcements of new policies in 2019 that will develop over 2020 and beyond.

2019 in effect saw three separate governments, albeit all of the same political colour. Each however made policy announcements that will develop over the coming years.

The May Government

The Theresa May Government, had already announced reform of consumer redress in the property sector which included the introduction a New Homes Ombudsman, landlord redress and a single Housing Complaints Resolution Service, which would be a single front door for all housing complainants to access existing redress and resolution services. A working group was set up and is in progress with the aim of making this a reality.

Despite a change of leadership, the Government has yet to provide further details on landlord redress, however this remains on the horizon. The New Homes Ombudsman will become a reality and will mean developers and freeholders will come into the redress scope.

The big change in policy that will affect the sector came as the May Government announced the end of no-fault possessions and the reform of the eviction process. There was a commitment to encouraging longer tenancies, reforming the court system and possibly setting up a dedicated Housing Court.

The Johnson Government

With the arrival of Boris Johnson on the scene, it was speculated whether he would follow up on these promises, however following his victory in the election and based on his manifesto commitment, these reforms are firmly on the agenda.

Interestingly, Boris has also committed to a reform of tenancy deposit protection and announced that he would introduce a “lifetime deposit” to allow tenants to passport their deposit between properties. Very few details on these changes have yet emerged, but a new bill called the Renters’ Rights Bill will put to Parliament, and will form part of the Government’s strategy for the lettings sector. Boris has also announced that he wants landlords to be more pet friendly and the model tenancy agreement provided by the Government and the How to Rent Guide will be amended to reflect new clauses making it harder for landlords to refuse pets. The Government is also cracking down on discrimination against benefit tenants and following the court ruling on Right to Rent they may well have to revise this as well.

Leasehold reform

Reforms to the leasehold sector and changes in the law to change enfranchisement, ban leases on houses and look to re-introduce commonhold as the predominant tenure are also in the background. Reforms to the buying and selling process, with possibly the introduction of property condition reports and regulation of reservation agreements are also on the cards, following a 2019 report on ‘Improving the Home Buying and Selling Process’. Many in the letting industry are also calling for a ‘Property MOT’ that properties should have in place before letting.   

Regulation of property agents

On top of all of this, we await with bated breath the Government’s proposals stemming from the publication in 2019 of the ‘Regulation of Property Agents Report’, which was published at the end of 2019. The report, which calls for the compulsory training of all property agents, a code of conduct with sub codes for the different types of property professionals and possibly a national register for English agents, will be considered by the Government and may well lead to a policy announcement in 2020. The actual implementation of new regulations may be a few years away, however this would be a welcome reform in the sector.

As you can see there are still massive changes to occur in the sector and we at the Property Redress Scheme are here to help and assist you with guidance and support through these changes and compliance. Thank you for choosing us as your redress scheme and we look forward to working with you for a successful future.

Sean Hooker, Head of Redress, Property Redress Scheme