Plans for new measures to help create a fairer property management system that works for everyone have today (18 October 2017) been announced by the Communities Secretary Sajid Javid.
With over 4.2 million leasehold homes in the country and service charges reaching between £2.5 billion and £3.5 billion a year, the Communities Secretary will say the government is determined to fix the problems in the property management industry, drive down costs and protect consumers from the small minority of rogue agents.
The problem isn’t just for leaseholders, but for some of the 4.5 million tenants in the rental sector too – with overcharged costs for repairs and services often passed down to tenants.
Since 2010, government has taken action to require all letting and management agents to belong to a redress scheme, and we have introduced a range of tougher measures to target rogue landlords and agents in the private rented sector.
As part of this new call for evidence, government is seeking views on:
- whether regulatory overhaul of the sector is needed
- measures to protect consumers from unfair costs and overpriced service charges
- ways to place more power in the hands of consumers by giving leaseholders more say over their agent
It will ask if a new independent regulatory body is needed - and if separate bodies should be established, for both leasehold and private rented management, and letting agents.
While the sector is partly self regulated - through professional bodies such as the Association of Residential Managing Agents (ARMA), ARLA Propertymark (formally Association of Residential Letting Agents) and the National Approved Letting Scheme (NALS), which have a code of conduct – other property agents operate outside of any system and can provide a poor deal for consumers.
Communities Secretary Sajid Javid said:
This is supposed to be the age of the empowered consumer – yet in property management, we’re still living in the past.
Today we are showing our determination to give power back to consumers so they have the service they expect and deserve, as part of my drive to deliver transparency and fairness for the growing number of renters and leaseholders.
Our proposed changes to regulate the industry will give landlords, renters and leaseholders the confidence they need to know that their agents must comply with the rules.
Research by consumer group Which? shows that unfair practices can lead to as much as £700 million of unnecessary service charges being paid each year, and others such as the All Party Parliamentary Group on leaseholds believe the total could be as much as £1.4 billion.
The government will consider changing the law so that all letting and management agents, across both the private rented and leasehold sectors, must be qualified and regulated in order to practice.
Measures to be considered as part of the call for evidence include:
- how consumers can be empowered in the market, including whether leaseholder tenants should have a greater say over the appointment of managing agents
- how transparency can be increased in the system so that tenants and leaseholders know what they are being charged for and why
- ensuring fairness and openness around relations between freeholders and agents
- looking at what qualifications are needed by agents to practice and how regulation can be improved
This piece of work is part of wider government action to bring power back to the tenant and leaseholder.
In summer 2017, government launched a consultation setting out radical proposals to cut out unfair abuses of leasehold to deliver a fairer, more transparent system for homebuyers. Plans include banning new build homes being sold as leasehold as well as restricting ground rents to as low as zero.
Earlier this month the Secretary of State also announced measures to help make sure tenants are more secure in their homes; requiring all letting agents to be regulated; and consulting with the judiciary on the case for a new Housing Court – a specialist court with the aim to save time and money resolving housing disputes.
Government has also confirmed it will legislate to ban letting fees so that tenants aren’t hit by unfair charges.
Anecdotal evidence of poor management includes:
- a group of leaseholders charged ten times the market rate to have a new fire escape fitted – with the £30,000 contract handed to the freeholder’s brother
- one landlord charged £500 by his agent for repairing a shower door
- a London-based property agent who tried to charge a leaseholder almost £5,000 to transfer ownership of a parking space to other leaseholders
The call for evidence will last for 6 weeks from Wednesday 18 October 2017.
The proposals relate to England only.
Managing agents are a person or company appointed by the owner (or someone operating on their behalf) to manage that property and their role may include for instance repairs and maintenance. Managing agents operate in both the private rented sector and the leasehold sector.