Letting agent redress schemes: What does it mean for you?

What is a redress scheme?

Letting agents in England have a choice between three schemes – The Property Ombudsman, Ombudsman Services Property or the Property Redress Scheme. What they do not have a choice about is whether to sign up: joining is compulsory as of 1st October 2014. The schemes are designed to give tenants somewhere to complain about discrimination, hidden fees, missing deposits or other disputes – and, most importantly, receive compensation.

Other government measures being introduced to protect tenants include a new voluntary code of practice to set standards for the management of property in the private rented sector and a new Help to Rent guide, which helps tenants understand what they should expect from their rental deal and how they can take action if they are the victim of poor standards of accommodation.

Why is it needed?

The private rented sector has become a hotbed of complaints from tenants and landlords, both about each other and letting agents. The Property Ombudsman (TPO) reported a sharp increase in the number of consumer complaints for the residential lettings sector in the first half of 2014, with 1,187 complaints resolved in total about both sales and lettings issues. 721 complaints were made against letting agents ñ a 37 per cent increase on the same period last year.

Another survey by OnBoard Pro also found that more than 40 per cent of private tenants in London felt that letting fees were a rip-off.

Christopher Hamer, the Property Ombudsman explained: “Up until now there has been no legal requirement for any letting agent to register with a redress scheme, which has left thousands of tenants and landlords unable to access our free, fair and independent dispute resolution service. That is shown by the fact that around 20 per cent of the initial consumer enquiries we received in this period related to lettings agents that were not signed up to TPO.”

Aren’t all the letting agents signed up now?

The “vast majority” of letting agents were already signed up to one of these 3 redress schemes, Housing Minister Brandon Lewis said in September.

“We’ve already seen nearly 1,000 firms register this year,” said The Property Ombudsman, “making us the largest redress scheme with 11,744 lettings offices under my jurisdiction and following our Code of Practice, which sets out what service consumers should receive from member firms”.

A survey carried out by the Property Redress Scheme, though, found that as of the week before the deadline, 900 London letting agents had still not completed the required paperwork.

The Ombudsman cautioned them: “There is no grace period for registration. Anyone trading without registering after this week’s new legislation comes into force will be committing a criminal offence.”

Where can I sign up?

You can sign up at www.theprs.co.uk, www.tpos.co.uk or www.ombudsman-services.org.

David Cox, managing director of Association of Residential Letting Agents, says: “We welcome the introduction of compulsory redress. The industry needs regulating and this is the first step towards that. As a matter of course, letting agents hold money on behalf of the tenant and landlord but depending on the agent you choose, you could stand to lose your money as not all are covered by client money protection. ARLA is calling for all agents to have client money protection, which in many ways is similar to the Financial Services Compensation Scheme. For example, with ARLA Licensed agents, in the unlikely event a member goes bust or misappropriates a client’s funds we can cover losses for both the landlord and tenants.”

Do I need to sign up?

Yes, it is a legal requirement to join one of the three redress schemes, if you are an agent carrying out instructions from a private rented sector landlord who wants to find a tenant, or a tenant who wants to find a property in the private rented sector.

What happens if I do not sign up?

The new legislation makes it an offence for any agent who has not registered to trade. These “rogue” agents will a face of up to £5,000.

Tenants – what do I do if have a problem?

You can now complain to the relevant redress scheme. The Property Redress Scheme says you must first write to complain formally about the matter and allow a minimum of 8 weeks for a response. If you have not received a response from your letting agent, or you are unhappy with the response you have received, your complaint must then be made to the Property Redress Scheme within 6 months of your last communication.

Landlords – what do I do if have a problem?

There are some restrictions on which landlords can complain, depending on the membership requirements for each scheme:

The Property Ombudsman – landlords with a turnover of [£3.4million] can access the scheme.

Ombudsman Services Property – only landlords who are consumers can complain. This means, in practice, that only smaller landlords will be able to make a complaint. The law on who is or is not a consumer in the case of a landlord is far from clear.

The Property Redress Scheme – you must first write to complain formally about the matter and allow a minimum of 8 weeks for a response. If you have not received a response from your letting agent, or you are unhappy with the response you have received, your complaint must then be made to the Property Redress Scheme within 6 months of your last communication.

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