Back to School: ROPA is on its way, agents get ready

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Back to School: ROPA is on its way, agents get ready

Published 29 January 2020

In October 2018 Lord Best was commissioned to lead a working group made up of industry and consumer experts and the findings, encapsulated in the report issued last year, makes a number of recommendations to Government about the regulation and management of property and managing agents. The very clear focus, once again, is on consumer protection and ensuring consistency of standards across a profession that is suffering from low consumer confidence.

The main conclusions recommend:

  • a model for an independent property-agent regulator, including how it will operate and how it will enforce compliance
  • a single, mandatory and legally-enforceable Code of Practice for property agents
  • a system of minimum entry requirements and continuing professional development for property agents
  • clarifying processes and charges for leaseholders

Scope

The proposed regulatory framework covers all types of estate agents, letting agents and auctioneers, albeit with two principal exceptions; online property portals (e.g. Rightmove) and those involved in the short term let sector (e.g. AirBnB).

It is recommended that the reforms only cover residential property agents as opposed to commercial work. The proposals also do not relate to private landlords who manage properties themselves or corporate landlords such as in-house teams for developers. There is however an emphasis in the proposals to encourage Government to take positive steps to prevent gaps in consumer protection and it is recommended that the new regulatory model be flexible so that it may be extended in the future.

It is also worth pointing out that the proposed framework is only intended to cover agents in England but the report concludes that it will be important to work together with the relevant counterparts in Wales, Scotland and Northern Ireland.

The findings concluded that local authority housing cannot be regulated in the same way and consumers in that market will therefore need to rely upon the protection of their elected representatives and the Local Government and Social Care Ombudsman. It is recommended, however, that any training requirements should be extended to these bodies.

Given that not everybody employed within property agencies are agents themselves, it is also recommended that there should be a list of reserved activities which can only be performed by a licensed individual at a regulated firm e.g. conducting viewings, negotiating on behalf of clients, signing contracts and handling client money.

Licensing

All property agents will need to hold a licence from the new regulator, full records for which should be held online. Agents will need to provide evidence that they have the relevant qualifications that will be required under the new regulations and that they have fulfilled their legal obligations, such as ensuring they have professional indemnity insurance and a clear complaints procedure.

Codes of Practice

It is recommended that there be a code of practice with underlying regulatory practice standards which are specific to the type of service being provided. The recommended principles for the overarching code of practice include acting with honesty and integrity, communicating clearly, making appropriate arrangements to protect client money, reporting code breaches to the regulator and avoiding conflicts of interests.

The Government would like the code to be legally enforceable and it is proposed that it must be adhered to in order to retain the licence.

Qualifications

Property agents are not currently required to have any qualifications and it is recommended that all staff have the necessary qualifications in order to instil confidence in consumers. There should be different requirements depending upon the seniority of the staff member and a syllabus which will follow prescriptive qualification routes. It is also proposed that there be continuing professional development requirements.

Leasehold and Freehold Charges

It is recommended that the new regulator be given a statutory duty to ensure transparency with leaseholder and freeholder charges. It is also proposed that the new regulator takes over power from the First-tier Tribunal to block a landlord’s chosen managing agent where the leaseholders have reasonably exercised a veto.

The New Regulator

It is recommended that the Government establishes a new public body to undertake the role of the new regulator and that it should be predominantly funded by those it regulates. The proposal is that a new regulator should take over responsibility for the approval of property agent redress and client money protection schemes and should be able to consider complaints from all sources.

Assurance and Enforcement

The proposals emphasize that enforcement should protect consumers and that the process should have clarity and flexibility. It is recommended that penalties be tiered so that first minor offences are treated relatively leniently and that training is used to rectify issues where possible. The proposed enforcement options include warnings, orders for training, fines, modifying, suspending or revoking licenses and prosecution. The focus is however on prevention rather than punishment.

Our Reaction

The proposals are intended to cover a wide range of property professionals and are fairly radical given the current lack of regulation in this industry. It is also intended that the new regulatory regime should be flexible so as to extend its reach in the future should it be deemed desirable.

The report’s recommendations were met with what can best, if you pardon the pun, be described as a mixed reaction.

Many trade bodies welcomed the findings, saying that better regulation would be a huge step forward in stamping out bad practice and applauding the introduction of licencing, strict codes of practice and professional qualification. On the flip side, a number of professionals active in the market consider existing frameworks sufficient and complain of more red tape, bureaucracy and cost at a time when revenues are already being squeezed, particular with competition from web based DIY style platforms.

What happens next remains to be seen. Like the wider reforms that have been promised across the housing sector, the political turmoil around Brexit which culminated in last month’s General Election caused a paralysis in implementation which is yet to be overcome.

Authors

Naomi Park

Naomi Park

Leeds

+44 (0)113 251 4793

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