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Under the skin of the letting market

Here we share news and views on both the local letting market in & around Oxfordshire and all planned and recent legislation.

CSC misses an opportunity to fully regulate letting agencies

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As you know we’ve been following the Commons Select Committee investigation into the Private Rental Sector. It has just released its report and you can find the link here.

If you’re pushed for time you could go straight to the recommendations on Page 56.

We made a submission to the Committee as they were collecting views and here is our response to the report.

The next step is that the Government then responds to the Committee later in the year via a publicly available report.

The Good

  • The CSC recommends that letting agency fees should be transparent, be published and double charging to both landlords and tenants should be banned, as the letting trade body ARLA has been suggesting
  • Rent increases could be linked to the Retail Price Index or equivalent for annual increases during a long-term tenancy. We do this now and it works well.
  • Letting agents should be governed by the same regulation as estate agents. This will give the OFT the power to ban letting agents as it can estate agents. Agents will need to have client money protection and professional indemnity insurance.
  • The CSC has recognised that a lack of rented stock is ‘the elephant in the room’ and that more needs to be done to encourage investors into the PRS.  This includes dismissing calls for a cap on private rents.
  • A 5 year mandatory electrical safety test would help remove some of the ambiguity surrounding electrical tests

The Bad

  • The CSC called for standards to be raised within the PRS but has not recommended that improvements be made tax deductible. At the moment only like-for-like replacements are deductible but if a landlord chooses to improve the property in any way, these improvements cannot be deducted from the taxable income generated by the property.
  • The committee also recommended a simpler legal framework including a standardised tenancy agreement. A standardised tenancy agreement sounds good in theory but our worry is that it will be too vague to suit all properties leading to significant problems for tenants and landlords if it fails to account for different scenarios or types of property.
  • The CSC recommended a Key Fact Sheet to communicate rights and responsibilities to tenants but there are two substantial problems with this.  Firstly, the Key Fact Sheet might soon be out of date if the legal framework is simplified and the Housing Health and Safety Rating System replaced. Secondly, we are concerned that a Key Fact Sheet would discourage tenants from reading the entire tenancy agreement.

The Ugly

The CSC has not recommended mandatory qualifications for lettings agents and the concept of ‘regulation’ is only a half measure. A more robust view of regulation would demand that an agent is licensed before started to trade and part of this would be that those operating the business must have been awarded the necessary qualifications. The more the sector can professionalise the better the image and service will be. Consider how lawyers or accountants or surveyors work – they cannot fully advise clients before qualified. We are not suggesting a person needs two years of training to be a letting agent, but the industry should demand that anyone letting or managing property has the ARLA Propertymark Qualified and that at least one person per office has the ARLA Propertymark Level 4 Award.