The first steps towards regulation of the property management industry?

There have been calls for formal regulation of the Property Management industry for as long as I can remember but successive governments have ignored these calls on the basis that while there are a few rogue operators in any sector, the vast majority of property management businesses provide a good standard of service to residents.  Further, the worst excesses of property managers should arguably be avoided by proper use by the tenants of the existing statutory safeguards, mainly found in the Landlord and Tenant Act 1985.

The Property Factors (Scotland) Act 2011 has changed all that but as the title suggests, only inScotland.  This legislation will result in a register of property management businesses and will create a new offence of operating as a property factor (ie property manager) without the correct registration. 

In order to achieve registration a business/individual will have to pass a “fit and proper person” test, which is designed to exclude those with criminal convictions for crimes involving dishonesty/violence/drugs, those who have been found to practice unlawful discrimination or contravened any provision of the law relating to tenements, property or debt.

The question is, will this form of regulatory regime work?  One potential criticism is that in reality, the fit and proper person test will only operate to exclude a small minority from the industry.  Further, there is not express provision for those who are persistently found to have been overcharging or contravening lease provisions either through complaints or through LVT findings (or the Scottish equivalent) to be sanctioned.  However, there can be little argument that this is a step in the right direction for residents provided it is properly enforced by the authorities.  The question is when will England and Wales see similar steps introduced.


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3 Responses to The first steps towards regulation of the property management industry?

  1. Desmond Moreira says:

    I think England will drag their heels and I dont expect them to follow Scotlands lead. Also this change in in Scotland, I am unsure how effective it will be. In England, the big players who rip off the majority of Leaseholders would pass the fit and proper persons test. These companies are not run by ex-cons, although you could argue what they are doing is a crime against humanity! We still have a long way to go, but I expect 2012 might just be the year for a significant shift in how this industry is viewed and the likes of Melissa Briggs (LKP) who is tirelessly campaigning in England for a review of existing regulation and the launch of new services such as ‘The Leasehold GURU’ will start making a big impact.

    2012 is going to be a year to remember in this sector!

  2. I don’t know if managing agents need more regulation to be completely honest. As letting agents we manage tenancies, and “managing agents” often refers to those who manage whole blocks, which we do not do yet. But from all the regulation and red tape we deal with at Let Me Properties I would say that people are pretty well protected already. To be members of schemes like MyDeposits, The Property Ombudsman, ICO, among others you need to abide by their rules and regulations on everything from accounts, banking, in-house procedures, and complaints through to rules on discrimination and handling of client money. Most of these codes of practice overlap with each other and if one we to breach the code of one organisation, one could lose all credibility by losing their memberships to all these organisations at once. As long as landlords and tenants make sure the agents they choose to use are legit and abide by the regulations of The Property Ombudsman then their shouldn’t be a problem. I don’t think it’s right to put another layer of administration on small agencies like ours which inevitably cost time and money to deal with and be part of, when considering we already follow the rules and regs they would introduce, it wouldn’t add any further value to our clients but the cost may end up being passed onto them eventually. Just my two cents worth of course.

  3. James Cooke says:

    It’s a shame leaseholders don’t simply vote with their feet. In a free market poor performers get punished as consumers move on to better performers. I suspect the problem is made up of several factors: leaseholders lack support and knowledge. Most lessees probably aren’t aware of their rights. There’s a big “hassle factor” in changing agents. Plus leasehold law is seen as complex with Resident Management Companies, managing agents, head leases, etc. So establishing who’s responsible for what is tough. For me the most important priority is to educate leaseholders, let them know their rights, and support them in achieving better value and service.

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