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From 1 October 2014, all agents who carry out letting agency or property management works will be required to join a redress scheme.
At first glance, the legislation appears remarkably straightforward for brand new legislation.
This is perhaps because it will be up to the schemes themselves to monitor complaints and provide redress within their rules. As such, all the legislation needs to do is ensure the correct people are caught and required to join. The legislation applies to England only.
The starting point is Part 6 Enterprise and Regulatory Reform Act 2013, particularly sections 83 - 88.
The Enterprise and Regulatory Reform Act 2013 requires persons involved in two types of property work to be members of a redress scheme:
Nothing within the Act requires a person to join a scheme as everything is simply allowing the Secretary of State to create orders authorising schemes, and those orders will also require persons to join.
Under the Act, there may be two types of schemes:
A “redress scheme” is a scheme which provides for complaints against members of the scheme to be investigated and determined by an independent person [s.83(2)].
The “independent person” mentioned is to be known as the “ombudsman” [Article 2, The Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013.]
An approved scheme may allow other persons not subject to the requirement to join.
The schemes may also deal with complaints voluntarily or refuse to deal with specific complaints [s.88(5)].
The detail in respect of the approval of a scheme is to be found in The Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013, whereby a scheme will not be approved unless there are satisfactory provisions for:
There is also a provision for a scheme to be withdrawn after approval [article 8].
There are two schemes available:
A person who engages in “lettings agency work” or “property management work” must be a member of a redress scheme for dealing with complaints in connection with that work.
Here, we will consider the definitions of such persons.
Section 83 Enterprise and Regulatory Reform Act 2013 defines “lettings agency work” as-
things done by any person in the course of a business in response to instructions received from—
- a person seeking to find another person wishing to rent a dwelling-house in England under a domestic tenancy and, having found such a person, to grant such a tenancy (“a prospective landlord”);
- a person seeking to find a dwelling-house in England to rent under a domestic tenancy and, having found such a dwelling-house, to obtain such a tenancy of it (“a prospective tenant”).
However, “lettings agency work” does not include any of the following things when done by a person who does no other things falling within above-
“Lettings agency work” also does not include-
“Domestic tenancy” means-
The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc.) (England) Order 2014 sets out exclusions from activities being considered as letting agency works.
Exclusions include:
Section 84 Enterprise and Regulatory Reform Act 2013 defines “property management work” as:
The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc.) (England) Order 2014 sets out exclusions from activities considered property management work.
Property management work does not include:
Each scheme will have its own rules.
The rules of all the schemes are likely to be similar.
We have used the Property Redress Scheme terms for this part.
The rules require the member to provide all consumers with a copy of their internal complaints procedures (if any) and information about the redress scheme when signing any agreement AND at the point of any formal complaint received.
They require the complainant to first contact the agent to try to resolve the complaint without going to the scheme. But, if there is no success, the scheme will consider the complaint and issue its decision accordingly.
The scheme will have the power to award monetary penalties and require an apology or other practical action to mitigate any detriment. There are powers to award payments for distress or a settlement “ in recognition of time and trouble taken to make the complaint”.
If a member fails to comply with a decision of the scheme, after notification, ultimately the member can be suspended and then terminated. If suspended or terminated, that information will be publicised to the relevant body.
Presumably, if a member is terminated (and fails to join some other scheme) and continues with letting or management work, that person will be in breach of the legislation and deemed to have failed to join a scheme.
It is possible for the member to re-join the scheme, but only after full payment of all penalties, compliance with the decision and re-paying the membership at double the standard amount of its class.
Section 85 Enterprise and Regulatory Reform Act 2013 allows for orders to be made, making provisions for sanctions for any breach of the legislation.
It seems pretty well locked down in our view that this legislation should catch all letting and managing agents as we commonly know them in the high street (and online). Exclusions are minimal indeed.
However, it is worth noting that any company which advertises a property for rent and only passes the contact details of prospective landlords to prospective tenants will not be required to join a redress scheme.
However, any other letting agency work will be required to join. As well as property management and the functions listed, which are regarded as property management work, seem to include the general duties of property managers as we know them.