In their May newsletter Sean Hooker of the PRS wrote a brilliant article regarding rip offs in the property rental sector. Read on…
“It is never easy being a victim of crime, you feel violated, shame, anger and feel a real sense of injustice. These feelings are heightened and compounded if the perpetrator of the criminal action was somebody you trusted and had built a relationship with.
This sense of betrayal is a powerful emotion and drives a strong desire that the criminal should not be allowed to get away with it. In the real world however things are never as simple as this and it is not just a matter of calling the Avengers to fight your cause and deliver the justice you deserve.
It is particularly poignant in the world of the property when a landlord enters into a contract with a letting agent and that agreement is flagrantly abused for the personal gain of the agent. Nothing encapsulates this more clearly than when an agent deliberately fails to pass on rent to landlords or deposits to tenants. However you dress this up this is theft and is a criminal action.
Unfortunately, this view is not shared universally by our law enforcement agencies and often when these sorts of matters are brought to the attention of the police they are either dismissed as civil matters or are not prioritised as “real” crimes.
The victim is therefore forced to act through alternative avenues. When these do not deliver the result they hoped for the frustrated victim often shifts the blame to another source, usually the organization try to assist them.
A classic example of this dilemma was highlighted recently, with regards to an agent trading under various guises of the name Carter Stone. This so-called agent had long track record of devising elaborate scams where rent was not being passed onto the landlords and illegal subletting was occurring in the properties they managed. The details are shocking and the actions of agent broke every rule in the book from not protecting deposits, subletting the property to multiple tenants who were forced to live in unsafe and overcrowded properties and ultimately stealing the rents and deposits of their landlords.
We at the PRS first became aware of Carter Stones after they were complained about by a prospective tenant who had paid a holding deposit and were not refunded any money when the property was suddenly no longer available. The Agent was strangely silent when we tried to contact them and of course failed to pay the award triggering our discipline process. Another complaint arrives about the same time involved a landlord not receiving rent and being sold a non-existent rent guarantee policy. Again, the Agent failed to respond. By this time the first discipline case had led to Carter Stones being expelled from the Scheme and we informed the other two schemes and local trading standards. The Agent was therefore acting illegally and the local authority could slap a £5,000 on the Agent for trading illegally.
Not surprisingly this fine was unpaid. The complaints however continued to come in but it was clear that the now expelled Carter Stone was not playing ball and we had to inform the Complainants that we could no longer take the complaint and that they should take legal action. The complainants were naturally not best pleased with this but we have never been regulators or enforcement agencies and our government licenses are clear on this.
This case however does raise a number of issues that do bear looking at and believe you me, they are top of the agenda whenever we meet with the government.
We are now in the midst of a General Election and it is an ideal time to highlight what should be the new government’s priorities.
They are namely the lack of financial recompense for victims of the type of situations highlighted above, the patchy enforcement of the current laws and regulations and finally the loopholes unscrupulous agent use to hide their wrongdoing and evade justice, the primary example of this is dissolving one business and setting up a phoenix company, effectively walking away from their debts and obligations.
There are three government approved consumer redress schemes for the property industry. They are set up to decide if an agent has acted incorrectly and set out any award as a result. Like all other ombudsman/redress schemes they are not set up to compensate complainants. Therefore, we have supported fully the campaign to make client money protection a mandatory requirement and this is now a step forward. Having such protection does not indemnify the agent from their dishonest actions but does provide some compensation for their victims.
Enforcement is another area that we have sought a robust approach from the Government and whilst there are many powers devolved to local authorities and trading standards, the effectiveness of the action is a postcode lottery and support and resources are needed to ensure a consistent approach. Local Authority resources are scarce and they need persuading to priorities this issue. New powers are coming into force such as banning orders and fit and proper tests but for these to be effective they need teeth.
In the recent consultation on banning orders I submitted a number of points to consider including whether being prohibited from being a member of redress scheme should constitute a banning offence.
My argument is where a redress scheme has expelled a member, usually for non-compliance with a binding decision, if they refuse or cannot comply with the order then we inform the other schemes who then apply a prohibition and the relevant local authority. As the law states that you cannot operate without being a member of redress scheme then local authorities should have the power to seek a banning order on the agent.
The same principle should apply when mandatory client money protection comes in and an agent has been refused cover for misappropriating client funds. A banning order would make the enforcement of this more effective.
We are concerned about the phoenixing of companies and banned individuals reconstituting agencies or “working” under the cover of a legitimate principle whilst subject to a banning order. The banning orders and database should be sophisticated to help prevent this.
The issue of phoenixing is one that will need a concerted effort and a joint approach to solve. How criminals are able to rip people off and then continue to trade is the real issue that needs tackling and the direction of travel points clearer and cleared to some form of regulation. What form this regulation will take, it remains to be seen, however the most likely approach will be some kind of agent registration and check list of compliance criteria. Further measures can be looked at in terms of say making letting agency a protected term, accreditation and fit and proper tests.
You will note that I have not included banning letting agent fees as one of the pressing priorities. This is because in my view, it is not a major factor in building a safe and reliable industry to serve tenants and landlords. I believe that excessive fees can be dealt with using the redress schemes and other consumer powers and increasing the transparency and accountability of agents.
The ban is however likely to feature in all the main manifestos of the parties during the election and therefore whilst it remains to see the detail of any future policy it is prudent to prepare for this change as coming down the tunnel during the next parliament.
These are my own thoughts and what I am looking for the new Government to address when elected, you of course may have others that you would like to see on the agenda but on the whole the industry should be craving a progressive approach from our leaders to building a safe, professional and reputable sector that address the needs of its customers and contributes to the wealth of the country. It only remains for us all to cast our votes and hope for the best!”