The amendment will see letting agents forced to sign up to a government backed Ombudsman and give tenants and landlords the chance to get money back from rogue agents without resorting to the courts.
Until now many agents have been able to operate with impunity as consumers have had no way of addressing the actions of unscrupulous or negligent agents.
Ian Potter, managing director of the Association of Residential Lettings Agents, said: “The government’s amendment to the Enterprise and Regulatory Reform Bill marks a positive move for the private rented sector and in particular, for consumers, who only stand to benefit from a formal system of redress.
“However it is vital that the Government begins the process of consultation quickly, taking on board the views of the sector and moves to introduce secondary legislation as soon as possible.
“ARLA will continue to push for regulation of the private rented sector. This is a solid first step, but we must not lose momentum.”