Taming the new Wild West … UK lettings agents regulated
Kevin Paterson is managing director of Source Insurance
On April 25th the Enterprise and Regulatory Reform Act 2013 gained Royal Assent. Included in the final draft was a provision that, for the first time, gives regulation a foot in the door of the lettings market.
The Act will force letting agents to sign up to a government backed ombudsman which will give landlords and tenants a route to obtain redress from unscrupulous letting agents who have to date been able to operate with impunity in what is widely viewed as the wild west of the property sector and about time.
Up until the implementation of this legislation, any landlord or tenant seeking financial redress from the actions of a rogue or negligent letting agent would have to seek recompense through the courts if the agent refuses to acknowledge and deal with their complaint and as we all know many will drop any pursuance at this point fearing a long drawn out and potentially expensive process with no guarantee of success.
The rental sector is counter-cyclical to the mortgage market and for the last few years has seen burgeoning growth as house sales have been depressed in the wake of limited access to funding and as we have seen in other sectors that experience explosive and sustained growth it can be a breeding ground for unscrupulous operators to enter the market.
Of course the growth in the rental demand presents ample legitimate opportunities also, as you will be well aware.
In light of the continuing growth of the buy-to-let sector, this tightening of the regulatory environment has to be seen as a positive step and one that should be encouraged and welcomed. It is of particular relevance to the swathes of new, risk averse investors being attracted to Buy-to-Let as an alternative to the negligible interest rates now offered by savings accounts and the emaciated returns and increased risk levels associated with hitherto “safe haven” investments such as government bonds.
This new regulation will certainly help put many of your less experienced Buy-to Let landlord clients’ minds at rest – and there is certainly an appetite for that at the moment. As an indicator of the growing demand for peace of mind you need only look at the increased demand for BTL insurance. At Source we have seen our Landlords’ Insurance business grow by over 32% in the past year.
It is also encouraging that ARLA – the Association of Residential Lettings Agents – are supporting this latest action and indeed pressing the government for further regulatory reforms by pushing for a second level of legislation to further regulate the sector as quickly as possible.
I only hope the government use this momentum to continue pushing through further changes to protect this market and drive the cowboys out before they get a stirrup hold.