Property management redress schemes - What leaseholders need to know

Kavita Bharti, Legal Adviser at LEASE explains the regulations surrounding property management and the potential for reform.

Are property managers regulated?

From 1 October 2014 anyone who is engaged in property management work became legally required to belong to one of the following government approved redress schemes. This requirement means leaseholders and freeholders dealing with property managers will be able to complain to an independent body about the service they have received. Ultimately, the requirement for property managers to belong to a redress scheme will help weed out the minority of bad managers and help drive up standards.

Is the management of my building covered by this?

There are some exemptions from these rules which include:

  • Landlords – not explicitly excluded but are not generally covered by the definitions as they are not acting on instructions from someone else
  • Local authorities
  • Right to Manage companies
  • Those authorised/licenced to carry out regulated activities under the Legal Services Act 2007

What should I do if I have a complaint about a property manager?

You must give the property manager a chance to deal with the problem before you complain to a redress scheme and should first follow your property manager’s internal complaints procedure

Use the property manager’s internal complaints procedure or write to the manager if they don’t have procedure.

If you are not satisfied with the outcome, you can refer your complaint to whichever approved scheme your property manager belongs to. Details of how to do this can be found on the scheme websites.

Complaints that can be considered

Typical complaints accepted by the redress schemes in respect of unfair treatment by the members include, but are not limited to:

  • Poor or incompetent service
  • Rudeness or discourtesy
  • Not explaining matters
  • Not administering a transaction as efficiently as would be expected
  • Avoidable delays
  • Infringement of your legal rights
  • Failure to follow the rules set for agents under any relevant Code of Practice and membership obligations
  • An apparent breach of obligations
  • Failure to follow proper procedures

Reasons why you would contact a Redress Scheme

You can use the service if:

  • You are complaining about a property company listed on the redress scheme’s website
  • You are complaining about a Chartered Surveyor and you are acting outside the course of your business, trade or profession unless your complaint is about the surveyor acting as an agent in which case any user of the surveyor’s service can make a complaint (subject to certain restrictions – see the redress scheme’s individual terms of reference)
  • You are an actual or potential buyer or seller or a residential property who has a complaint about an estate agent that has provided, failed to provide, or is contracted to provide, a service to you
  • You are an actual or potential buyer or seller of a residential property who has relied upon the services of an estate agent
  • You have a complaint against a letting or a residential managing agent that has provided or is contracted to provide, a service to you or
  • You are representing a customer who meets the above conditions.

What happens next?

If a complaint is made against a scheme member and is upheld, then there are a number of actions that could be taken by the redress scheme provider:

  • Require the member to apologise
  • Issue a reprimand
  • Order compensation – the amounts payable are capped at £25,000. If you wish to claim more you would need to apply to the courts; rather than the redress scheme.
  • Fine a member
  • Expel a member – If a member is expelled then it is likely they would be refused access to membership of another scheme. If no scheme will accept them into membership they could not then legally operate.

The scheme’s decision is binding on you and the managing agent, but if you are unhappy with the decision you don’t have to accept it. You can go to court instead.

What happens if a property manager has not joined a scheme?

Local authorities have a duty to enforce the Order and can impose a fine of up to £5,000 where a lettings agent or property manager who should have joined a scheme has not done so.

The process

  1. The local authority must give written notice of their intention, setting out information that includes the amount of the penalty.
  2. The written notice must be served within 6 months of the date on which the authority is in a position to issue the fine.
  3. After the 28 days have passed, the local authority must decide whether to impose the fine, with or without modifications.
  4. If they decide to go ahead with a fine, they must serve a final notice which must include certain information, such as reason for the fine and the amount to be paid.
  5. If the property manager wants to appeal against the final notice, an application to the First-tier Tribunal (Property Chamber) (Tribunal) should be made within 28 days of the day on which the final notice was sent.
  6. The Tribunal has the power to quash, confirm or change the final notice.

If a property manager fails to join one of the redress schemes after the imposition of a fine, the local authority can impose further penalties. There is no limit to the number of penalties that may be imposed on an individual lettings agent or property manager if they continue to fail to join a scheme.

Reform

There are some shortcomings with regards to these current regulations and this has been acknowledged by the Government, who are looking to improve the current process.

On 1 April 2018, the Government published its response to the regulation of letting and managing agents. This follows the Secretary of State’s announcement in October 2017 of his intention to regulate letting and managing agents followed by a six-week call for evidence. The call for evidence closed at the end of November 2017 and MHCLG received almost 2,000 responses. LEASE’s response can be seen here.

In October 2018, Housing Minister, Heather Wheeler MP has announced the formation of the Regulation of Property Agents Working Group.

LEASE is one of ten members of the Working Group. The group is set up to consider options to raise standards across the entire property agent sector so home buyers, sellers, tenants, landlords and leaseholders receive the best service possible. This will include the case for regulation and the introduction of mandatory qualifications for all property agents so tenants, homebuyers and sellers can be confident they are getting a professional service and are being charged fairly.

In particular, the Working Group will be responsible for advising on:

  • a model for an independent property-agent regulator, including how it will operate and how it will enforce compliance;
  • a single, mandatory and legally-enforceable Code of Practice for letting and managing agents, and whether similar could be provided for estate agents;
  • a system of minimum entry requirements and continuing professional development for letting, managing and estate agents;
  • a standardised approach for presenting transparent service charges to leaseholders and freeholders;
  • an easier statutory-backed process for consumers to challenge unfair service charges;
  • whether other fees and charges which affect both leaseholders and freeholders are justified; should be capped or banned;
  • further measures to professionalise estate agency; and
  • additional matters which in its opinion support the aims above.

Other information:

Reviewed: July 2019