The Communities Minister, Sajid Javid, chose the 2017 ARMA Conference as the stage on which to announce his plans for the regulation of managing agents.
The regulation of managing agents is not a new issue; the coalition government looked at how this might be achieved and also launched the 2014 Competition and Markets Authority study into practices in the sector. Indeed ever since the 2002 Act came into force there have been calls for further and better regulation of the sector.
What is the issue?
Essentially anyone can set up as a managing agent – you do not need any particular qualifications; this is in spite of the fact that this sector controls billions of pounds of leaseholders’ money.
www.gov.uk/government/news/crackdown-on-unfair-managing-agents
ARMA (Association of Residential Managing Agents) has campaigned for better services for the consumer and regulation of managing agents. In 2014 ARMA set up “ARMA’Q’” its own system of regulation to which it requires its members to subscribe.
With this in mind it seems particularly appropriate that Savid Javid should choose to announce this at the 2017 ARMA Conference.
A full transcript of his speech appears here
Why has government moved on this now?
The background is in part the White Paper (fixing our broken Housing Market), and also the recent consultation on ‘Tackling Unfair Practices in the Leasehold Market’. The topic of managing agents is not specifically mentioned in either of these documents, but the concept of regulation has been in the pipeline for some time and now with the ongoing discussion about wider reforms it seems material to bring this back to the fore.
As the Communities Minister said in his speech, the Grenfell tragedy is something ‘without parallel’ and has rightly brought national scrutiny and attention to the property management sector.
The ARMA code is seen as being a positive step and the minister was at pains to point out that ARMA members are very much the ‘good guys’. Unfortunately, there are also ‘the bad guys’ and he stretched the analogy to an un-regulated market being a little bit too much like the ‘Wild West’ with the inevitable presence of cowboys.
There are some very specific examples of poor or sharp practice, and some of these were quoted in his speech. For example, ever-changing insurance commission being one area where there have been demonstrable abuses. A specific example quoted was a fire escape that had been over-priced by a factor of three times, and subsequently been installed by a contractor who was the agent’s brother.
A quoted figure was that the value of ‘over-charging’ in the sector could be as high as £1.4 Billion per year.
In Mr Javid’s view, the system itself is seemingly stacked against tenants and there is a need for action to redress the balance. Mr Javid suggested that this could be achieved in part by ‘making the Right to Manage Process simpler’ (in my view, this is a lot easier to say than to do). The specifics of the Elim Court case, (although not cited by name) were clearly seen as a driver for this.
For further details on Elim Court see here.
In addition, there is the issue of management on shared estates. At the moment there is a regulation gap in that rent charges are not covered by the service charge regime. This is something that government wants to address.
The Communities Minister also stressed that this is supposed to be the ‘age of the educated consumer’ – the current situation does not promote enough consumer choice.
Whilst regulation is not the ‘go-to’ choice for this flavour of government politically, there is a real need for change and intervention. Mr Javid was keen to point out that the announcement in relation to management forms part of the government’s wider effort to reform the property sector generally; the newly announced regulation to be applied to letting agents and the proposed redress for the problems of leasehold houses and ground rents, particularly in relation to new-build property were cited as further examples of this.
So what did the Minister actually say?
Early indications were that the announcement was to be of the decision to regulate all managing agents. In fact the government has held back from that and has instead announced a consultation about regulation. Details of this appear here.
The consultation sets out a fairly tight 6 week timescale for response and poses some interesting questions. There is a longer list of questions appearing in the document and I would strongly recommend further and detailed reading.
In overview, to my reading there appear to be essentially three key options that the government is seeking views on:
- A requirement that all managing agents become members of a relevant “professional body.”
- Similar to 1 above, but with a regulatory body established by government.
- Government establishing a new regulatory body, which all managing agents have to sign up to, with membership of a further professional body being optional.
All of the above would appear to indicate that the government is not of the view that ‘doing nothing’ is an option.
So, in my view, the one thing that we can be sure that the consultation will bring is a move to impose at least one of the ideas floated above.
Have your say
The consultation closes at 11:45pm on 29th November 2017 and is open to all to provide their opinion and insights. View the full details and make sure you have your say here
