The government is taking action to protect private renters (part 2)

The government is taking action to protect private renters (part 2)

This is the second post in a two-part blog exploring how the government is taking action to improve protections for private renters. Part one considered the impact of the introduction of banning orders and the rogue landlord database. In this part, we turn to the issue of letting-agent regulation.

Here’s an update on the main changes for the lettings sector and what more we want to see the government doing to ensure there are no loopholes, through which letting agents can continue to take advantage of private renters.

Regulation is coming

The lettings market has previously been described as the ‘wild west’ of the property industry. It is one of the rare examples of an industry where those in the industry have been almost as vocal as those outside in calling for more regulation.

We are no stranger to the extent of poor practice in the lettings industry and, in our most recent survey, only 22% of private renters said they felt agents were acting on their behalf and with their best interests in mind.1  So for us, the government’s commitment to regulating letting agents is a very welcome step.

Following a consultation late last year, the government has now published further details of what this regulation is going to look like. The main proposals for the lettings sector include:

  • creating a single code of practice that letting agents must comply with
  • requiring letting agents to undertake a national qualification and continuous professional development
  • introducing criminal sanctions for agents who practice, despite not meeting these minimum standards
  • establishing an independent regulator to oversee the lettings industry

As well as regulating letting agents, the government is also planning to regulate managing agents in the leasehold sector.

Much of the detail behind these proposals still needs to be worked through and the government is planning to set up a working group to further develop its recommendations. However, at first glance, the introduction of training and a single code of practice could go a long way to driving up standards in the industry, particularly if combined with an effective regulator for enforcing these requirements.

Better protection for client money

In more good news for private renters, the government has also set out how it plans to implement mandatory client money protection (CMP) for letting agents. A CMP scheme will offer compensation to a landlord or tenant if a letting agent misuses their money or goes bankrupt whilst holding their money. Considering the lettings industry is estimated to hold a staggering £2.7 billion in client funds, it seems only right that this money should be protected.2

Based on feedback from a call to evidence, the government has set out its plans for bringing in CMP, including:

  • CMP providers will need to be granted approval from the government in order to operate. To be approved, providers must meet certain requirements including having sufficient insurance for the amount of client money they hold and having a clear claims handling procedure for complaints against agents. This is to ensure that all schemes are offering the same level of protection to landlords and tenants
  • CMP providers will also need to ensure their members are meeting certain conditions for handling client money – this includes holding client money in a separate bank account and having professional indemnity insurance
  • responsibility for enforcing the requirement to join a CMP scheme will lie with Trading Standards and agents who fail comply with this requirement could face a civil penalty of up to £30,000

We’ve long highlighted the need for CMP to be mandatory and have welcomed the government’s commitment to making this happen. We’re looking forward to seeing the government bringing forward the regulations to finally make mandatory CMP a reality.

Beware of loopholes

Combined with plans for banning letting agent fees, the above demonstrates the government’s commitment to tackling poor practices in the lettings sector. Unlike landlords, tenants often do not have a choice over the letting agent they use and the introduction of a clear regulatory framework for the lettings industry should help to improve private renters’ experience of letting agents.

However, the government’s good intentions could all too easily be undone if they fail to close loopholes in the Tenant Fees Bill which will allow letting agents to continue to exploit tenants. We’d urge the government to listen to these concerns and take action to close these loopholes if they want to ensure tenants are properly protected from exploitative agents.


1 YouGov survey of 3,978 private renters in England, online, weighted, July-August 2017.

2 Government response to consultation on Mandatory Client Money Protection Schemes for Property Agents