Why is compliance a growing issue for letting agents?

It’s been clear for a while that the additional regulation landlords and agents are facing has helped professionalise the private rental sector (PRS). However, increased legal obligations pose compliance requirements for many letting agencies.

While the demands and expectations of the modern tenant and landlord grow, agencies are also having to comply with more rules than ever before. This puts an understandable pressure on their time, resources and finances.

Compliance has become one of the biggest considerations for most agencies, but what can be done to ensure a higher rate of compliance that isn’t to the detriment of an agency’s business?

A significant rise in rental sector regulations

Much has been said about the growing number of laws that letting agencies and landlords have to abide by - recently published figures back this up.

According to the Residential Landlords Association (RLA), the number of laws governing the PRS has increased by 32% since 2010.

The trade organisation reports that there are now 156 regulations affecting those operating in the rental market, up from 118 nine years ago.

Further legislation is in the pipeline, including plans to introduce mandatory electrical checks of rental properties and reform the evictions process.

The pressure on letting agencies seems likely to grow as there is no indication that the aim of professionalising the PRS through legislation is going to slow down and with a General Election on the horizon, there could be even more radical changes to come.

Increased responsibilities provide letting agencies with the opportunity to prove their worth to landlords and guide them through challenging times. It’s equally important for agencies to make sure their affairs are in order as it’s becoming increasingly easy for things to slip through the net.

Where is PRS compliance falling down?

In recent months, there have been a number of examples showing letting agencies and landlords failing in their compliance obligations and we’re yet to see any significant investigation into rates of compliance with the recent Tenant Fees Act.

Trading Standards research revealed that in the 15 months to June 2019, 46% of 1,922 letting agencies inspected in London failed to comply with their obligation to join a redress scheme or the rules they must follow under the Consumer Rights Act.

This resulted in 14 criminal prosecutions and a total of £1.2 million in fines being issued.

Some of the key issues agencies were failing on included displaying fee templates, Client Money Protection certificates and redress scheme memberships prominently in their offices and on their websites.

This could be the knock-on effect of having to deal with a huge number of new regulations over a short period of time as agencies struggle to cover all the bases.

Another recent example of poor compliance were the results of a safeagent investigation into landlord licensing in London.

It uncovered over 130,000 unlicensed rental properties in the capital that should be licensed under either a selective, additional or mandatory House in Multiple Occupation (HMO) scheme.

Again, this could be down to a combination of factors, including a lack of understanding among landlords and the constantly changing licensing frameworks which can be hard for agencies and investors to keep up with.

What's more, many agencies will have focused on the introduction of the Tenant Fees Act in 2019, which may have caused them to neglect other important issues such as landlord licensing or their consumer rights obligations.

Technology and enforcement can provide compliance solutions

It's clear that the sheer number of new rules is having an effect on rates of compliance. However, there must be a concerted effort from all industry stakeholders to try and improve the current situation.

The recent news that the government is providing local authorities with an additional £3.8 million to tackle rogue landlords is positive. What's more, plans to open up the database of rogue landlords and property agents could be effective in helping the industry and consumers to police the industry and weed out criminal operators.

PRS legal enforcement has been a growing problem and it's been exacerbated by the surge in new regulation in recent times. Hopefully, the next government will provide even more funding and focus on enforcement to help create the fully professional sector everyone is striving for.

As for agencies, using the best technology available can help them to save time and become more efficient. This, in turn, can allow them to pay full attention to their compliance obligations, reduce the risk of things getting missed and become more efficient.

Looking ahead, a successful combination of government enforcement and adoption of technology can be successful in making sure that compliance does not continue to be a growing issue for letting agencies.

*Neil Cobbold is Chief Operating Officer of PayProp UK