RPI

RPI: Ombudsman Guide

residential property investor rpi
RLA
Written by RLA
Taken from the September/October RPI magazine, some important information for property managers / letting agents and mandatory registration to one of three redress schemes. Currently, all estate agents who handle sales must belong to an ombudsman scheme, but letting agents do not. While a number do, this is on a voluntary basis. This anomaly is due to be put right, on October 1, all letting agents must be members of an authorised redress scheme.  These will allow tenants and landlords to complain about their agents and seek redress.

For landlords, it is clearly important both for themselves and their tenants that they use only agents who comply with this legal requirement.

Who must join a scheme

Anyone who engages in either lettings agency or property management work must be a member of a redress scheme. There are certain exemptions from this requirement – see below.

The three schemes are:

  • The Property Ombudsman
  • Ombudsman Services Property
  • Property Redress Scheme.

The first two schemes are already in operation. The third scheme is a newly authorised scheme which is now accepting applications for membership.

What is lettings agency work?

Lettings agency work is defined as things done by any person, in the course of a business, in response to instructions received from a person seeking to find another person wishing to rent a dwelling house in England under a domestic tenancy and having found such a person to grant such a tenancy (the “prospective landlord”).

Property-finding services where agents work for a prospective tenant to find a property are also covered by the requirement to join a redress scheme.

What is property management work?

Property management work is defined as things done by a person (the agent) in the course of a business in response to instructions received from another person (the client) where the client wishes the agent to arrange services, repairs, maintenance, improvements or insurance, or to deal with any other aspect of the management of premises in England on a client’s behalf, and the premises consist of a dwelling house let under a relevant tenancy.

What tenancies are covered?

For lettings agency work, essentially letting premises on assured shortholds and assured tenancies generally are covered; whereas with property management work the definition is wider as it includes not only lettings under an assured tenancy (including assured shortholds) but also where there is a longterm tenancy in place (such as a flat held under a long lease by an owner/occupier).

Informal agents – guidance awaited

It is to be noted that these activities must be carried out in the course of a business. The question arises whether people acting as “informal” agents are covered, e.g. a father letting/managing a property owned by his daughter or a retired surveyor who manages a property for a friend. Likewise, it is uncertain whether an arrangement between two landlords who cover for each other when one is on holiday is included.

Further guidance is awaited.

Exemptions

Lettings agency work does not include things done where an employer is letting to an employee/ worker so that the employee/ worker is the prospective tenant. There are further exemptions in the regulations for universities and social landlords as well as lawyers.

Enforcement

The local authority is the enforcement body.

There is a civil penalty of up to £5,000 for breach of a requirement to belong to a redress scheme. There are rights of appeal against a penalty.

Who can complain to a scheme?

Tenants, including prospective tenants, and landlords can complain about agents. Any tenant or prospective tenant can make a complaint, but in relation to landlords the position is more restricted and depends on the individual scheme’s rules. The position is as follows:

  • The Property Ombudsman: professional landlords with a large turnover can complain to the scheme.
  • Ombudsman Services Property: only landlords who are consumers can complain. This means, in practice, that only smaller landlords will be able to make a complaint. The law on who is or is not a consumer in the case of a landlord is far from clear.
  • The Property Redress Scheme: details to be announced.
What rules apply?

The particular rules which agents must comply with, vary from scheme to scheme.

In all cases, any Government approved code of practice in effect underpins the scheme, and the consumer protection legislation outlined in the Competition and Markets

Authorities Guidance to Consumer Protection will be relevant. Ombudsman schemes must have regard to the law but can also apply principles of fairness. Both the Property Ombudsman and Ombudsman Services also have detailed rules which must be observed by agents. Initially at least, the Property Redress Scheme will rely on the PRS Code of Practice (once published) as the basis of rules for its scheme.

What can a redress scheme do?

If a complaint is found proven, then schemes have a number of options. They can require an apology; issue a reprimand; order compensation; and fine or expel a member.

As regards compensation, the amounts payable are capped at £25,000, and if an aggrieved party wishes to claim more they have to proceed via the courts, rather than the ombudsman scheme. Members of the scheme are bound by the scheme decision, but complainants do not have to accept the decision. They can go to court instead if they are not happy with the outcome.

If an agent is expelled, then they are likely to be refused access to membership of another scheme, so effectively they could not then legally operate if no scheme will accept them into membership.

About the author

RLA

RLA

The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.

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