Sweeping changes are urged across all areas of property management and agency, including leasehold, in an important review published today by the independent peer Lord Best.
The aim is to bring order into an area where cowboys have roamed the range with control of millions of pounds of other people’s money with very little effective oversight.
The practices of developers, monetising freeholders and their appointed managers have led directly the leasehold scandals now reported with frequency by Parliament and the mainstream media.
This is an effort to bring order to the money’s appointed managers.
The report urges that all property agents have an independent regulator, mandatory qualifications and a code of practice and that leaseholders’ funds are protected.
No existing body could take on the role of regulator, so a new public body is required, accountable to the Secretary of State for Housing, Communities and Local Government.
The report says:
“We recommend that the new regulator take over responsibility for the approval of property agent redress and client money protection schemes.
“The new regulator should have the power to appoint a single ombudsman for property agents, rather than competing redress schemes, if they believe this to be the best way of improving standards.
“There are numerous potential sources of complaints against property agents (e.g. other agents, whistle blowers, accountants) that have few if any places to go to raise concerns. The new regulator should be able to consider complaints from all sources. Where solicitors, lawyers or other professionals have evidence of possible illegal agent behaviour, they should be obliged to present it to the new regulator.”
For leasehold the report says:
“The new regulator should be given a statutory duty to ensure transparency of leaseholder and freeholder charges, and should work with the sector (property agents, developers and consumers) to draw up the detail of the regulatory codes to underpin this aim as it applies to property agents.
“The regulatory code should include standards for transparency; potential conflicts of interest (e.g. mandatory disclosure of commissions and management fee charges); communication and use of service charges; administration charges; permission fees; use of covenants; and protection of client money.
“Standard industry cost codes, as have been developed for commercial service charges, should be developed to help consumers to more easily identify and compare items of expenditure, and to form a standard basis for accounts for managing agents.”
The report also urges that a freeholder’s stooge property manager – the means by which an aggressive freeholder can monetise the site – can be vetoed by the regulator:
“We recommend that the new regulator takes over from the First-tier Tribunal the power to block a landlord’s chosen managing agent where the leaseholders have reasonably exercised a veto. We also recommend that the new regulator provides information on managing agent performance to allow landlord freeholders – and where relevant, leaseholders – to make an informed choice of managing agent.”
“As Government considers broader reforms to the leasehold and freehold charges regime, we recommend that the new regulator has a role in enforcing compliance with any new requirements that apply to managing agents.
“We have also provided suggestions for Government to consider around boarder reforms to the leasehold and freehold charges regime.
“These include introducing a standardised form for service charges; revisions to major works consultations; extending the use of sinking funds and asset management plans to help avoid surprise or large one-off bills for leaseholders; improving transparency and protection of client money; setting a framework around the use of administration and permission fees; and reviewing the process for replacing an under-performing managing agent.”
The full report can be read here: 001 ADVANCE EMBARGOED COPY Regulation of Property Agents Working Group report-2