When a vendor was recently advised by the estate agent to reduce his asking price and complete additional works on the property, it seemed like sound advice to speed up the sale of his property, especially as the house went under offer just a few days later. But when it materialised that the buyer was actually a member of staff at the estate agency, the seller issued a complaint to the Ombudsman Services on the grounds that the company had failed to disclose this conflict of interest, which may have influenced the negotiation.

“In the small number of cases where people have complaints these should be addressed quickly and effectively.” Brandon Lewis, Minsiter for Housing & Planning

The estate agent maintained that it sold the property to the highest bidder. It also stated that the complainant was aware of the conflict in interest.

However, upon investigation, the Ombudsman Services could find no evidence to show that the conflict of interest was disclosed to the complainant (the vendor) in writing, which is a legal requirement, in accordance with the Estate Agents Act.

Following its failure to follow the rules, Ombudsman Services ordered the company to reduce their commission for selling the property by half, acting as a warning that all complaints from clients should be treated seriously, and not just by estate agents.

As most readers will know, it is now also mandatory that all letting agents and property management agents register with one of three Government approved redress schemes, and has been since 1st October 2014. Failure to do so is a criminal offence and could result in a fine of up to £5,000.

Although in many cases disputes are resolved without a formal referral, these Government approved schemes, run by The Property Ombudsman (TPO), Ombudsman Services: Property and the Property Redress Scheme (PRS), provide fair and reasonable resolutions to disagreements between members of the public and property agents, ensuring that tenants and landlords have a straightforward option to hold their agents to account when required.

“Most tenants and landlords are happy with the service they get from their letting agent, but in the small number of cases where people have complaints these should be addressed quickly and effectively,” said the Housing Minister, Brandon Lewis. “This means that anyone who feels they are not being treated fairly has somewhere to go with their concerns – and could receive compensation,” he added.

Sharp rise in complaints

With more agent branches now signed up to redress schemes there has been a significant increase in complaints over the past year.

TPO reports a 42 per cent year-on-year rise in complaints to 12,915, up 28 per cent on the previous year, which it says is largely owed to a growing trend in consumer challenge when something does not offer satisfaction, in addition to a sharp rise in the number of letting offices now signed up to the TPO. This brings the total number of sales and lettings offices offering the TPO’s free, independent route to resolve disputes to 26,735.

Christopher Hamer, The Property Ombudsman, said, “With an estimated 1.6 million private landlords, many of whom have limited experience and understanding of their responsibilities, and large numbers of consumers seeking tenancies, the role of letting and managing agents in providing quality customer service based on a comprehensive knowledge of relevant legislation, is more important now than ever before.”

Lack of trust

Aside from a rise in the volume of agents signed up to redress schemes, the increase in the number of complaints also reflects the fact that there is a perceived general lack of trust and respect between landlords and tenants, at least, that is what the national press and tenant pressure groups claim.

A recent survey by online tenant portal, The Tenants’ Voice, found that almost half of tenants – 47 per cent – do not trust letting agents to protect their interests, while 28 per cent believe that agents do not provide them with a suitable duty of care.

Glenn Nickols, Founder of The Tenants’ Voice, commented, “What’s clearly lacking in the relationship between tenants and letting agents is trust. In some cases it’s there, but in many more it’s not.

“Given the vast number of people who rent these days, the fact that nearly half do not feel their interests are protected by agents should make the industry sit up.

“More needs to be done to drive awareness of the schemes that exist to protect tenants’ interests. Many tenants have to find their way in the dark and the industry often appears happy for them to do so.”

Among the largest areas of dispute for the lettings sector are “miscommunication and repairs,” according to Rajeev Nayyar, Managing Director of Fixflo.

“Time is running out for lettings professionals to get their repairs processes in order before the Deregulation Act takes effect in October 2015.

“Agencies that fail to do so, leave themselves open to litigation and to reputational damage as tenants take advantage of their operational failures to successfully defend a Section 21 notice.”

Tenant fees

A recent report issued by the PRS found that of the complaints about agent members raised with the scheme, the most common grievance involved unfair or excessive fees being charged to the consumer. This has been reinforced by the latest data issued by Citizens’ Advice, who have hit out at agents’ ‘inexplicable fees.’

“Do not assume that the tenant is trying it on, is wasting your time or will go away if you ignore them.” Sean Hooker, The Property Redress Scheme

To aid fee transparency and educate its member agents, the PRS recently issued two guides – one for agents and their landlords and another for agents and their tenants, available to download from their website – to help each party understand what may be deemed as an obscure or unjustifiable fee.

Sean Hooker (left), Head of Redress for the PRS, said, “We felt that the subject of agent Fees needed to be looked at in an objective and reasoned way and that agents should be provided with guidance on what they can and can’t charge. Tenants and landlords also need help understanding what they can complain about and which practices are legitimate and legal.”

Clear Communication

According to the PRS, there are two areas that agents should be aware of – ‘documentation and communication.’

Clear and unambiguous documents, in particular those that relate to terms and conditions, charges and management agreements, are essential to ensure that the customer is fully protected. This also protects the agent, defines the business relationship and manages customer expectations.

Communication is also essential and agents should ensure that they do everything to keep the channels open even when the relationship is breaking down. Not doing so inevitably leads to the situation deteriorating and by the time of scheme involvement, the consequences have moved far beyond the initial dissatisfaction.

Mr Hooker added, “Do not assume the customer is trying it on, is wasting your time or will go away if you refuse to engage with them. Treat the complaint seriously and professionally and learn from your mistakes.”

Consumer awareness

Many property professionals, including the Head of Redress for the PRS, accept that there is still further work to be done to make more customers conscious of the scheme.

The PRS actively encourage agents and landlords to spread the word about redress schemes and report agents that have failed to comply, because there are still a small group of agents shirking their obligations.

Sean Hooker continued, “It is still, in my view, the duty of the industry to help police this legislation. There are a number of agents out there who either through ignorance or wilful defiance have not signed up to a scheme. We are therefore working with local authorities to ensure the law is enforced as vigorously as possible and consumers remain protected.”

As of 27th May 2015, it became a legal requirement for all letting agents to clearly publicise their fees, state whether or not they are a member of a client protection scheme and publicise which redress scheme they are signed up to, which should help to ensure that more agents comply with the new requirements.

David Cox, Managing Director of Association of Residential Letting Agents, said, “All our members should comply fully with the new measures; relevant information should be placed prominently in offices where letting agents have face to face contact with clients, as well as on their websites.”

North of the border

Consumer awareness of redress schemes should be aided by the recent launch of TPO Scotland. Although redress schemes are not yet compulsory in Scotland, TPO Scotland has already attracted 500 members and its Non-Executive Director, Malcolm Cannon, wants to encourage people to seek out TPO Scotland agencies, “It is imperative that good lettings businesses, providing high quality and reliable customer service, are not damaged by the rogue agents and non-compliant landlords acting at the edges of acceptable practice. It is equally important that members of the public are made aware of what standards they can expect.”

Greater regulation

Leaders’ CEO, Paul Weller, believes that landlords and tenants would prosper from the formal regulation of letting agents, “More people and families than ever use the PRS and letting agents – most are unaware that letting agents are not regulated by the Government and that anyone can set up a letting agency, with no experience, knowledge of lettings law or client money protection in place.”

The only way to tackle the issue, he says, is to make it mandatory for agents to abide by an agreed code of conduct, be professionally qualified with a sound knowledge of the laws governing lettings and to have client money protection and professional indemnity insurance, but until that happens, a Government approved redress scheme remains the fairest and most impartial service for dealing with unresolved disputes between sales and letting agents and consumers.

Redress schemes:

The Property Ombudsman
The Property Ombudsman, formerly, the Ombudsman for Estate Agents (OEA), established in 1998, charge registration costs of £294 including VAT per application per office.
www.tpos.co.uk

Ombudsman Services
Ombudsman Services does not charge property firms a joining fee per office, with one membership fee of £180 including VAT covering all the services offered by the company. RICS members may find that the cost of joining the scheme is included in their subscription fees.
www.ombudsman-services.org/property

Property Redress Scheme
The Property Redress Scheme is a new, straightforward and easy to use consumer redress scheme for property agents and professionals, with registration costs starting from £114 including VAT per application per office.
www.theprs.co.uk