When we launched Clan Gordon to focus on managing residential property, we knew we were entering a crowded market in Edinburgh with over 200 letting agents. However, with no clear brand leaders, and the industry having a poor reputation for customer service, we knew there was an opportunity. Our aim was to provide a fully regulated and high value customer service experience for landlords and tenants and then use that reputation to build a trusted brand in the market.
As well as running a successful letting agency our Managing Director, Jonathan Gordon, is Chair of the RICS (Royal Institution of Chartered Surveyors) PRS (Private Rented Sector) Forum. Jonathan represents the RICS on all Scottish Government consultations in the sector for the last few years and has played an integral role as a stakeholder in all stages of the recent improvements to the Repairing Standard as well as plans for a new Private Residential Tenancy and Letting Agent Regulation.
Why is Regulation Important?
Keeping it very simple, regulation is essential for two reasons. Firstly, landlords are investors and usually completely entrust the management of their investment, which is likely worth £100,000 (or much more) to a letting agent. Nearly all types of investment by individuals can only be managed by a business which is regulated by the Financial Conduct Authority (FCA) making management of residential property almost uniquely unregulated. Think about pensions, equities or even cash: no one would let an unregulated business manage these and by law they can’t.
Secondly, the process of managing a property is more complex than many other investments and requires a wider set of skills. As well as investment advice on buying property and perhaps what yield might be achieved, a letting agent managing a complex legal arrangement between the landlord and tenant, signs a legally binding document on landlord’s behalf and can be responsible for managing significant maintenance issues, not least safety obligations for the landlord in terms of their duty of care to the tenant. Consider if an agent forgets to have a gas safety carried out; not only is the tenant’s life at risk but the landlord could be liable for that tenant’s life should they suffer from carbon monoxide poisoning.
Regulation is therefore essential and no landlord should be using a letting agent which is not regulated by the RICS or licenced by ARLA. Even then a landlord should be asking the agent some pertinent questions about how they manage the property. In our experience too many landlords focus only on the fee the agent is charging without even asking about regulation or management practice.
What is a Rogue Letting Agent?
We’ve taken over a number of properties from other agents where the landlord has become unhappy with their letting agent. The word rogue, however, is quite a strong term and it usually refers to someone being dishonest or acting illegally. In our experience there are certainly a couple of instances of letting agents acting illegally deliberately but that is rare, as it is in any business sector.
However, with over 200 agents in Edinburgh and only a handful of these regulated in any way, the standard of management in the sector varies widely. Without regulation anyone can become a letting agent and there is no set standard in terms of management practice or training of staff. There are many good letting agents of course, and most are trying to provide a good service, but the lack of regulation and training is a real issue that must be addressed.
Letting Agent Regulation
The Housing (Scotland) Act 2014 introduced plans to regulate letting agents throughout Scotland which will include formal registration, a code of practice including requirements for client money protection and professional indemnity insurance, a requirement for training together with powers for Ministers to enforce the regulations. Landlords and tenants will also be able to complain to the new First-tier Tribunal.
The recent Scottish Government budget has delayed the progress in establishment of a First-tier tribunal which is required to handle complaints relating to the regulation of letting agents and so the Scottish Government is also delaying letting agent regulation by about a year until late 2017. They will still be laying out their code of practice before the Scottish Parliament this month and announcing their proposed training requirements.