Introduction

1.     More and more people now rent their home or own leasehold properties. This has fuelled the growth of a multi-billion pound property agent market. The Competition and Markets Authority estimated that service charges alone could total between £2.5 and £3.5 billion per year.

2.     In return for these significant sums agents play an important role in protecting the value of peoples’ most treasured asset, their property, and in ensuring that residents are safe and secure in their homes. Choosing the right agent is critical, and yet consumers are often disempowered in the process. Those paying and benefitting from the service often have no say as to who their agent is. A lack of transparency can allow unfair fees and costs to go unnoticed. Even in cases where consumers are really unhappy with their agent they could find it impossible to switch.

3.     There is overwhelming evidence of the harm that some people experience, with claims that consumers could be overpaying for managing agents services by up to £1.4bn. Generation Rent found that the average fee paid by two tenants to letting agents is £400 with costs ranging from £40 to £780. Letting agents also have no contractual responsibilities to the tenant, despite the fact that they are the primary beneficiary of the service.Where property agents under-manage in order to squeeze costs, leaseholders and tenants can suffer due to late and poor quality repairs and services. 
 
4.     The structure of the leasehold system itself is partially to blame. The very nature of the agreement means that leaseholders are typically excluded from decisions on property management. Government has introduced a number of protections to address the imbalance of power in leasehold over time, but these are often inconsistent and complex and can be abused by those that they were meant to protect against. Rights to challenge service charges, or to take on management directly, can be undone in a tribunal system that is too daunting, costly and uncertain. A lack of minimum standards has allowed unscrupulous agents to enter the market. Anyone can become a property agent regardless of their background, skills or experience. Many take a professional approach and sign up to standards of practice through membership of a trade body, but others do not. This creates an unlevel playing field

5.     The Government is committed to ensuring that those living in the rented and leasehold sectors are protected from abuse and poor service. On 18th October 2017 Sajid Javid, the Secretary of State for Communities and Local Government, said “This is supposed to be the age of the empowered consumer – yet in property management, we’re still living in the past. I’ve already announced plans to regulate letting agents, including banning fees for tenants. I’ve also made clear that I want to see an end to unjustified use of leasehold in new-build houses. And today I’m setting out a plan to fix the problems in the property agent market.”

6.     This call for evidence takes forward this ambition, seeking views on whether an overhaul of regulation in the property agent market is needed and the approaches Government could take; we are also considering measures which will empower leaseholders by making it easier for them to choose and switch agents, potentially reducing costs. The call for evidence will run until 29 November 2017. Government will bring forward detailed proposals early next year.


 

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