At last! I am delighted to have read the latest government announcements about the proposed changes to the way the property market is going to work in the future – and you should be, too!
For years governments of all colours have dictated their rules to the property industry. And for the same number of years the property industry have not done the best job of working together to tell the government what’s needed to change the market in the consumers’ favour.
Unlike retail or car sales, property isn’t a single industry. It’s one of the most diverse and sometimes opposing groups of industries I have ever worked with, consisting of agents, lenders, brokers, legal companies, the search industry, insurance and removal companies to name but a few. And although they operate side by side, they don’t really work in tandem to do the best by the consumer, whether they are investing in a property to let, buying their first time home, or their last.
However, I think now we are starting to see a real change. Government is doing a much better job of talking to the industry – rather than dictating – and the industry is doing better at liaising ‘as one voice’ with the government, both working hard to make sure the consumer is at the heart of decision making.
Here is a summary of the key changes the government has recommended. Whether you are buying, selling, renting or investing, you should know what’s happening so you can navigate the property market and choose the right service from the start.
Increased regulation of estate agents, letting agents and managing agents
The private rental market now comprises around 20% (4.7 million) of households in the UK with an additional 4.2 million leasehold properties also present in the residential market. The growth of these sectors has, according to the government, “fuelled the growth of a multi-billion-pound property agent market”, often leaving consumers “disempowered in the process”.
Similarly, more than a million homes are bought and sold in England each year and government research has shown that over 60% of buyers and sellers have been stressed out by the process and roughly one in four would use a different agent if they were they to sell again.
While many agents are honest and professional, lack of regulation means that historically anyone can act as a letting, managing or estate agent regardless of background, leaving consumers potentially open to abuse.
In response, the government has announced major changes in the way agents will be regulated in future:
Proposed changes for letting, managing and estate agents and consumers in those markets
Proposed mandatory and legally enforceable code of practice for letting and managing agents setting minimum standards for a number of things including service charges and dispute resolution;
Introduction of a nationally recognised qualification to practise, and continuing professional development;
Introduction of an independent regulator that owns the code of practice, is responsible for delivering the qualifications and has enforcement powers;
Estate agents will be required to hold professional qualifications;
Estate agents must be transparent for the fees they charge for referring clients to solicitors, surveyors and mortgage brokers;
National Trading Standards Estate Agency Team to be strengthened, enabling them to carry out more enforcement activity which includes the option of banning estate agents.
Housing Secretary Sajid Javid said: “Buying a home is one of the biggest and most important purchases someone will make in their life. But for far too long buyers and sellers have been trapped in a stressful system full of delays and uncertainty.
“So we’re going to put the consumers back in the driving seat. We will require estate agents to hold a qualification so that people are no longer at risk from a minority of ‘rogue agents’ and can trust the process when buying or selling their home.”
Mark Hayward, chief executive of NAEA Propertymark, said: “We particularly welcome the commitment to further regulation – we have long argued that estate agents should be recognised as professionals, this is an important step towards achieving this and we look forward to working with the government.”
David Cox, chief executive of ARLA Propertymark, said: "We are hugely supportive of these proposals. After 20 years of campaigning, the Government has finally listened to our call for proper regulation of the industry.”
Further government suggested changes to the buying and selling process:
Introduction of consumer friendly ‘How to Buy’ and ‘How to Sell’ guides;
Encouraging the use of voluntary reservation agreements to help prevent sales falling through and crack down on gazumping;
Encourage sellers to store and collect together relevant information (eg planning permissions, guarantees and certificates for works done, previous searches etc) in an effort to be ‘sale ready’;
Getting a Decision in Principle before house hunting; A Decision in Principle is a certificate from a mortgage lender setting out how much money they will lend to a buyer;
Setting a timeline for local authority searches so buyers get the information they need within 10 days;
Work with removal firms, conveyancers and lenders to see how the process around the release of funds can be improved;
Establish a technology working group to engage users, industry and partners such as HM Land Registry to understand user needs for new digital technology and stimulate innovation in order to reduce completion time.
Further government suggested changes for lettings and managing agents:
Criminal sanctions to be imposed on agents who practise after being banned;
Empower leaseholders to change managing agents if they perform poorly or break the terms of a contract;
Managing agents and freeholders will provide up-to-date lease information for a set fee and to an agreed timetable, ending the current situation where leaseholders are at the mercy of freeholders and their agents.
Simplification of the 'Right to Manage ' process.
Restricting ground rents in newly established leases of houses and flats to a peppercorn (zero financial value);
Addressing loopholes in the law to improve transparency and fairness for leaseholders and freeholders;
Working with the Law Commission to support existing leaseholders – including making buying a freehold or extending a lease easier, faster, fairer and cheaper.
How will this affect you?
These changes are going to make a massive difference to consumers:
First we will have properly trained agents, hopefully not just in the ‘technical’ side of buying, selling and renting and abiding by the legals, but also in how to advise consumers.
Secondly, raising standards will lead to a lot of agents who aren’t doing things properly to sell up or close down. In the main, this will definitely leave just the ‘good guys’ in the market. If you are using an estate, letting or property management company, there are lots who are already trained. They are members of NAEA, ARLA, RICS, UKALA, ARMA etc. Use them – don’t go for cheap alternatives that may not be here in a few years and are possibly not abiding by the law.
Speeding things up
In addition, being able to access information more quickly from freeholders about leasehold and especially local authorities having to get back to search companies within 10 days is fantastic news – some local authorities are behaving atrociously when it comes to responding to search requests, while others are just not investing in the staff/systems required.
Finally the best thing is that more enforcement is on the way. This might make life uncomfortable for those not abiding by the law, or those who don’t realise they are abiding by the law. But I’m afraid I have little sympathy for them!
Bringing in lots of laws without any enforcement has just played into the hands of rogues, poorly run companies and landlords letting properties illegally. We spend so much time and effort enforcing car parking fines, but so little time and effort making sure people are owning and renting safe homes, it’s pretty shameful. And with an ageing property stock, this can’t continue.
Transparency in all industries from a consumer perspective is essential moving forward, so being upfront about fees will be coming in for estate agents, but I also hope for other industries who earn referral fees during the buying, selling and letting process.
Have you ideas of things you’d like to see changed or what companies or individuals have done for you that you would like to see replicated for others?
Now is the time to let me know – we have a lot of people listening, so I would love to hear about things you’d like changed and what can be done to make the renting, buying and selling process much better!
|Choosing a letting agent - Belvoir||Joining a landlord association - RLA||15 ways to speed up buying and selling legals - SLC|