The regulation and licensing of property agents now in the pipeline

The government has recently received the report it commissioned last year on the proposed regulation of "property agents" (ie letting, managing and estate agents). The working group responsible for producing the report included representation from RICS, ARLA, NAEA and the Leasehold Advisory Service, amongst others.

The working group's terms of reference were, in very broad terms, to advise on a new regulatory regime that will strengthen principles of best practice within the sector while exposing the worst performers, with a view to stamping out shoddy practice.

In essence, the report proposes a new regulatory framework and licensing regime covering estate agents across the UK and letting and managing agents in England. The context is that at present anyone can set themselves up as a property agent with no qualifications, training or experience.

There are voluntary standards of practice adhered to by many property agents, but no compulsory standards. This has led to fragile consumer confidence in the industry as a whole. The government's aim is to provide a more comprehensive set of guidelines and regulations to govern the industry, with an independent regulator appointed to oversee compliance and enforcement.

So what are the key proposals and how will they impact on property agents?

The working group's key strands of responsibility:

• to develop a single, mandatory and legally enforceable code of practice for property agents
• to devise a system of minimum entry requirements and continuing professional development for property agents
• to advise on the set-up, functions and relationships of a property agent regulator, including how it will operate and ensure compliance
• to explore whether fees and charges that affect leaseholders and freeholders should be capped or banned.

Basic scope of the new regulatory regime

The report recommends that all those undertaking property agency work should be regulated. This includes auctioneers, international property agents and online agents but not property portals such as Rightmove and the short let sector such as Airbnb.

It proposes that any legislation should allow for future extension to the scope of regulation, to include landlords and developers, as well as retirement housing managers and Right to Manage companies.

It suggests that the regulator should be a newly established public body that would be funded by those it regulates, with the power to appoint an ombudsman for property agents. Currently, there is limited scope for redress where complaints arise.

In terms of enforcement, the report recommends that options should range from issuing warnings up to the revocation of licences and prosecutions for unlicensed practice; it also envisages that infringements should be publicised. A right of appeal through the First-tier Tribunal would also have the power to consider applications for judicial review against the new regulator.

Qualifications and "grandparenting"

Under the proposed regime, every agency must ensure that their agents and other staff are trained appropriately. The working group recommends that licensed agents should be qualified to a minimum of level 3 of Ofqual's Regulated Qualification Framework (equivalent to an A-level).

It is acknowledged that many agents would not meet the proposed qualification requirements were they to be introduced immediately and that there should be some form of phasing in of the qualification requirements.

One of the more controversial areas of the report is the apparent rejection of any "grandparenting" approach that would allow those currently in the sector to be treated differently from those who join after the implementation of the reforms. Some in the industry have argued that a number of the best quality property agents do not hold any qualifications at all and should not be penalised.

But the report is clear that the new regulator should not exempt agents from a qualification requirement on the basis of experience alone. Despite this, the report stresses that there is no wish to see experienced agents leaving the industry because of concerns around new qualifications. The intention is to tackle this through continuing professional development requirements and by making training and assessments more easily accessible.

However, it seems inevitable that these measures will be seen by some as introducing further red tape that could drain resources of smaller agencies some of whom are still grappling with their relatively new rigorous AML responsibilities.

Timing

These proposals are of course part of a wider, well-publicised government drive to tighten up protections for consumers in the letting and managing agent market, and to improve the home ownership and buying and selling experience generally. These particular proposals have been welcomed by many in the industry, including ARLA.

There is already something of a queue of consultations around property reforms. However, once the more pressing needs of Brexit have been overcome it seems likely that these proposed reforms will move their way up the queue and towards the statute book.