Ombudsman calls for more control over actions of rogue letting agents

He has seen the number of lettings offices voluntarily covered by his scheme climb to almost 8,000 by the end of 2010 but is concerned that agents who do not sign up to and adhere by the standards in the TPO Code of Practice can continue to operate, potentially to customer detriment.

‘Many agents conduct their business by following the TPO Code of Practice but there are still too many who are operating without that commitment to standards and without any external controls over what they do with client money,’ says Mr. Hamer.

‘The Code of Practice represents a comprehensive set of standards by which firms conduct their business. Knowing a firm is complying with those standards will give consumers confidence that they are dealing with an organisation which has a committed approach to customer service and that best practice is being treated as a priority by agents,’ he adds. ‘I had hoped to gain accreditation from the OFT to further strengthen consumer confidence in the Code but I am disappointed that having submitted it to the OFT some three years ago I remain unclear as to when that endorsement will be given.’

From this summer, the TPO Lettings Code of Practice will include a requirement for lettings agencies to hold a separately designated client account to protect money the agencies receive.

Currently there is no compulsion for letting agents to join an Ombudsman scheme and Mr. Hamer notes that this is inconsistent with the obligations on estate agents who market property for sale.

‘Whilst the Code of Practice is not intended to be a substitute for formal regulation it would at least mean all letting agents would be following a comprehensive set of standards designed to protect the consumer. Consumers should therefore look to use an agent that displays the TPO logo – that means they are committed to operating fairly.’

Mr Hamer believes that there is general support from within the industry for some form of regulation of letting agents and to see all agents taking a secure approach to the protection of client money with insurance to ensure clients are covered if the business fails or money is misappropriated.

‘There can be no excuse for client money not being held in separate and properly audited client accounts such that it is less easy for unscrupulous agents to misappropriate it. Furthermore, there needs to be an obligation that such monies are protected by suitable client money insurance. An appropriate regulatory regime could ensure that the necessary separation of client and business money is enforced.’

‘An agent who uses client money because they are operating on the edge of viability and needs to bolster the business, or more worrying still is using the money for personal enjoyment, is entirely unacceptable and against the law.’

Mr. Hamer pledges he will continue to campaign with the industry for higher standards. He believes these are being achieved in the residential sales sector, although complaints against sales agents still remain unacceptably high.

‘The sales sector has room for still greater improvement, of course, but the growing impact of the TPO Code of Practice is further borne out by my average award to compensate complainants for the agent’s actions for sales in 2010 being £258 when in 2007 it was £547, an indicator that the gravity of complaints is diminished.’

Mr. Hamer says the number of cases relating to sales and lettings referred to TPO was 40 per cent ahead of his forecast for 2010 and despite a significantly reduced number of housing transactions the excess has been purely down to the number of sales disputes received.

There were 1,338 new referrals, 646 sales and 672 lettings with the remainder related to HIPs and Residential Leasehold Management – the highest ever recorded in the 20 years of the scheme’s existence and 28 per cent above the previous peak in 2008 of 1,043. They arose from a total of 11,794 enquires, compared with 11,165 during 2009 and 11,201 during 2008.

The largest single cause of complaint was communication failure between the agent and consumer (214) followed by complaints handling by agents (163) and sales details / advertising / marketing (138).

South East England was the source of most complaints (26 per cent), followed by south West England (13 per cent) and the eastern region (12 per cent). Wales generated only 3 per cent of the total, a figure matched by Northern Ireland and Scotland combined.

At the end of 2010, TPO had 8,008 member firms operating 11,321 sales and 7,851 lettings offices. This compares with 7,332 member firms operating 10,577 sales and 7,276 lettings offices at the end of 2009 and 6,322 member firms with 11,215 sales and 5,100 lettings offices at the end of 2008.

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