Redress Scheme - How does it affect me?
The government have recently announced they will be introducing strict regulations of the, as of yet, unregulated letting market which will make it compulsory for letting agents to sign up to an independent redress scheme.
From the 1st October 2014, letting agents will face very heavy fines of up to £5,000 if they cannot prove they are signed up to one of the three independent redress schemes with either the Property Ombudsman, the Ombudsman Service: Property or the Property Redress Scheme. It will also require for a letting agent to take out professional indemnity cover and to continue with this cover for the entirety of their trading business.
Up until now many letting agents have signed up to the redress schemes and taken out professional indemnity cover voluntarily but there is a remaining minority of letting agents which have not and this deadline will encourage them to see the benefits this will bring to their business.
According to Christopher Hamer of The Property Ombudsman, their membership has increased and that “many firms are keen to show that they want to follow the standards in the TPO Code of Practice”. This can only be good for agents business as it proves to potential landlords and tenants alike that they are aware of their responsibilities and the emotional affect dealing with complaints can have on individuals. Private renting is now at all time high and letting agents can really monopolise on this popularity.
This will also see the very small minority of rogue letting agents be forced out of business as they will now have to answer to a regulator, thusly regaining public confidence in the market.
As this legislation comes into motion, regulation of the market will increase to protect consumers, but in the same token this can also protect agents. In the event of a landlord or tenant being seriously unhappy with the advice given or the way their letting agent has dealt with an issue there is now an official and independent place for them to take their complaints to and somewhere for them to get the best advice on the next steps in dealing with this. The ombudsman will look into the grievance efficiently and impartially and this could mean them finding fault with the agents and awarding compensation to the complainant.
This is why, alongside their redress scheme, taking out professional indemnity cover is so important for letting agents, despite it also being mandatory. This insurance will cover a letting agency in the event of them having to pay compensation which in some cases could be extremely high and crippling to their business.
The government have not released a grace period date so it is important that agents get covered as soon as possible to avoid a hefty fine.