New redress scheme gives regulation for landlords and tenants

A terraced street

On Tuesday 16 April, the House of Commons agreed to an amendment to the Enterprise and Regulatory Reform Bill which will make it obligatory for letting agents to belong to a redress scheme, meaning that landlords and tenants who feel that they have been victims of malpractice will have the means to pursue compensation.

The move had seen opposition from politicians on the grounds that it would create ‘excessive red tape’, but pressure from industry regulators and Labour groups lent it extraordinary momentum. Last week saw a change in policy from Boris Johnson and now the government has also bowed to the pressure.

Ministers wrote to Lady Hayter, the Labour peer behind the campaign, stating:

Ensuring that landlords and tenants have access to redress, via an ombudsman, will not only provide an avenue for dealing with complaints when they arise but, in the case of those agents who do not currently offer redress, will act as a strong deterrent to providing unacceptable services and engaging in unlawful practices. Good quality management in the residential leasehold sector is important, where people’s homes are involved.

Until now, only estate agents were required to belong to a redress scheme by law. It is reported that the number of privately rented households in the UK has doubled since 2001, whereas the number of complaints against letting agents has more than doubled in as little as half a decade. Despite this, it is estimated that 40% of letting agents are not regulated.

It is thought that a new ombudsman will be created to oversee disputes between letting agents and their clients. However, there is no indication that the regulator will have the authority to ban unscrupulous letting agents from trading, which has led some to criticise that the amendment does not go far enough.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.