New laws may not be enough to stop rogue estate agents

Rules aimed at cracking down on dodgy estate agents should be tougher, writes David Prosser
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t may not quite be time to stop worrying about rogue estate agents. New legislation, announced by the Government last week, will give consumers an automatic entitlement to have complaints about any estate agent considered by an independent watchdog. But Which?, the leading consumer group, is already warning that the new rules may not go far enough.

Under the legislation, all estate agents will be compelled to join an independent Ombudsman scheme, so that customers with complaints will all be able to take their case to an independent body. That is likely to be the existing Ombudsman for Estate Agents (OEA), to which only 60 per cent of firms currently belong, and it hopes to sign up the other 40 per cent when the rules come into effect.

At first sight, consumers should then be protected from rogue estate agents. And a crackdown is overdue - the industry has been the subject of a series of damning reports over the past 10 years, including several government inquiries. But it remains unpoliced.

"The new rules are good news for consumers who will finally be covered by a totally comprehensive and independent redress scheme," says Stephen Carr-Smith, chief executive of the OEA. "Estate agents will have to abide by a code of conduct and those that don't could be put out of business."

However, even Carr-Smith has a warning about the crackdown. The Government has not yet set out the criteria that an independent Ombudsman scheme would have to meet. In theory, the 40 per cent of agents that are non-OEA members could set up their own arbitration scheme, which might have less exacting rules.

"There must be one single set of standards, captured in a single code of practice and measured by the same Ombudsman scheme" Carr-Smith warns.

A more fundamental problem with the planned reforms, says Which?, is that they don't go far enough. The first problem, says Louise Westall, a Which? campaigner, is the OEA itself. "We're supportive of the proposal to introduce compulsory membership of an independent redress scheme, but we have raised issues with the OEA in the past and we want to see it toughen up," she says.

While the Ombudsman considers a wide range of complaints, the only monitoring work it does is of successfully completed transactions, where problems are less likely to have occurred, Westall points out. She is also concerned that the OEA cannot require agents to pay compensation of more than £25,000. The Financial Ombudsman Service, for example, has no such cap on redress.

More seriously, Which? is angry that the Government is still refusing to consider regulation of estate agents. While the OEA can refer dodgy agents to the Office of Fair Trading, which could, in theory, take action in the worst cases, the law will continue to allow anyone to set up in the business, whatever their qualifications.

"We need a licensing scheme," says Westall. "At least then, you could set some minimum standards of training and competence." Under the current proposals, Which? points out, an Ombudsman will consider consumer complaints, but there will be no watchdog or regulator to stop cases of dishonesty or incompetence in the first place.

However, the Government insists that licensing, or another form or regulation, is not necessary for estate agents, even though every other party in the home buying process, from mortgage lenders to solicitors, is policed by a statutory body.

A spokesman for the DTI argues: "The estate agent's role as an intermediary and salesman does not require the same level of specialist knowledge, and is not one that would normally require qualifications by law."

The DTI also says it has considered introducing a system of licensing but decided that the costs would outweigh the advantages.

Victory for tenants on lost deposits

* Consumer groups campaigning for Government help for tenants caught up in disputes over deposits will finally get their way next April. New rules covering all assured shorthold tenancies in England and Wales signed after 1 April, will require landlords to be a member of one of three officially-cleared deposit protection schemes.

* The schemes will either hold tenants' deposits in a ring-fenced bank account, or insure the money. When the tenants move out, the schemes will then arbitrate on any disputes about whether or not the deposit should be handed back in full.

* David Salusbury, chairman of the National Landlords Association (NLA), says reputable landlords and letting agents will welcome the new rules. "We've always been aware that there is a small minority of rogue operators who deliberately and unfairly withhold part or all of tenants' deposits."

* The average deposit is around £700 according to the NLA, which will run one of the new protection schemes. It is supporting the initiative because, despite an additional cost for landlords, they will be protected, too. "Both sides will have to agree to accept the outcome before going to dispute resolution with the schemes," Salusbury adds.

* David Harker, chief executive of Citizens Advice, says the charity, which has campaigned for deposit protection for several years, is also pleased. "The focus must now be on making sure landlords and agents know what the rules are, and that tenants understand their rights," he says.