The New CPR Guidance for Letting Agents

The letting agent sector was described as the ‘wild west’ of the property profession by RICS. Whether you agree with that or not the publication of government guidance on compliance has got to be a good thing! But is it.

I am a compliance consultant and 97 pages is a lot to wade through for me and so I cringe to think how agents will go on with it.  Even the CMA Legal Director says there is quite a lot of repetition in it and he is not wrong.

But putting that aside, I think there is a lot of useful information in the guidance that hopefully will improve the wild west and help make it a more level playing field, but what things stand out?

From an agents perspective I would say the stand out issues are, firstly, the CMA’s view that all charges quoted should include VAT and not be quoted as purely VAT exclusive. This not a new concept when actual figures are being quoted and there are legal obligations now to quote inclusive prices (Even though many agents do not do it). However, the CMA has taken this a stage further.  Their guidance states that percentage fees should now include VAT.  Which means you should not quote management fees as, for example, 12% + VAT – It should now be quoted as 14.4% including VAT.

 

This is at odds with the OFTs Sales Guidance published in 2012, which allows sales agents to advertise percentage fees as being + VAT.  When questioned on this the CMA stated that they had revised their views on percentage fees and that when the Sales Guidance is updated they would be bring it into line with the Letting Guidance.

They also state that before you take instructions from a landlord to market a property you should have provided the landlord with full information about all the fees you will be or may be charging applicants and tenants. Again most agents currently do not do this.

The ASA and CAP guidance on advertising fees to potential tenants is reiterated throughout this guidance and it is well worth agents looking at their own advertising to ensure they meet the new requirements.

An interesting statement in the guidance is that you should not “downplay main characteristics of the property that may be less attractive”. Whether this means agents should be highlighting, less attractive or detrimental aspects of a property in the same way they promote a property location or number of bedrooms is unclear, but even if the CMA believe they should be highlighted, I would suggest it is not likely to happen.

It will be interesting to see how many change their practices.

One point that did stand out and amuse me was a comment relating to gas and electrical installations.  According to the guidance agents can rent out properties with unsafe gas or electrical installations providing they clearly disclose the unsafe nature of the installation to applicants.  Clearly, this is wrong and agents cannot rent out such properties.

I am sure the CMA would say that it is easy for someone like me to criticize and find fault with a document like this. Well I would agree, because if you produce national guidance you must make sure it has credibility and I think this document lacks that for a number of reasons.

To illustrate the point, I must mention the wonderful statement that they have copied from the Sales Guidance “IF YOU DO NOT KNOW A PIECE OF MATERIAL INFORMATION, IT COULD STILL BE A MISLEADING OMMISSION IF YOU DO NOT DISCLOSE IT”

I will leave you to think about that one!

A copy of the guidance can be viewed by clicking here

David's Philosophy

My clients take compliance matters very seriously and I have spend many years working proactively and reactively to provide them with cost effective solutions. My success is based, not only on the unique expertise I hold, but also around my ability to balance the need for compliance with commercial reality. Whatever your needs, I am happy to discuss them and the services we can offer to meet them on a no obligation basis. Email me at david@compliance-matters.co.uk or ring my office on 0161 727 0798

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