Property Redress Schemes
A Redress Scheme is a scheme which allows consumers to escalate a complaint they have against the member of the scheme. The main purpose of the redress scheme is to resolve or settle unresolved complaints from consumers who have suffered a loss as a result of the actions of the member.
All property agents and professionals that carry out estate, lettings and property management work are legally obliged to join an authorised redress scheme, whereby they agree to resolve complaints using prescribed resolution processes, and agree to abide by the final decisions of the scheme.
There are 2 authorised schemes in the UK – The Property Ombudsman and the Property Redress Scheme.
Who Has to Join a Property Redress Scheme?
Individuals and businesses required to join the scheme are those involved in the following activities:
Estate Agency Work
Estate Agency Work is defined as work carried out by any person in the course of a business (including employees) following instructions received from a customer who wishes to buy or sell an interest in land:
(a) For the aim and purpose of introducing the customer to a third person who wishes to buy or sell an interest in land, and
(b) Following that introduction in the course of that business, has the aim of securing the purchase or sale of that interest
Deal Packaging
Deal Packaging is not expressly defined in law, but deal packagers can be thought of as operating in the same way as Estate Agents but acting on behalf of prospective buyers rather than vendors.
Lettings Agency Work
Lettings Agency Work is defined as activities carried out by an agent in the course of a business in response to instructions from:
· (a) A private rented sector landlord who wants to find a tenant: or
· (b) A tenant who wants to find a property in the private rented sector.
Property Management Work
Property Management Work is defined as activities carried out by a person in the course of a business, in response to instructions from another person who wants to arrange services, repairs, maintenance, improvement, or insurance or to deal with any other aspect of the management of residential premises.
What Are the Penalties?
In England, a letting agent or property management agent who does not join an approved consumer redress scheme can be fined up to £5,000 by the local authority and ultimately closed down, if they continue to operate illegally.
In the UK, estate agents who continue to work without being a member of a consumer redress scheme may be fined £1000 with the potential to receive a formal warning or be forced to close the business
In Wales, all letting agents and landlords are required to register with Rent Smart Wales. Part of the licencing application criteria is to show that they are a member of a consumer redress scheme, have purchased professional indemnity insurance, and can offer their landlords and tenants client money protection. The penalty for someone operating illegally can be either a fine or prosecution, as well as having their licence revoked if one has been issued.
Will it Affect Me as a Property Investor?
The private rental sector is coming under increased scrutiny by the UK government which has recently announced that private landlords in England are likely to be required to join a consumer redress scheme at some point in the future.
Together with other recent or proposed changes in legislation (eg Section 24, Section 21) it appears that tighter regulation (and therefore more expenditure) is inevitably going to affect landlords, with the non-professional small investor probably feeling the pinch most.
If you are an anxious, frustrated or tired landlord looking to explore your options going forward, why not book a free no obligation call with BIAS Property Group to explore the possibilities? Simply click the button below and select an available time slot which suits you.