Property agents play an important role in the running of residential buildings. Whilst many provide a good service, some managing agents do not.
In a written statement to Parliament in November 2024 the government indicated its intention to “act to protect leaseholders from abuse and poor service at the hands of unscrupulous managing agents”.
In this article we look ahead to a consultation to be launched in 2025 that will build on earlier work by the Regulation of Property Agents working group, with a particular focus on strengthening the regulation of managing agents.
WolfBite - the key takeaways
• The government has announced that it will launch a consultation in 2025 into how to better regulate residential property managing agents.
• The consultation will build on a report produced by the Regulation of Property Agents Working Group in 2019.
• The government has indicated that it wishes to see mandatory professional qualifications introduced that will set basic standards that managing agents must meet.
• Other measures may include the introduction of a new regulator, licensing regime and mandatory Codes of Practice.
• The consultation will need to take account of legislative changes brought in since the 2019 report was published.
What has the government announced about property agents?
On 21 November 2024, the Minister of State for Housing and Planning issued a ministerial statement that was primarily concerned with setting out the government’s plans for leasehold reform in 2025.
However, within the statement, the government also signalled its intention to put the regulation of managing agents firmly back on the agenda.
The statement explained that the Conservative government had in 2018 asked a working group, chaired by Lord Best, to advise on how to better regulate property agents to protect leaseholders from abuse and poor service. The Regulation of Property Agents Working Group published its report in 2019, but no further action had really been taken since then.
The Minister has announced that a consultation will be launched about this in 2025. The announcement suggests that there will be particular focus on how to drive up the standard of service that managing agents provide.
The government has said that it expects, as a minimum, that new provisions should include mandatory professional qualifications that set a new basic standard that managing agents will be required to meet.
What did the Regulation of Property Agents Working Group’s 2019 report say?
There is currently no overarching statutory regulation of private sector residential letting or managing agents in England, although they are subject to consumer protection law and specific provisions relating to the charging of fees and membership of redress schemes.
A call for evidence was issued in 2017 which sought views on whether a new regulatory model was needed for agents in the leasehold sector.
A response was published in 2018 in which the then government restated the intention to regulate letting and property management agents.
The Regulation of Property Agents Working Group was established later on in 2018. Its remit was to develop the regulatory model. The term “property agents” in this context covers managing agents, lettings agents and sales agents.
The working group published its report in 2019. The report included the following recommendations:
• All those carrying out property agency work should be regulated.
• The creation of a new independent property-agent regulator that would have enforcement powers.
• The creation of a new licensing regime under which lettings and managing agents would be required to hold a licence to practise from the new regulator.
• A requirement that property agents carrying out reserved activities should hold minimum qualifications appropriate for the type of work they conduct, coupled with a commitment to continuing professional development.
• A new mandatory Code of Practice for property agents, with an overarching Code setting out the principles that apply to all agents, and sub-Codes that would apply to each different type of property agency (lettings, management and sales) dealing with things like client money protection, ethical behaviour, and service charge-related standards.
• New duties on the regulator to ensure transparency of leasehold and freehold service charges.
Possible overlap with other reforms
The landscape has changed since the working group published its report in 2019.
In particular, the Building Safety Act 2022 (BSA 2022) and Leasehold and Freehold Reform Act 2024 (LFRA 2024) have both been passed into law, even though a number of their provisions have still yet to be brought fully into force. The Renters’ Rights Bill (RRB) is also making its way through Parliament.
It is therefore likely that the proposed consultation in 2025 will need to adjust the working group’s 2019 recommendations to fit within the new landscape.
For example, the BSA 2022 imposes additional duties on those involved in managing taller, higher-risk, residential blocks of flats. The LFRA 2024 contains provisions designed to better regulate the management of service charges in long residential leases and estate management charges on freehold estates. The RRB contains provisions intended to improve the management of shorter-term residential lettings, for example by requiring landlords to become members of a redress scheme and creating a private rented sector database.
Although many of the measures in the BSA 2022, LFRB 2024 and RRB are directed at landlords, whereas the working group’s 2019 recommendations are directed at lettings and managing agents, there may be a degree of overlap. Any future proposals concerning the regulation of property agents will therefore need to work alongside those other measures.
Do managing agents need regulating?
The regulation of managing agents would be a very welcome step.
The cause of many of the residential landlord and tenant disputes that we deal with relates to problems with how buildings are managed, whether this concerns the services that are (or are not) provided, the amount that is charged for those services or issues with communication and transparency.
Putting residential property management on a more professional footing, with set minimum standards and a system for holding those managing agents who provide a poor level of service to account, would go a long way to reducing the scope for dispute.
This is not just an issue for leaseholders either.
Landlords often rely on managing agents to run their buildings properly and efficiently, and it can be a real problem where this does not happen (including where leaseholders may own the building through a freehold company).
As the Ministerial statement explains, regulating property agents will be just as important if, rather than being held in a leasehold structure, we move to a commonhold system (where each flat owner owns the freehold of their home and becomes a member of a commonhold association that owns and manages the common parts).
Ultimately, the management of residential buildings is important irrespective of how the ownership of those buildings is structured.
We will provide a further update once the consultation is launched.
