Managing Agents : Upcoming changes to Regulations, Qualifications and Licensing

To date, setting-up a managing agents and calling yourself a property manager was easy, but this will all change!

Current Codes of Conduct for Managing Agents

Anyone can set-up as a managing agents company and sell their services to freeholders or residents management companies. They can hire trades people when needed to maintain the building, and they may even do a good job if the block is fairly simple and nobody wants to move home.

This new managing agents will make a name for itself until suddenly something goes wrong e.g. they didn’t issue the service charge demands correctly, someone is refusing to pay, and it becomes a case at the First Tier Tribunal. Now they regret not getting some training, or signing up to one of the professional institutions.

Here are some industry codes of conduct and best practices:

The RICS Service Charge Residential Management Code is one of the principal guides for how managing agents should behave and is widely adopted. But these are all voluntary, and a managing agent is not obliged to be a member or have the right type of membership. It’s up to the residents management company directors to carry-out their own due diligence when employing a new managing agents service.

Poor Industry Performance driving change for Managing Agents.

Most managing agents who know what they are doing are members of relevant institutes and hold some relevant training & CPD record which they will happily show potential new clients. Sadly this isn’t true of every company.

MPs have been receiving a barrage of complaints from disgruntled leaseholders about rising service charges, poor service, mis-management of funds etc.

While many issues may not be the fault of managing agents, their job is to mediate problems to a successful conclusion, and the overall level of complaints thrown at MPs has forced them to act.

Lord Best’s “Regulation of Property Agents: working group report”

In Parliament, Lord Best is chairing a working group tackling all these areas, and has written a in-depth report on what needs to be done.

The working group has made recommendations on:

  • a model for an independent property-agent regulator, including how it will operate and how it will enforce compliance
  • a single, mandatory and legally-enforceable Code of Practice for property agents
  • a system of minimum entry requirements and continuing professional development for property agents
  • clarifying processes and charges for leaseholders

For qualifications, Lord Best has recommended:

“…licensed agents should be qualified to a minimum of level 3 of Ofqual’s Regulated Qualification Framework; company directors and managing agents should be qualified to a minimum of level 4 in most cases.”

The good news is that for anyone who already holds a qualification, as long as the content covers the syllabus that the regulator comes up with, then the recommendation is that their qualifications will be sufficient.

In addition Lord Best’s report is looking to mandate transparency for:

  • the declaration of insurance commission and management fees,
  • service charges and associated fees levied by managing agents as a schedule of costs
  • and the protection of client monies.

These are things that are part of the current RICS code, which are voluntarily applied.

Notable other issues the new Regulator may cover

The Regulator should devise a standard set of cost codes, such as expenditure items, to help standardise accounts and allow for easier comparison and dispute resolution.

The Regulator should take over from the First-tier Tribunal the power to block a landlord’s chosen managing agent where the leaseholders have exercised a veto.

The Regulator should provide performance metrics against managing agents to enable landlords and leaseholders to make an informed comparison. This should help to weed out poor managing agents.

Key Takeaways

  • voluntary codes of conduct recommended by the various industry bodies are not being universally followed
  • complaints by leaseholders to MPs has led to Lord Best’s working group
  • Lord Best has recommended the setting-up of an independent property-agent regulator
    • to manage a mandatory and legally enforceable Code of Practice
    • to ensure professionals are suitable qualified and receive continuing professional development
    • to clarify processes and charges for leaseholders

The Regulator, these changes and much else are on the way.

In the meantime, we recommend RMC directors carry-out their own due diligence of new managing agent appointments using Lord Best’s recommendations for their evaluation criteria.

Find out about PMMS block management services for residents management companies.