Tuesday 12 July 2011

Be Realistic about Regulation and we might just get it.


There has been much discussion in recent years about why the residential leasehold management sector needs regulating. Some of this debate is excellent and has already led to a huge change of attitudes and in particular to increasing transparency and increasing consumer knowledge. In themselves these are both excellent and long overdue changes for what remains a growing and increasingly important service to the built environment.

However, the fact that Grant Schapps has confirmed that Government will not regulate the industry directly should come as no surprise. They have not regulated industries with far greater consumer issues and where the pressure has been even greater. Some of the business areas where there are current calls for regulation include: Estate agents letting agents, hedge funds, oil and gas container products, hair smoothing products, foster homes, outsourcing businesses, sunbed shops, care homes, shale gas extraction, lap-dancing clubs and the list goes on and on and on.

The simple reason is that the cost of Government regulation is massive and faces constant challenge. They prefer legislation (of which there is plenty both in leasehold and consumer rights) and for the courts to decide.

Regulation then needs to come from the industry. Firstly, from ARMA and then from other interested parties such as IRPM, LEASE and consumer bodies. Insistence on qualifications, as well as expertise and experience and other fundamentals such as PI insurance must become the norm. Regulation will require an independent board of experts and lay members to uphold the standards set in agreement with the industry. Credibility will be assured when the hurdles required are set at a level that only allows the most transparent and diligent agents in. The rest will not survive because customers will insist on the regulated standard.

Increasingly I am seeing new entrants spouting on about why they don’t need to be members of ARMA. But let’s be honest, why would you choose an agent who wasn’t prepared to wear a badge confirming that they demonstrated external audit requirements were met, that PI insurance is in place and that agrees to act in accordance with a code as prescribed by RICS?  ARMA may be a 'trade body' but it has teeth and these are increasingly making it the obvious choice to self regulate the industry. Once that happens (in less then two years I believe) then you will need to be in it to have any credibility as a managing agent.

Finally, why would any one choose to use an agent who wasn’t prepared to publish on its website the names and contact numbers of its senior team? Too many websites promise the earth but will not reveal their principals.  If this is to be an entirely transparent industry then that might be a good starting point – after all, what could they have to hide?