Estate agents and letting agents throughout the UK are being warned that they could be trading illegally.
They are being urged to check that they are signed up with an approved redress scheme to cover the full remit of their work.
The warning from the industry regulator follows a case – thought to be the first of its kind – where an agent managing a block of flats was fined £3,000.
Although Samson Estate, in east London, was a member of The Property Ombudsman scheme for its sales and letting activities and some property management, it was not covered for residential leasehold management.
The relevant legal requirement to belong to an approved redress scheme is in Section 84 of the Enterprise and Regulatory Reform Act 2013.
The case dates back to 2017, when the firm was issued by Newnham Council with notices of financial penalties following a complaint.
Samson Estate appealed to the First-tier Tribunal, which found that there was “no express term” in the legislation requiring that different categories of membership of a redress scheme must be taken out, and concluded that there was insufficient evidence to find that Samson Estate’s membership of TPO was insufficient.
However, Newnham Council appealed against this the following year to the Upper Tribunal.
This appeal was refused, but Newnham Council persevered and permission was given for an oral hearing, which took place in March this year.
Here, Judge Levenson found that the First-tier Tribunal had made an error in law.
He said that the legislation says: “A person who engages in property management work must be a member of a redress scheme for dealing with complaints in connection with that work.”
The judge ordered a penalty of £3,000.
The decision has now prompted National Trading Standards to issue guidance to estate and letting agents across the UK.
James Munro, head of the National Trading Standards Estate and Letting Agency Team, said: “We’re urging all estate and letting agents to double-check their redress scheme to ensure it covers the full breadth of their work.
“If you’re already signed up to a redress scheme, you may think your business is covered, but you should check that this covers the full breadth of your company’s activities.
“The recent tribunal decision shows businesses that are signed up to redress schemes for one area of their work but not for others may face hefty penalties in the courts.”
There are only two approved redress schemes – TPO and the Property Redress Scheme.
Sean Hooker, head of redress at the Property Redress Scheme, said: “Whilst PRS membership covers most agents for all the work they do, they must tell us from the outset the areas they undertake work in so we can record this under their membership.
“Agents must also ensure that all their branches and offices are registered separately and the appropriate fee paid.
“If you are in any doubt whether you are fully compliant please contact us immediately.”
Ombudsman Katrine Sporle said: “TPO’s online membership and website provides detailed information about the categories of work TPO provides redress for, the options available, and clarity around the need to be registered for each category.
“Our membership team is on hand to give support and advice for new and existing members alike, so do please contact us if there is anything you are unsure about or need guidance on.”
The regulator has also issued the following guidance:
Make sure that your business is signed up with an approved redress scheme for the correct line of work (Sales, Lettings or Property Management Work).
Review your existing terms of agreement/membership to ensure your redress scheme covers the full activities of the business.
Check the terms of agreement/membership to confirm if your business is required to pay membership for individual branches.
As of April 1, 2019, letting and property management agents in the private rented sector are required to belong to a Client Money Protection (CMP) scheme if holding client money. If you’re an agent who is required to belong to a CMP scheme, you should be displaying a certificate of your membership at your premises and online. CMP schemes should all be providing certificates. If you’re having difficulty in obtaining a certificate, please contact CMPschemes@communities.gov.uk