Date:

Redress Scheme in force from 1 October 2014

The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 (SI 2014/2359) (“the Order”) comes into force in England on 1 October 2014.

The Order has been made as part of the Government’s proposals for improving standards in the private rented sector and is directly linked with Part 6 Enterprise and Regulatory Reform Act 2013, which at present does not require a person to join a scheme, but does however allow for orders authorising schemes to be made requiring relevant persons to join.

What does the Order do?

From 1 October 2014 the Order will require all persons who carry out letting agency or property management works to join a redress scheme (subject to exceptions) for dealing with complaints in connection to that work. The scheme must either be a scheme approved by the Secretary of State or which is a Government administered redress scheme.

Who will the Order apply to?

Letting agents

A person who engages in lettings agency work must be a member of a redress scheme to deal with complaints in connection with that work made by a person who is, or has been, a prospective landlord or a prospective tenant. The scheme will apply to prospective tenancies which are assured (including assured shorthold tenancies), which are to be granted by a private sector landlord. Companies will not be able to seek redress under a redress scheme.

For thepurposes of the Order, lettings agency work is defined as things done by any person in the course of a business in response to instructions from either a private rented sector landlord who wants to find a tenant, or a tenant who wants to find a property in the private rented sector.

Property managers

A person who engages in property management work must be a member of a redress scheme to deal with complaints in connection with that work.

Unlike for lettings agency work, the Order does not define the type of complaints in relation to property management work that the redress schemes must consider.

Property management work is categorised as things done by a person in the course of a business in response to instructions from another person who wants to arrange services, repairs, maintenance, improvements, insurance, or to deal with any other aspect of the management of premises consisting of, or containing, a dwelling-house let under either a long lease, an assured tenancy or a protected tenancy.

Who is excluded from the requirements?

Lettings agency work - does not include things done by:

  1. An employer, where the prospective tenant is an employee.
  2. A person for whom the prospective tenant provides work or services, where the prospective tenant is a worker.
  3. A person for whom the prospective tenant provides work or services, where the prospective tenant is   (i) an employee who provides work or services under the contract of employment to a person who is not the prospective tenant’s employer; or (ii) a worker who provides work or services under the worker’s contract to a person who is not a party to that contract.
  4. A hirer, where the prospective tenant is an agency worker.
  5. A person for whom the prospective tenant provides services under a contract for services.
  6. Higher and further education establishments.
  7. Those authorised or licensed to carry out regulated legal activities under the Legal Services Act 2007.

 Property management work - does not include:

  1. Things done in relation to premises which consist of or include more than one dwelling-house where the land is registered as commonhold land (whether or not there is a relevant tenancy in relation to any of the commonhold units).
  2. Things done in relation to premises which are used wholly or mainly for the accommodation of students.
  3. An organisation that provides refuge homes where that organisation (i) is not operated on a commercial basis and the costs of operation are provided in whole or part by a government department or agency, a local authority or parish council; or (ii) the organisation is managed by a voluntary organisation or charity.
  4. Work done by a person (“A”) in the course of a business where the property is subject to a mortgage and A is the receiver of the income of it.
  5. Work done in the course of a business by an authority to which Part 3 of the Local Government Act 1974 (LGA 1974) applies (including a local authority, a National Park authority, police and crime commissioners, or fire and rescue authorities etc).
  6. Work done in the course of a business by a right to manage company who acquires the right to manage under Part 2 of the Commonhold and Leasehold Reform Act 2002.
  7. Work done in the course of a business by those authorised or licensed to carry out regulated legal activities under the Legal Services Act 2007.
  8. Things done by a person (“A”) in the course of a business in response to instructions received from an authority to which Part 3 of the Local Government Act 1974 applies or a social landlord for the purposes of Schedule 2 to the Housing Act 1996.

Redress Schemes

Each scheme will have its own rules; however it is likely that these will be similar in nature. For example, to provide all consumers with a copy of their internal complaints procedures and any relevant information about the redress scheme when signing any agreement.

It is also likely that the scheme will have power to award penalties as well as requiring other practical action to mitigate any detriment.

Enforcement and penalties

The Enterprise and Regulatory Reform Act 2013 provides for orders to be made making provisions for sanctions for any breach of the legislation.

Where it is found on the balance of probabilities that a person has failed to comply with the requirement to belong to a redress scheme, the relevant enforcement authority may by notice require the person to pay the authority a monetary penalty of such amount as the authority may determine. The monetary penalty cannot exceed £5,000.

If an enforcement authority intends to impose a penalty, it must give written notice of their intention which must set out the reasons for the penalty, the amount of the penalty, and explains that the person being penalised has 28 days in which to make representations or objections.

If an enforcement authority decides to impose a fine following the period for making representation, the authority must serve a final notice imposing that penalty.

Any person served with a final notice imposing a fine may lodge an appeal against a penalty to the First-tier Tribunal.

Conclusion

Exclusions under the Order are limited. Any company which simply advertises property for rent and only passes the contact details of prospective landlords to prospective tenants will not be required to join a redress scheme.

Property managers who deal with the functions listed which are regarded as property management work seem to include all general duties of property managers. Property management work also extends to those managing long leases (e.g. lease term longer than 21 years).

Failure to comply with the Order may result in a hefty fine.

For further information, please contact Suzanne Gregson

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Suzanne Gregson

Partner - National Head of Housing Litigation

I am the National head of the Housing Litigation team.