Appendix 6 - Imposing Civil Penalties for Property Redress Offences
The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 came into force on the 1st October 2014.
All letting agents and property managers in England are required to join one of the two Government approved redress schemes:
‘Lettings agency work’ is things done by an agent in the course of a business in response to instructions from:
- 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.
It applies where the tenancy is an assured tenancy under the Housing Act 1988 (the most common type of tenancy) except where the landlord is a private registered provider of social housing or the tenancy is a long lease.
Lettings agency work does not include the following things when done by a person who only does these things:
- publishing advertisements or providing information;
- providing a way for landlords or tenants to make direct contact with each other in response to an advertisement or information provided;
- providing a way for landlords or tenants to continue to communicate directly with each other.
Employers who find homes for their employers or contractors; higher and further education authorities and legal professionals are excluded from the requirement.
Property management work means 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, improvement, or insurance or to deal with any other aspect of the management of residential premises.
For there to be property management work, the premises must consist of, or contain:
a) a dwelling-house let under a long lease - “long lease” includes leases granted for more than 21 years, leases granted under the right to buy, and shared ownership leases;
b) an assured tenancy under the Housing Act 1988; or
c) a protected tenancy under the Rent Act 1977.
Property management work would arise where a landlord instructed an agent to manage a house let to a tenant in the private rented sector. It would also arise where one person instructs another to manage a block of flats (often with responsibility for the common areas, corridors, stairwells etc.) that contains flats let under a long lease or let to assured or protected tenants.
The legislation applies to people who in the course of their business manage properties, for example, high street and web based agents, agents managing leasehold blocks and other organisations who manage property on behalf of the landlord or freeholder.
The requirement to belong to a redress scheme does not apply to Managers of commonhold land, student accommodation and refuge homes; receivers and insolvency practitioners; authorities where Part 3 of the Local Government Act 1974 applies; right to manage companies; legal professionals and property managers instructed by local authorities and social landlords.
The requirement to belong to a redress scheme only applies to agents carrying out lettings or property management work ‘in the course of business’. The requirement will therefore not apply to ‘informal’ arrangements where a person is helping out rather than being paid for a role which is their usual line of work. Some examples of ‘informal arrangements’ which would not come under the definition of ‘in the course of business’ are set out below:
- someone looking after the letting or management of a rented property or properties on behalf of a family member or friend who owns the property/properties, where the person is helping out and doesn’t get paid or only gets a thank you gift;
- a friend who helps a landlord with the maintenance or decoration of their rented
properties on an ad hoc basis;
- a person who works as a handyman or decorator who is employed by a landlord to repair or decorate their rented property or properties when needed;
- a landlord who looks after another landlord’s property or properties whilst they are away and doesn’t get paid for it;
- a joint landlord who manages the property or properties on behalf of the other joint landlords
One of the key issues to consider when deciding what could be considered an ‘informal arrangement’ is whether the person doing the letting or property management work is helping out an individual as opposed to offering their services to anyone who wants to use and pay for them.
Where the authority considers that the requirements of the regulations have been breached, it must give written notice of their intention to impose a penalty setting out the reasons and the amount of the penalty, a Notice of Intent. The lettings agent or property manager has 28 days to make written representations or objections to the authority, starting from the day after the date the Notice of Intent was sent. At the end of the 28 day period, Council will decide, having taken into account any representations received, whether to impose the fine and, if so, must issue a Final Notice to the lettings agent or property manager giving at least 28 days for payment to be made.
A lettings agent or property manager can appeal against the penalty to the First-tier Tribunal. The appeal must be made within 28 days of the day on which the Final Notice was sent.
The local authority can impose further penalties if a lettings agent or property manager fails to join a redress scheme despite already having had a penalty imposed. There is no limit to the number of penalties that may be imposed on an individual lettings agent or property manager if they continue to fail to join a scheme.
Each scheme publishes a list of members on their respective websites so it is possible to check whether a lettings agent or property manager has joined one of the schemes.
Determining the level of the Financial Penalty
Local authorities can impose a fine of up to £5,000 where a lettings agent or property manager who should have joined a scheme has not done so. Coventry City Council takes a blanket approach, issuing a fine of £5,000 in all cases when issuing a Notice of Intent. The exemption to this being, where the Council is aware of extenuating circumstances outlined below.
Where the recipient of the Notice of Intent makes representations to the Council within 28 days of receipt of the Notice, the Council will consider whether those representations constitute extenuating circumstances and take them into account when issuing the Final Notice. The Final Notice giving the final level of fine the Council is imposing for the offence.
Extenuating circumstances which could lead to the reduction in a fine include; that the fine would be disproportionate to the turnover or the scale of the business and ability to pay. However, the lack of awareness of the scheme will not be considered a valid reason since the requirements of the legislation have been in place for a significant time, since the 1st October 2014.