Are Property Redress Schemes Useless?

Answer – No!  And here’s why:

Some of you may have seen reports on the BBC website and on Property Industry Eye about problems with rogue letting agent Carter Stones.

The reports talk about various customers who have lost money to Carter Stones and who obtained awards via the Property Redress Scheme. However Carter Stones have failed to pay up and the complainants are still out of pocket.

They are not pleased.

The Property Redress Schemes

There are three authorised property redress schemes, The Property Ombudsman, The Property Ombudsman Services and The Property Redress Scheme (the scheme referred to in the article).

I should start by saying that I am a member of the Property Redress Scheme Council as an independent member (ie I am not an employee) and have been for some time.  This article is an attempt to explain where they stand and their place in the scheme of things.

I should also say that the question of enforcement has always bothered us on the Council and we have discussed it many times.

The BBC Article

Here is part of the BBC article quoting some of the people interviewed in their report:

“The PRS is pretty much useless,” Mr Soeyono told me.

Teresa said: “The PRS is not effective at all, absolutely not in the case of a rogue agent. They’re just using the scheme for their benefit.”

The PRS does not require letting agents to sign up to a code of conduct, and does not publish a list of companies that have been expelled on its website.

Let’s first clear up the last two points.

• The Property Redress Scheme does publish a list of expelled agents. You will find it here at the top.

• Although there is no specific code of conduct which members sign up to, when the Ombudsman is considering a case, it will be judged against the Private Rented Sector Code published on the RICS site here or if the agent is signed up to a more onerous code, to that code.

A misunderstanding

I think one of the problems shown up by this issue is that people misunderstand the role of the Property Redress Schemes.

This is essentially to provide a free route for landlords and tenants who are unhappy with their agents’ service (or the service provided by any of the other PRS members) which they can use to make a complaint, as an alternative to going to court.

This is beneficial as court proceedings are expensive, time-consuming and very stressful.  A complaint to the agents’ Property Redress Scheme is free and considerably less stressful for people who are often already stressed out, or out of pocket, by the issue they are complaining about.

So the schemes all have procedures for members customers to use when making a complaint and qualified adjudicators to consider their case and make decisions and (where appropriate) awards. For example, they have the power to award up to £25,000 – although lower awards are more usual.

Many cases are resolved at an early stage. If the initial mediation does not succeed, the Ombudsman will make his (or her) award and the Scheme member notified. They are then given a period of time to comply.

If the member fails to comply

In the vast majority of cases, the scheme member will pay up, or apologise or do whatever he has been ordered to do. If they don’t do this, the penalty is expulsion from the scheme.

This may sound like a bit of a rubbish penalty but actually its not. Under law, all letting agents and property managers must be a member of an authorised redress scheme as a condition of being in business.

So if they are expelled from their scheme, they are no longer compliant with the law. None of the other schemes are going to accept them as a member (unless and until they comply with the award made) as they all exchange information about which firms have been expelled and have an agreement to this effect.

The rogue agent will then be vulnerable to being fined £5,000 and ultimately being closed down by the Local Authority.

The problem with enforcement

The problem is, as the people interviewed in the BBC article found, this does not really help the victims of the rogue agent.

However, there is nothing the Redress Scheme (any of the Redress Schemes) can do about it. They don’t have any powers to enforce the award – that is not what they were set up to do.

And anyway – what could they do? How do you enforce a financial award against a criminal who has either spent all the money or hidden it where it can’t be found?

It’s the same in other areas. For example, many, probably as many as 30% of all County Court Judgements go unpaid. But we don’t say that Judges are useless and that there is no point in having a County Court system.

Then what about injunctions – court orders ordering people not to do something. They will work against most law abiding people – but what about unhinged fanatical bitter ex-partners determined to attack and maybe kill their former spouse no matter what?  They won’t take any notice of a piece of paper.  Only the sort of security used for Presidents and Royalty will stop unhinged fanatics (and not always then).

It only works with the law abiding

And that’s the thing. Our system works by and large, because most people, people who are not unhinged, people who want to live in the ‘real world’, run a respectable business and get credit if necessary, will abide by judgements and awards made against them.

YOU probably would, wouldn’t you? If you knew that failing to pay up would make your business illegal?

But not if you are a rogue agent. If you are outside societies norms, you won’t care. Which means that society has no hold on you.

Only a small proportion of people are rogues and criminals, though.  In most cases, the awards and court orders work – because most people respect the law.

Local Authority Funding issues

The other problem with the Redress Schemes and failure to comply with their awards, is that enforcement action needs to be taken by Local Authority Trading Standards Offices (NOT the property redress schemes). However, we all know the problems they have at the moment with funding.

Most Local Authorities (with a few honourable exceptions) don’t have the staff or the expertise to deal with this sort of thing.

Maybe when the Housing & Planning Act 2016 comes into force and they are able to keep some of the penalty fines they issue things may change. But it will take a while.

The real answer

The real answer is to prevent the crooks and the criminals from setting up as letting agents in the first place.

We need proper regulation of the industry – which means proper training and qualification requirements, licensing of agents and mandatory client money protection. Letting agents should be regulated in the same way as solicitors – after all they too hold huge amounts of other people’s money

It is only then, that we will have a chance of eradicating the sort of situation reported by the BBC in their article.