Raising the bar

For decades, solicitors and licensed conveyancers have operated within rigorous regulatory frameworks, supported by mandatory qualifications, continuing competence requirements and detailed professional rules. Estate agents and managing agents, despite exercising considerable influence over property transactions and often handling substantial sums of client money, remain subject to a far less comprehensive regulatory regime. 

As ministers seek to modernise the homebuying process, professionalising property agents has once again moved firmly onto the policy agenda. For property lawyers, the implications extend well beyond estate agency. The reforms have the potential to reshape collaboration across the transaction chain, improve the quality of information available at the outset of a sale and create greater accountability for those responsible for managing residential property.

The policy catalyst and the credibility gap

The current proposals are rooted in the Regulation of Property Agents (RoPA) working group, chaired by Lord Best. Its 2019 report concluded that estate agents, letting agents and managing agents should all become subject to a statutory regulatory framework supported by mandatory qualifications, licensing, continuing professional development, a code of practice and an independent regulator.

The government subsequently consulted on implementing those recommendations. Responses from professional bodies, consumer organisations and industry stakeholders broadly supported raising professional standards while emphasising that any new regime should be proportionate and avoid unnecessary burdens for reputable firms.

More recently, the government’s homebuying and selling reform roadmap (the roadmap) has reaffirmed that commitment. In its response to the consultation, the government confirmed its intention to develop an implementation plan for mandatory qualifications, a statutory code of practice and a more consistent regulatory framework, recognising that higher professional standards should complement wider reforms around digital property information and earlier disclosure, rather than operate in isolation.

The renewed emphasis reflects a growing recognition that faster transactions depend not only on technology, but also on the competence and accountability of every professional involved.

The present regulatory imbalance has become increasingly difficult to defend, says Gunnercooke partner Juliet Baboolal. “The regulation of property professionals in England and Wales remains strikingly uneven. Solicitors are subject to rigorous oversight by the Solicitors Regulation Authority and bear the heaviest regulatory burden of any participants in the property sector. Yet estate agents and managing agents who routinely handle significant sums of client money, occupy positions of trust, and exert considerable influence over transactions operate under a far lighter regulatory framework. This imbalance is neither sustainable nor fair, and it is ultimately the consumer who suffers.”

Consumers deserve greater consistency, argues Andrew Hazeldine, senior associate solicitor at Aaron & Partners. “Estate agents are one of the few elements of the homebuying process which aren’t operating under a universal system of regulation, and while many agents provide an excellent service and voluntarily adhere to professional standards through industry bodies and codes of practice, unfortunately, those frameworks are not applied consistently across the sector.”

As a result, he says, consumers experience significant variations in service quality depending upon who they instruct. “In the most serious cases, where an agent fails to meet expected standards, consumers are often left with limited options beyond complaints procedures or pursuing legal action, which can be both time-consuming and costly.”

Regulation has the potential to strengthen confidence in the profession, says Jonathan Christie, co-founder and co-CEO of The Property Buying Company. “These proposals have a solid foundation behind them – property transactions are pretty stressful, both financially and emotionally. Yet estate agency remains one of the few industries where you don’t actually need proper qualifications to work there. A bit more consistency in the way the industry is regulated could really help boost consumer confidence and get agents to the level where they can be trusted, all things being equal, as long as it’s not over the top.”

For conveyancers, the debate is about more than consumer protection. Solicitors already operate within one of the most heavily regulated professional environments in England and Wales. Anti-money laundering obligations, professional indemnity insurance, continuing competence requirements and detailed accounts rules impose significant compliance responsibilities that are not mirrored elsewhere in the transaction chain.

Baboolal argues that regulatory consistency is now overdue. “Every stakeholder in the property industry, estate agents, managing agents, letting agents and their associated professionals must be required to play their part in upholding standards of competence, transparency and integrity. The RoPA recommendations calling for a mandatory regulatory framework, statutory codes of practice and minimum qualification requirements, should be implemented without further delay.”

Professionalising property agents

At the heart of the reforms lies a straightforward proposition: individuals guiding consumers through one of the largest financial transactions of their lives should demonstrate recognised professional competence.

RoPA recommended mandatory qualifications supported by continuing professional development, licensing and statutory oversight, while allowing transitional arrangements for experienced practitioners. The government’s consultation demonstrated broad support for that approach, reflecting a consensus that qualifications should enhance, rather than replace, existing expertise.

Hazeldine considers professional qualifications central to improving public confidence. “Property transactions are among the most significant financial commitments people will ever make, and so there is a strong case for introducing a more consistent framework that ensures consumers can expect a minimum standard of competence from everyone involved in the process … Greater consistency across the property sector should help improve consumer confidence and reduce avoidable issues further down the line.”

While a balance needs to be struck to protect smaller firms from unnecessary bureaucracy, at a minimum an agent should understand consumer protection law, anti-money laundering regulations and material information requirements, as well as have a basic understanding of property law, including leasehold ownership and service charges, he says.

He is clear that any qualification should not be viewed as a one-off hurdle, but as part of an ongoing commitment to professional competence. “Property law and regulation evolve constantly, so there is a strong case for mandatory continuing professional development to ensure agents remain up to date with legal developments, industry standards and relevant case law.”

Christie supports raising standards while urging a degree of flexibility. “Ultimately, any new framework has got to be realistic about the fact that a lot of very capable agents have built a living out of the industry without that sort of formal training. Some sort of transition period, with competency checks or recognition of past experience would make a lot of sense so you don’t end up losing out on all that valuable expertise.”

Estate agent Lillie Connolly, founder and director of Connolly Real Estate Services Ltd, however, insists there should be no exceptions. “Even experienced long-term agents who lack formal legal or property qualifications should nonetheless be required to pass exams or work under the supervision of a person in the practice who has passed those exams. While there are many reputable seasoned members of the profession, if the aim is to professionalise agency work, there can be no exceptions, even if a generously long period for passing the exams may be considered as part of the legislation.”

For conveyancers, improved professional standards should produce benefits beyond public confidence. Poor-quality property information remains one of the principal causes of delay, with errors relating to tenure, planning, service charges or restrictive covenants often emerging only after legal investigations begin.

That issue connects directly with another central element of the government’s reforms: creating a more front-loaded transaction. National Trading Standards’ (NTS) material information guidance has already shifted expectations by requiring key facts about a property to be disclosed before an offer is accepted. The government’s wider reforms build on that principle by encouraging greater availability of digital property information earlier in the transaction.

This, says Hazeldine, is capable of making a tangible difference. “From a legal perspective, better quality information at the outset benefits everyone involved in the transaction. Buyers are able to make more informed decisions, while sellers are less likely to encounter delays caused by important information only coming to light after an offer has been accepted and further investigations carried out.”

The earlier potential issues are identified, addressed and possibly remedied, the less likely they are to derail a transaction further down the line, he says. “Regulation should therefore be viewed as part of a wider package of reforms focused on improving the quality of information available at the start of the process, rather than as a standalone solution.”

Connolly – who has recently set up her own agency – suggests that conscientious firms have little to fear from increased professional standards and argues that consumers continue to value expertise, accessibility and personal service over the size of an organisation. Proper regulation, she believes, should strengthen rather than diminish independent firms that already operate to high standards.

Managing agents

While the regulation of estate agents has understandably attracted much of the attention, extending statutory oversight to managing agents may ultimately have the greatest practical significance for property lawyers.

Managing agents occupy a pivotal position within residential property. They administer service charge accounts, oversee reserve funds, procure contractors, commission major works and provide the management information upon which leasehold conveyancing depends. Despite those responsibilities, they continue to operate within a comparatively fragmented regulatory landscape.

The RoPA working group concluded that this inconsistency could no longer be justified. Bringing managing agents within a statutory regulatory framework would not only improve professional standards but also complement the government’s wider programme of leasehold reform, where transparency, accountability and consumer confidence are recurring themes.

The case for reform is compelling, says Baboolal. “Managing agents … owe duties that are, in substance, fiduciary in nature. They act on behalf of their clients and are entrusted with decisions that have significant financial consequences. Yet the current regulatory landscape does not hold them to the standards that such a position demands.”

Leaseholders, she says, are subject to exorbitant service charges levied by managing agents with little meaningful accountability, while contractors are engaged from considerable distances, bypassing competent local tradespeople, at what appear to be inflated costs, with no adequate explanation or competitive tendering process disclosed to those who are ultimately paying the bill. “This lack of transparency is wholly inconsistent with the position of trust that managing agents purport to occupy.”

Connolly agrees. “While estate agents are now required to belong to an ombudsman scheme and comply with anti-money laundering regulations, there is virtually no regulation of the activities of managing agents, many of whom are handling substantial service charges and dealing with properties purchased by overseas buyers, the identity of whom and source of funds from whom are not always clear.”

For conveyancers, one of the most immediate benefits of the reforms could be improvements in the provision of leasehold information. Delays in obtaining management packs remain one of the principal causes of frustration during leasehold transactions, while the fees charged for replies to enquiries frequently become a source of complaint for both sellers and buyers.

Hazeldine identifies this as one of the most persistent obstacles within modern conveyancing. “One issue frequently encountered by conveyancers is the cost of obtaining management information during a leasehold sale. Sellers often have little choice but to pay substantial fees for management packs, replies to enquiries and other transaction-related documentation, as the managing agent is often the only party able to provide the information required to progress the sale.”

Although the current proposals stop short of introducing statutory fee caps, he believes stronger regulation should nevertheless improve accountability. “While the proposed reforms do not directly impose caps on such charges, greater professional oversight and clearer standards should make it easier to scrutinise fees, challenge unreasonable costs and provide consumers with greater transparency and accountability. The reforms also propose to impose a time limit in the return of information when requested from managing agents, which may reduce some of the delays in the buying and selling process.”

Greater transparency sits at the heart of the government’s wider reforms. Consumers increasingly expect clear explanations of service charge expenditure, reserve funds, administration fees and planned major works, particularly as leasehold legislation continues to evolve. Christie expects regulation to reinforce those expectations. “With new regulations, we expect that transparency will be one of the main areas of improvement. A clearer display of fees, charges and management costs would give consumers greater visibility on how their money is being spent.”

The protection of client money is another area in which reform is overdue, says Gunnercooke partner Russell Davidson. “Leaseholder reserve funds should be ring-fenced in a trust account so that they are not affected by the collapse of an agency which has not protected those funds. In the same way that solicitors can be held personally liable for a failure to protect client funds, so should estate and managing agents, many of whom are custodians of significant figures.”

At the same time, policymakers will need to ensure that regulation remains proportionate. The increasing complexity of higher-risk buildings following the Grenfell Tower tragedy has already expanded the compliance responsibilities facing managing agents.

Christie cautions against creating unintended consequences. “There’s a potential that some agents may be put off from taking on high-risk developments because of additional compliance burdens. We need regulation that is robust, but also does not reduce the supply of experienced managing agents.”

Enforcement, regulatory framework and compliance

Professional standards ultimately depend upon effective enforcement. One of the principal questions considered during consultation was whether oversight should remain with NTS or pass to a new specialist regulator responsible for estate agents and managing agents.

Davidson favours the latter approach. He describes the Estate Agents Act 1979 as “completely inadequate” and argues that oversight should rest with “an independent, properly funded regulator”, not least because NTS has experienced significant funding and staffing pressures, limiting its capacity to provide effective sector-wide regulation.

Christie places greater emphasis on creating a coherent regulatory structure. “Whatever you do, you need to make sure it’s clear and consistent. Both agents and consumers need to know who is responsible for setting the rules, making sure people follow them and keeping an eye on what’s going on. A mishmash of different bodies would probably just end up causing more confusion.”

He warns too, that a new regulator will need to make sure it is not duplicating all the work of consumer redress schemes. “We don’t want to have people running around in circles trying to figure out which process to use for what problem, so coordinating between different bodies is going to be really important.”

Whether oversight is handed to an existing body like the NTS, or a new, dedicated regulator he calls for it to be given real teeth, while handing out penalties sensibly. “You can’t slap the same amount of punishment on a genuine mistake as you would on something deliberate. But serious breaches involving client funds, lying to consumers or repeatedly hurting people should still carry the weight of being a serious breach and attract some real penalties to make people sit up and take notice.”

Technology is likely to play an increasingly important role in supporting compliance, he adds. “Technology will clearly have a role to play. Automating compliance procedures, adopting digital audit trails and implementing document management systems could help reduce the burden of administration, while improving transparency and accuracy.”

Conclusion

The professional regulation of estate agents and managing agents has been discussed for years, but the government’s roadmap has given the proposals renewed momentum. By endorsing the principle of mandatory qualifications, improved professional standards and a more coherent regulatory framework, ministers have signalled that reform is intended to complement wider initiatives aimed at reducing delays, improving material information and modernising residential conveyancing.

For property lawyers, the proposals represent an opportunity to become involved earlier in the sales process – working alongside agents to ensure key information is assembled before properties are marketed – improve the quality of information entering the transaction process, strengthen confidence between professional advisers and create greater consistency across a sector in which regulatory obligations have long been unevenly distributed.

As Baboolal concludes: “The property industry will only function effectively if it operates on a foundation of trust. Consumers must be able to rely upon the professionals they engage to act honestly, to disclose material information, and to prioritise the client’s interests above their own. Solicitors have long been held to these standards. It is time all property professionals are held to the same account. Only then will the industry command the public confidence it needs, and only then will the property market work fairly for all.”