Consultation on a draft statutory code of practice and training requirements for letting agents in Scotland: analysis of consultation responses

3. Part 1: Draft code of practice

3.1 This section analyses responses to Part 1 of the consultation which concerns the draft letting agent code of practice. More specifically this covers:

• Section 1 - Introduction
• Section 2 - Overarching standards of practice
• Section 3 - Engaging with landlords
• Section 4 - Lettings
• Section 5 - Management and maintenance
• Section 6 - Ending the tenancy
• Section 7 - Communications and resolving complaints
• Section 8 - Handling landlords' and tenants' money, and insurance arrangements.

Section 1: Introduction

Q1a: Does the introduction tell you enough about the broader regulatory background?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	18	69%	5	19%	3	12%	26	1
Member of public	14	74%	3	16%	2	10%	19	1
Professional/representative	10	71%	4	29%	-	-	14	-
Local authority	9	82%	2	18%	-	-	11	-
Other	8	80%	2	20%	-	-	10	2
Tenant/community	4	50%	4	50%	-	-	8	-
Total	63	71%	20	23%	5	6%	88	4

*Percentages of yes/ no/ don't know are calculated based on the total who answered this question.

3.2 Of the 92 respondents, 88 chose to answer the question about the introduction to the letting agent code of practice. Of those, seventy-one percent agreed that it was comprehensive enough, twenty-three percent disagreed, and six percent said that they 'didn't know'.

3.3 Respondents who were content that the introduction was adequate provided a range of comments to support their views.

3.4 Many respondents (13) said that the introduction was 'clear', 'thorough' and 'easy to understand'. Some of these commented that it provided sufficient information in relation to the wider regulatory framework.

3.5 Respondents provided a range of suggestions for developing the introduction. For example, one housing association proposed that a 'softer' more informative approach might be required for organisations that were new to letting.

3.6 Another local authority respondent suggested that there should be more information in relation to the 'crossover' between landlord registration and letting agent registration. It was felt that more information should be provided to councils on how to deal with this, in view of the volume of queries that their Private Sector Housing Unit had to deal with.

3.7 Whereas, a respondent from the 'other' group proposed that Scottish Government should encourage lettings agents to become members of the National Approved Letting Scheme (NALS) or a similar professional body, to ensure widespread compliance with the Code.

3.8 Finally, the Property Ombudsman Scotland (TPOS) highlighted that their code, the Property Ombudsman (TPO) Code of Practice for Residential Lettings Agents, had been in place for many years, and that many lettings agents were already working to the standards contained within this code. It was therefore suggested that if the TPO Code were to be adopted as the mandatory code, this would ensure greater consistency in how disputes were considered and judged by the Alternative Dispute Resolution (ADR) bodies and the First-tier Tribunal (FTT). Linked to this, another respondent from the 'other' group pointed out that introducing yet another code could lead to ambiguity and potentially encourage further differing approaches across devolved administrations. This respondent underlined the importance of encouraging consistency in approaches across all administrations.

3.9 A significant number of respondents (20) - mainly letting agent organisations, tenant/ community groups and professional or representative bodies - said that they did not think that the introduction was adequate.

3.10 One of the main reasons given for this was that it was not clear in Section 1.5 who the Code applied to. Some respondents (4) queried whether this would cover both formal, and informal letting arrangements. In particular, some respondents gave examples of situations where properties might be managed informally by a friend, member of the family, or even a neighbour. One local authority also highlighted the situation where Registered Social Landlords (RSLs) might be managing properties on behalf of a third party, for example, those operating as part of the National Housing Trust programme. It was suggested that Scottish Government should do more work to define the scope of who the Code was intended to apply to.

3.11 There was a general consensus among these respondents that the Code should apply to all people who were involved in letting agency work, regardless of the size of the portfolio that they managed, or whether this was on a formal or informal basis.

3.12 Although accepting that the introduction was clear and understandable, a few respondents said that more detail should be provided in the introduction about complying with all relevant legislation.

3.13 In particular, Capability Scotland expressed concern that disabled people could sometimes be prevented from renting privately because of a failure by Letting Agents to make reasonable adjustments. It was therefore recommended that the introduction should make clear the requirement for letting agents to comply with all aspects of the Equality Act 2010 as it relates to private lettings.

3.14 In addition, an individual letting agent highlighted that the introduction should make reference to UK wide Consumer Protection legislation and related guidance that all letting agents are required to comply with.

3.15 A few respondents (3) who said that they 'didn't know', felt that the introduction to the Code of practice was too broad, and that more detail should be provided, for example, in relation to Ministerial powers and also the wider regulatory framework.

Q1b: Please specify any more information about the regulatory background we should include?

3.16 Respondents were also invited to specify any additional information about the regulatory framework that should be included in the introduction. A wide range of suggestions were provided.

Greater clarity on who the Code applies to

3.17 Many respondents (14) from across respondent groups called for greater clarity on who the Code would apply to. Some of these (8) felt that the Code should apply to any individual or business involved in the letting or management of private rented property in Scotland, irrespective of where the individual or business was based. A few respondents commented that those involved in letting properties on an informal basis for friends or family, no matter how small the portfolio was, should also have to comply with the Code.

3.18 In contrast, two respondents called for certain individuals or organisations to be exempt from the Code and related training requirements, for example, solicitors involved in letting agency work, and those involved in managing properties on behalf of friends or family members.

3.19 Others sought clarification on how RSLs that manage market rent properties should be treated, given that they are already regulated by the Scottish Housing Regulator. It was suggested that they should be given automatic registration to the proposed register. Another respondent from the 'other' group sought clarification on whether the Code would apply to universities.

3.20 A member of the public queried whether an agent that was solely involved in marketing a property, finding a tenant and setting up the tenancy would require to be fully registered. Another member of the public and an independent letting agent suggested that it would be good to provide examples of the different types of letting agent that would be covered by the Code.

3.21 Finally, some respondents (4) called for the Code to cover online-only providers of letting agency services.

Links to other relevant legislation and codes of practice

3.22 Some respondents (4) - mainly from the lettings agents and professional or representative bodies groups - made reference to the existing voluntary Private Rented Sector Code (July 2015)^[3] for England and related guidance, and recommended that Scottish Government should make cross references to this code in its proposed Code of Practice. Some of these respondents also suggested that all businesses and individuals that were already regulated by RICS and ARLA should get automatic registration in the proposed register in Scotland.

3.23 A few respondents (3) highlighted the importance of the introduction to the Code identifying all legislation that might be relevant to the private housing sector, including legislation relating to the maintenance of common property.

Dispute resolution

3.24 One respondent from the 'other' group proposed that there should be a requirement in Section 1.7 to inform consumers about access to ADR, particularly if Scottish Government was keen to 'declutter' the FTT system of 'minor service' issues. It was suggested that consideration should be given to making ADR a mandatory step, prior to FTT. The respondent suggested that this would have the double benefit of reducing costs to Scottish Government, and also encouraging more consumers to pursue complaints through this less 'formal' dispute resolution route. It was also suggested that more information should be provided about ADR approved independent redress providers that operate in this sector.

3.25 In addition, an individual letting agent said that the regulation background should be clear on the broad timescale for the Tribunal to address complaints. It was suggested that a flow chart would help to clarify the process and related timelines.

3.26 Finally, a local authority noted that it would be helpful to give an upper limit to the level of compensation that may be awarded.

Assessment of 'fit and proper'

3.27 A few respondents (2) suggested that more detail should be provided on what was meant by a 'fit and proper' person, and the criteria that would be used to determine this. One letting agent organisation suggested that reference should be made to the requirements set out in Section 34 of the Housing (Scotland) Act 2014. Clarity was also sought on who would be responsible for carrying out the appropriate tests i.e. whether this would be the responsibility of local or national government.

Clear terms of business

3.28 A few respondents (3) noted the importance of letting agents having clear terms of business, particularly in view of the dual and sometimes complex role that they have in terms of managing the expectations of landlords, and at the same time fulfilling their responsibilities to tenants. It was felt that more guidance and support should be provided to lettings agents to ensure that their terms of business were clear and transparent.

Underlying drivers for change

3.29 A few respondents (2) stated that it would be useful to have more background information about the problems that the Code was seeking to address.

Section 2: Overarching standards of practice

Q2a: Do the overarching standards we have listed reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	23	88%	2	8%	1	4%	26	1
Member of public	14	74%	1	5%	4	21%	19	1
Professional/representative	10	71%	4	29%	-	-	14	-
Local authority	10	91%	1	9%	-	-	11	-
Other	9	90%	1	10%	-	-	10	2
Tenant/community	6	74%	1	13%	1	13%	8	-
Total	72	82%	10	11%	6	7%	88	4

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.30 Of the 92 respondents, 88 chose to answer the question about the overarching standards listed in the consultation paper. Of those, eighty-two percent agreed with the proposed overarching standards, eleven percent disagreed, and seven percent said that they 'didn't know'.

3.31 There was broad agreement across most respondent groups that the proposed overarching standards for lettings agents were 'transparent', 'reasonable', 'clear and concise' and 'appropriate'. Some noted that the standards listed covered the standards that many lettings agents already adhered to.

3.32 In addition, one local authority noted that the Code reflected the need to communicate early, to respond to complaints in writing, and to inform landlords and tenants of important issues such as repairs. It was also recognised that the standards should help to prevent disputes arising between lettings agents, landlords and tenants, and this might help to prevent homelessness. TPOS highlighted that in general the standards reflected those set out within the TPO Code of Practice, with the exception of the overarching standard to comply with all relevant legislation.

Issues raised

3.33 Although the majority of respondents from the professional or representative bodies category were in agreement with the proposal, a higher number of them (4) disagreed, compared to other respondent categories. The main concern expressed by some of these respondents was that the proposed standards were 'vague' and non-specific', and some of the terms used within the individual standards were 'undefined'. Particular reference was made to the use of the term 'reasonable' in a number of the standards, it was felt that lack of definition meant that the term was open to interpretation. Respondents therefore called for clearer definition to avoid ambiguity.

3.34 Capability Scotland re-iterated its view that it was essential that there was explicit reference to the duty of lettings agents to comply with all aspects of the Equality Act 2010, as it relates to private lettings. It was felt that this should be a central pillar of letting agent regulation in Scotland. Similarly, Shelter called for explicit reference to be made to the duty of letting agents to comply with all aspects of housing law, as it relates to private lettings.

3.35 In addition, another member of the public expressed concern that the proposed standards might result in the balance of the service being provided by the letting agent to the landlord, being skewed too far in favour of the tenant. This seemed unfair since the landlord was paying for the service from the letting agent.

Q2b: Please specify any other overarching standards the Code should include

3.36 Respondents were also asked to specify any other overarching standards that the Code should include. Respondents from across respondent categories provided a range of suggestions. These are summarised below, in order of prevalence:

• Compliance with relevant legislation (5)
  • There should be specific reference within the standards that letting agents must ensure compliance with all relevant legislation, for example, housing and equalities related legislation.
• Handling client money (4)
  • There should be a standard for handling client money i.e. deposits, rent payments.
• Recruitment and training of staff (3)
  • There should be a standard that covered the recruitment of staff ensuring that they were 'fit and proper', and also a commitment to the development and training of staff, linked to Continuous Professional Development (CPD) and wider training through professional bodies.
• Repairing standard (3)
  • There should be a clear standard, with clear timescales, relating to repairs, similar to the repairing standard used in the social housing sector.
• Record keeping (1)
  • There should be a minimum standard for record keeping.

3.37 In addition to this, respondents made a number of other individual general points, as follows:

• Letting agents should be encouraged to become members of representative bodies.
• Lettings agents should be required to use their registration number in all correspondence on advertising materials (this is covered later in the Code and in our analysis).
• Letting agents should publicise which independent redress providers they use.
• A model or template 'written agreement' should be developed for letting agents to use - RICS offered to help draft this template.
• Scottish Government should provide clear guidance on key elements of the standards.
• More should be done to actively promote best practice across the letting agents sector, for example, tapping into the experience and expertise of key professional and representative bodies, and also through the use of relevant case studies.

Section 3: Engaging landlords

Q3a: Do the standards of practice proposed in the section on engaging landlords reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know Total Answered*			Not Answered
Letting agents	23	88%	2	8%	1	4%	26	1
Member of public	13	68%	4	21%	2	11%	19	1
Professional/representative	9	64%	4	29%	1	7%	14	-
Local authority	9	82%	2	18%	-	-	11	-
Other	7	70%	2	20%	1	10%	10	2
Tenant/community	6	75%	2	25%	-	-	8	-
Total	67	76%	16	18%	5	6%	88	4

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.38 Of the 92 respondents, 88 chose to answer the question about the proposed standards relating to engaging landlords. Of those, seventy-six percent agreed that the proposal was appropriate, eighteen percent disagreed with this, and a small number (6%) said that they 'didn't know'.

3.39 There was strong agreement across most respondent groups that the proposed standards were reasonable and clearly defined. Many felt that they provided a good framework for developing a landlord's agency agreement, as well safeguarding the interests of both tenants and landlords.

3.40 Some of these respondents felt that the proposed standards would help to enhance current standards of service provided by letting agents, and also encourage greater consistency in terms of practice and procedures across Scotland.

3.41 However, one letting agent organisation suggested that Scottish Government should enforce letting agents to be more transparent about fees in their terms and conditions/ written agreements.

3.42 Although the majority of respondents from the member of the public category and the professional or representative bodies category were in agreement with the proposed standards, a higher number of these respondents (members of the public (4) and professional or representative bodies (4)) disagreed, compared to other respondent categories.

3.43 However, some of these respondents provided suggestions on how the standards could be developed or strengthened. Shelter Scotland and Capability Scotland proposed that the standards should emphasise the importance of complying with housing law in all circumstances, and not just in relation to meeting appropriate letting standards. Whereas one respondent from the tenant/ community group category said that the standards should be expanded to cover tenemental property.

3.44 On the other hand, the Law Society of Scotland expressed some particular concerns relating to the proposed standards, where solicitors might be acting as letting agents, as detailed below:

• Section 3.1f relating to potential conflict of interest - this would require more detailed consideration, as it may conflict with existing Practice Rules for solicitors.
• Section 3.3 relating to reporting a landlord that is not meeting their obligations - this could result in breaches of client confidentiality.
• Section 3.4m relating to indemnity insurance - it was considered that the Law Society of Scotland's master professional indemnity policy should already provide sufficient cover for solicitors.
• Section 3.4n relating to holding client's funds - there are already strict rules in place for all Scottish solicitors relating to this, they should therefore be exempt from any new provisions in the Code.

Q3b: Please specify any other standards the Code should include on engaging landlords

3.45 Respondents were also asked to specify any other standards that the Code should include on engaging landlords. Their suggestions are summarised below, in order of prevalence:

• Terms of business (4)
  • The fee structure should be clear from the outset, there should be no 'drip-pricing' of fees.
  • There should be clear definitions of the types of service available, for example, full management service, lettings only service.
  • The written agreement should also make clear what the letting agent will not be doing.
• Conflicts of interest (3)
  • Where there is a conflict of interest between the landlord and letting agent, written confirmation should be obtained confirming that the landlord is content for the agent to act on their behalf.
  • There should be mandatory disclosure if there is a close relationship between the agent and landlord, or if they are one and the same.
• Handling client money (2)
  • Letting agents should provide landlords with monthly statements of income and expenditure.
• Dispute resolution process (2)
  • Where there is a requirement for ADR referral, it should be made clear to the landlord that this does not compromise referral to the FTT.
• Duty of Care (1)
  • Letting agents should have the right to enforce safety standards on their landlords, and charge the landlords accordingly.

3.46 In addition to this, respondents made a number of other individual general points, as follows:

• The Code of Practice should be made accessible to landlords and tenants.
• Letting agents have a key role to play in the provision of advice to landlords; for example, in relation to any changes in legal and safety requirements.
• Letting agents should publicise if they are members of any professional or representative bodies; links should be made to other related codes of practice, for example, where a solicitor is acting as a letting agent, to ensure compliance.

Section 4: Lettings

Q4a: Do the standards of practice proposed in the section on lettings reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	19	73%	5	19%	2	8%	26	1
Member of public	13	72%	3	17%	2	11%	18	2
Professional/representative	8	57%	6	43%	-	-	14	-
Local authority	9	82%	2	18%	-	-	11	-
Other	8	80%	2	20%	-	-	10	2
Tenant/community	6	74%	1	13%	1	13%	8	-
Total	63	72%	19	22%	5	6%	87	5

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.47 Of the 92 respondents, 87 chose to answer the question about the proposed standards relating to letting. Of those, seventy-two percent said that they were in agreement with what was proposed, twenty-two percent disagreed, and a small number (6%) said that they 'didn't know'. Although the majority of respondents from the professional or representative bodies and lettings agents categories were in agreement with the proposed standards, a higher number of these respondents (professional or representative bodies (6) and letting agents (5)) disagreed, compared to other respondent categories.

3.48 Some respondents (8) who were content with the proposed standards said that they were clear and comprehensive and provided an excellent basis for developing letting agents' procedures.

3.49 Although some of these respondents suggested areas where the standards could be strengthened further. One local authority highlighted that the section on 'references and checks' would need to be changed to reflect provisions in upcoming legislation on immigration. Another local authority called for more information on how to deal with anti-social behaviour, and communal repairs.

Q4b: Please specify any other standards the Code should include in the section on lettings

3.50 Respondents were also asked to specify any other standards that the Code should include in the lettings section. Their suggestions are summarised below, in order of prevalence:

• Terminology (5)
  • Some respondents suggested that the term 'applicants' was confusing and should be replaced with 'prospective tenants'.
• Tenant information (3)
  • The letting agent should provide a tenant welcome pack including information about the property (gas/electric meter readings), tenancy agreement, a copy of the letting agent's phone number, and an out of hours contact number.
• Handling deposits and rent payments (2)
  • The Code should be clear on the treatment of 'holding deposits', as these are often kept by letting agents, when a tenant is no longer able to move into the property. Clarity was also sought regarding the 'rent in advance' practice used by some letting agents, as this is not covered by the tenant deposit scheme.
• Moving out standard (1)
  • There was a suggestion that there should also be a defined standard for moving out, covering check-out procedures, move-out inventories and the return of keys.
• 'Right to Rent' (1)
  • Clarification was sought on the Scottish position regarding provisions contained within the current Immigration Bill where landlords will be required to check whether prospective tenants have the right to live in the UK, as this could lead to increased discrimination.
• Complaints handling procedures (1)
  • A section should be added covering the complaints handling procedures for both clients and tenants.
• Consumer protection regulations (1)
  • Section 4.8 should more accurately reflect the letting agent's obligations under the Consumer Protection and Unfair Trading Regulations 2008 i.e. letting agents are required to divulge information that they either know, should know, or become aware of.

Section 5: Management and Maintenance

Q5a: Do the standards of practice proposed in the management and maintenance services reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	20	77%	4	15%	2	8%	26	1
Member of public	12	63%	5	26%	2	11%	19	1
Professional/representative	10	72%	2	14%	2	14%	14	-
Local authority	7	64%	4	36%	-	-	11	-
Other	10	91%	1	9%	-	-	11	1
Tenant/community	7	100%	-	-	-	-	7	1
Total	66	75%	16	18%	6	7%	88	4

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.51 Of the 92 respondents, 88 chose to answer the question about the proposed standards relating to management and maintenance services. Of those, three quarters (75%) agreed with the proposed standards, eighteen percent disagreed, and a small number of respondents (7%) said that they 'didn't know'. Although the majority of respondents from the member of the public, letting agents and local authority categories were in agreement with the proposed standards, a higher number of these respondents (members of the public (5), letting agents (4) and local authorities (4)) disagreed, compared to other respondent categories.

3.52 Some respondents (8) who said that they were content with the proposed standards said that they were comprehensive, robust and clear. They were seen to be a fair reflection of what should be expected of letting agents. A few (3) said that they were in line with current practice.

3.53 Others provided suggestions on how the standards could be developed. One tenant/ community group proposed that the standards should also cover common repairs, and the need for effective consultation. Another tenant/ community group suggested that all contractors or third parties should be registered.

3.54 One letting agent organisation flagged up a particular issue in relation to gaining access to HMO properties to undertake mandatory weekly smoke and heat alarm tests. The respondent was concerned that if the letting agent is unable to gain access to these properties, they might be required to seek 52 court orders a year.

3.55 A few respondents who disagreed with the proposed standards outlined their reasons for this.

3.56 The Law Society of Scotland was of the view that this section of the Code was over specific, and this could create loopholes. The Law Society also felt that the provisions might result in delays in getting work done, and also increasing costs. This might have the effect of putting off 'good' lettings agents from getting involved in this type of work, and driving business into the hands of less professional letting agents.

3.57 One letting agent organisation noted that the standards were similar to what was required in the social housing sector, but that few letting agents would have the resources to deal with the 'bureaucracy' associated with the proposed standards.

3.58 In addition, one local authority commented that the standards should make reference to other owners in a property having a right to the name and address of the landlord. This would assist with dealing with cases where there was anti-social behaviour, and also managing common repairs.

Q5b: Please specify any other standards the Code should include management and maintenance services

3.59 Respondents were also asked to specify any other standards relating to management and maintenance that the Code should include. Their suggestions are summarised below, in order of prevalence:

• Repairing standard (3)
  • Letting agents must ensure that landlords are updated on any changes to the repairing standard. Letting agents should also direct landlords to Scottish Government related advice and guidance on the Private Rented Housing Panel website.
• Financial accountability (2)
  • The Code should emphasise the importance of transferring rental money to landlords in a timely manner.
  • Letting agents should have robust accounting procedures in place for handling tax deductions from rental income, for non-resident or overseas landlords.
• Public liability checks (2)
  • Letting agents must ensure contractors' or third parties' pubic liability insurance policies are up to date, and cover the types of work being undertaken.
• Communal/ shared repairs (2)
  • Letting agents should be required to pass on any information about common or shared repair obligations to landlords. The letting agent should have to provide contact details for the landlord to other owners. The letting agent should engage, on the landlord's behalf, with property factors, owners' associations, and other owners in relation to common repairs and maintenance issues.
• Dealing with urgent repairs (2)
  • A section should be included to cover the instruction of urgent repairs when the landlord cannot be contacted.
• Good practice (1)
  • More should be done to promote good practice across the private rented sector, this will help to raise the quality of the sector.

Section 6: Ending the tenancy

Q6a: Do the standards of practice proposed in the section on ending the tenancy reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	24	92%	1	4%	1	4%	26	1
Member of public	13	68%	3	16%	3	16%	19	1
Professional/representative	10	72%	3	21%	1	7%	14	-
Local authority	9	82%	2	18%	-	-	11	-
Other	10	100%	-	-	-	-	10	2
Tenant/community	6	74%	1	13%	1	13%	8	-
Total	72	82%	10	11%	6	7%	88	4

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.60 Of the 92 respondents, 88 chose to answer the question about the proposed standards relating ending the tenancy. Of those, eighty-two percent said that they agreed with the proposed standards, eleven percent disagreed and a small number (7%) said that they 'didn't know'.

3.61 Some respondents (8) who were content with the proposed standards said that they were clear and concise, and consistent with current practice, and consistent with existing voluntary codes of practice. A few (2) said that they were a fair reflection of what should be implemented in Scotland.

3.62 One local authority proposed that the standards, should be supported by be clear guidance to ensure consistency of practice across Scotland.

3.63 One representative body that 'didn't know', felt that this section of the Code seemed vague in comparison to other sections, and suggested that it would be useful to provide a clearer framework on expected standards in relation to possession procedures.

Q6b: Please specify any other standards the Code should include in the section on ending the tenancy

3.64 Respondents were also asked to specify any other standards relating to ending tenancies that the Code should include. Their suggestions are summarised below, in order of prevalence:

• Tenancy termination (4)
  • The terms of business agreement must be clear on the notice period required from a landlord wishing to end a tenancy. In addition, the Code should make reference to the procedure that agents must follow, when a tenant serves Notice of Termination.
  • In any communication relating to ending tenancies, letting agents and landlords should encourage tenants to seek independent advice from a local Citizens Advice Bureau (CAB), or local authority.
• Tenancy deposits (2)
  • The Code should make clear that a letting agent must act in accordance with a landlord's instructions in relation to the Tenant Deposit Scheme (TDS) adjudication process, if a deposit dispute is escalated to this level.
  • The Code should include greater detail about what letting agents should do if a dispute occurs. It should also be made clear that a letting agent will be required to co-operate with any investigations by an independent body.
• Complaints handling procedures (1)
  • Reference should be made in this section of the Code to complaints handling and access to independent redress. The termination of a tenancy is a time when complaints are likely to be raised.

Section 7: Communications and resolving complaints

Q7a: Do the standards of practice proposed in the section on communications and resolving complaints reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	21	78%	4	15%	2	7%	27	-
Member of public	14	74%	2	10%	3	16%	19	1
Professional/representative	10	77%	1	8%	2	15%	13	1
Local authority	9	82%	2	18%	-	-	11	-
Other	7	70%	3	30%	-	-	10	2
Tenant/community	6	75%	2	25%	-	-	8	-
Total	67	76%	14	16%	7	8%	88	4

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.65 Of the 92 respondents, 88 chose to answer the question about the proposed standards relating communications and resolving complaints. Of those seventy-six percent agreed with the proposed standards, sixteen percent disagreed with this, and a small number (8%) said that they 'didn't know'.

3.66 Many respondents (10) who agreed with the proposed standards said that they were reasonable and clear, and provided a good basis for developing comprehensive procedures for letting agents.

3.67 One housing association noted that English law now requires all letting agents to be members of redress schemes, and this has to be displayed on all correspondence. It was also highlighted that this requirement had been in place for many years, as part of the regulation by RICS, ARLA, and NALS. On the other hand, a letting agent organisation suggested that it would be good to have one overarching complaints handling procedure for Scotland, rather than having lots of different ones.

3.68 A few respondents underlined the importance of ensuring that all communication was concise, clear and timely, and also suggested that the Code should be available online through letting agents' websites.

Q7b: Please specify any other standards the Code should include in the section on communications and resolving complaints

3.69 Respondents also provided a range of specific individual comments on the proposed standards for communications and resolving complaints, as follows:

• Complaints handling procedures (6)
  • Tenants may face barriers when trying to use the Tribunal service, therefore the service should be accessible and free. Support should also be available to tenants, particularly when letting agents will have access to their own legal support.
  • It is not clear how the Tribunal's role in ensuring adherence to the Code, might fit with any claims of discrimination made under the Equality Act 2010. Currently, these claims can only be heard in a Sheriff Court. More clarification will be required on this.
  • There should be reference to complaints handling and independent redress in the other sections of the Code.
  • RICS regulated firms already have to have a comprehensive complaints handling procedure, and belong to an approved redress scheme.
  • There should be a duty to respond to verbal or written communications from owners, and the letting agent should be obliged to provide owners with a copy of the letting agent's complaints resolution policy and procedure, particularly owners in tenemental properties.
  • Signposting for dispute resolution - It would be helpful for this section to highlight the different types of complaint, for example:
    • a regulatory complaint about the letting agent not complying with the Code, the appropriate place for those complaints is the FTT;
    • a service related complaint with the complainant seeking redress. This complaint would go to the independent redress provider; or
    • a complaint about the deposit, this complaint would go to the relevant tenancy deposit scheme.
• Clear accessible information (3)
  • The Code should be clear and accessible, and there should be access to translation/ interpretation services if required.
• Membership of professional bodies (1)
  • Letting agents should be encouraged to become members of relevant industry and professional bodies. This will help to ensure that they have robust internal complaints procedures in place, and will also reduce the burden on both alternative and statutory dispute resolution procedures.
• Impact on smaller businesses (1)
  • Will specific provisions be made for smaller companies, and individual landlords?

Section 8: Handling landlords' and tenants' money, and insurance

Q8a: Do the standards of practice proposed in the section on handling landlord's and tenant's money reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	19	73%	5	19%	2	8%	26	1
Member of public	11	61%	5	28%	2	11%	18	2
Professional/representative	7	50%	6	43%	1	7%	14	-
Local authority	11	100%	-	-	-	-	11	-
Other	9	90%	1	10%	-	-	10	2
Tenant/community	7	88%	1	12%	-	-	8	-
Total	64	73%	18	21%	5	6%	87	5

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.70 Of the 92 respondents, 87 chose to answer the question about the proposed standards relating to handling landlords' and tenants' money. Of those, seventy-three percent said that they agreed with the proposed standards, twenty-one percent disagreed with this, and a small number (6%) said that they didn't 'know'. Although overall the majority of respondents from the professional or representative bodies, member of the public and letting agents categories were in agreement with the proposed standards, a higher number of these respondents (professional or representative bodies (6), members of the public (5) and letting agents (5)) disagreed, compared to other respondent categories.

3.71 Many respondents (9) who agreed with the proposed standards said that they were comprehensive and easy to understand, and reflected the standards that should be expected of letting agents operating in Scotland. In addition, one local authority noted that it was good to require letting agents to set out written procedures for handling clients' money and debt recovery. The NALS welcomed the fact that letting agents have to be members of a CMP scheme.

3.72 However, a few respondents (3) suggested that more detailed guidance would be required.

Issues raised

3.73 The Law of Society of Scotland expressed particular concern in relation to solicitors, who carry out letting agent work, as the proposed arrangements for client accounts may conflict with the Society's own rules relating to client accounts. It was suggested that Scottish solicitors should therefore be exempt from the proposals in this section of the Code.

3.74 An individual letting agent was of the view that membership of a CMP scheme and having a dedicated account for handling clients' money should be adequate, whereas others highlighted the importance of having robust accounting procedures in place for handing deposits and rent payments. A few tenant/ community organisations called for accounts to be audited or examined every financial year, and these accounts should be made available to landlords and tenants.

3.75 One respondent from the 'other' category called for more training, particularly in relation to universal credit and the likely impact on rent collection.

3.76 Finally, one member of the public expressed concern that the terminology was confusing, in previous sections of the Code, 'clients' had referred to landlords, now it was also being used in the context of tenants.

Q8b: Do the standards of practice proposed on the insurance arrangements reasonably reflect the standards that should be expected of letting agents operating in Scotland?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	16	67%	7	29%	1	4%	24	3
Member of public	11	69%	2	12%	3	19%	16	4
Professional/representative	8	66%	2	17%	2	17%	12	2
Local authority	10	91%	1	9%	-	-	11	-
Other	8	100%	-	-	-	-	12	4
Tenant/community	5	71%	1	14%	1	14%	7	1
Total	58	74%	13	17%	7	9%	78	14

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.77 Of the 92 respondents, 78 chose to answer the question about the proposed standards relating to insurance. Of those, seventy-four percent said that they agreed with the proposed standards, seventeen percent disagreed with this, and a small number (9%) said that they 'didn't know'.

3.78 Many respondents (9) who agreed with the proposed standards said that they were clear, fair and comprehensive, and provided an excellent basis for developing procedures and standards for letting agents.

3.79 One letting agent organisation noted that RICS already had strict regulations regarding conducting insurance business, and this should be adequate for letting agents. The NLA and UK Association of Letting Agents noted that the majority of letting agents in the market place already belonged to a regulation scheme that required CMP insurance. It was felt that this should be mandatory for all letting agents.

3.80 Although the majority of respondents from the letting agent category were in agreement with the proposed standards for insurance, a higher number of these respondents (7) disagreed, compared to other respondent categories. Some of these respondents felt that the proposals were excessive, and would increase letting agents' costs considerably. A few letting agent organisations (2) commented that the section on professional indemnity insurance should be more specific, and also suggested that this insurance should apply 'retroactively'. In addition, the Law Society of Scotland sought more clarification on what was being proposed in relation to professional indemnity insurance, so that it could be compared with their own professional indemnity insurance cover.

3.81 A member of the public, who said that they 'didn't know', argued that this section did not go far enough, and that the standards should make clear that a landlord or tenant are not obliged to purchase insurance products from the letting agent, and they have the right to source their own insurance supplier.

Q8c: The draft Code includes a requirement that you have client money protection insurance. This is a distinct type of insurance that protects the money of landlords and tenants against theft or misuse by the letting agency while it is in their control.

Should the Code require letting agents to have client money protection insurance?

	Yes		No		Don't Know		Total Answered*	Not Answered
Letting agents	20	76%	3	12%	3	12%	26	1
Member of public	11	61%	2	11%	5	28%	18	2
Professional/representative	12	86%	1	7%	1	7%	14	-
Local authority	9	82%	-	-	2	18%	11	-
Other	8	89%	-	-	1	11%	9	3
Tenant/community	6	75%	-	-	2	25%	8	-
Total	66	77%	6	7%	14	16%	86	6

*Percentages of yes/no/don't know are calculated based on the total who answered this question.

3.82 Of the 92 respondents, 86 chose to answer the question about the requirement for money protection insurance. Of those, seventy-seven percent agreed that this should be a requirement within the Code, a small number of respondents (7%) disagreed with this, and sixteen percent said that they 'didn't know'.

3.83 A significant number of respondents (20) - particularly letting agents and local authorities - who agreed that there should be a requirement within the Code regarding client money protection insurance said that this was essential and should be standard practice for all letting agents operating in Scotland. One letting agent organisation highlighted that the costs were not significant and could easily be built into the business plan.

3.84 Some (8) said that they already had this type of insurance in place through membership of professional or representative bodies, for example, RICS, ARLA, and TPOS.

3.85 Some local authorities (4) commented that the requirement to have CMP insurance would offer enhanced and equal protection for both landlords and the tenants, and help to increase confidence in the private rented sector. Although one of these respondents added that tenants and landlords should not have to pay an additional surcharge to cover the CMP insurance premium.

3.86 One individual letting agent who did not agree with the proposal commented that this was just adding to bureaucracy, and increasing costs. In addition, the Council of Letting Agents (CLA) said that the majority of their members did not believe that CMP insurance should be mandatory, and many were not clear on what the benefits of CMP insurance would be to them or their clients.

Q8d: Please specify any other standards of practice the Code should include on the handling of landlords' and tenants' money and on insurance arrangements

3.87 Respondents were also asked to specify any other standards relating to handling of landlords' and tenants' money, and insurance arrangements that the Code should include. Their suggestions are summarised below, in order of prevalence:

• Transparent systems (4)
  • All letting agents must have transparent systems and processes in place for handling client money, for example, ring fenced 'client accounts', clear timescales for banking monies received.
• Clear and accessible information (2)
  • Information on any products offered to clients should be written in clear and plain English.
  • Copies of the client money protection insurance premium should be appended to the tenancy agreement or terms of agreement.
• Payment methods (1)
  • More clarity required on the use of different merchant services, for example credit/ debit cards, cheques, BACS transfers, and whether charges associated with these payment methods are eligible.
• Membership of professional bodies (1)
  • Letting agents should be encouraged to become members of one of the recognised representative bodies, for example, NALS, to help ensure that client money is secure.

Q9: Do you have any other comments about our proposed draft Letting Agent Code of Practice?

3.88 Respondents were invited to provide any other comments about the proposed draft Letting Agent Code of Practice, their suggestions are summarised below, in order of prevalence:

• Clear, accessible and usable (4)
  • The Code should be written in plain English, and available in a variety of languages and formats.
  • It should also be supported with clear guidance to ensure consistency in application across Scotland.
• Automatic registration/ 'passporting'(4)
  • It was suggested that letting agents who were already covered by existing regulation schemes, operated through a range of professional or representative bodies, for example RICS and ARLA, should be automatically 'passported' through the registration process.
• Promotion of the Code (2)
  • It was suggested that once finalised, the Code should be publicised widely, using the media and local networks.
  • It should also be made available to landlords and tenants, as part of the letting agents' terms of business and tenancy agreements.
• Monitoring arrangements (2)
  • More information is required on how Scottish Government intends to monitor compliance with the Code.
  • Consideration should be given to developing an accreditation scheme for letting agents, similar to the Tenant Participation Advisory Service (TPAS) scheme for landlords.
• Impact on certain letting agents (2)
  • Concern was expressed at the likely adverse impact of the Code on smaller letting agents, and the need for a more proportionate and tailored approach for smaller organisations.
  • Clarification was also sought on whether the Code would apply to universities.

3.89 One letting agent organisation suggested that it would be more appropriate to name the Code the Private Rented Sector Code.

3.90 Finally, although not directly related to the Code, one housing association noted that more needed to be done to tackle the problem of 'hidden landlords'. There was a call for action by Scottish Government to identify these landlords, to protect tenants, and also to protect the reputation of the private rented sector more generally.