When tenants or landlords want to make a complaint about a letting agency they are currently required to contact one of three Government-approved redress schemes their agent could be a member of.
The current redress schemes provide consumers with free and impartial advice, with the aim of reaching independent resolutions of disputes between consumers and property agents.
Back in 2014, it became mandatory for all letting agents to become a member of one of the three Government-approved schemes. Those that aren't members and continue to operate could be fined up to £5,000.
What are the three existing schemes?
- The Property Ombudsman (TPO)
The longest-running scheme, which has been handling complaints since 1990. In its latest annual report, TPO said it received 14,218 enquiries in a year from consumers seeking advice, instructing agents to pay awards of £1.2 million.
A smaller property organisation than TPO, Ombudsman Services does however have well-known divisions for the energy, communications and copyright sectors.
Part of the Hamilton Fraser insurance organisation, The Property Redress Scheme reported membership of over 5,000 agent offices in 2016.
These schemes had been operating concurrently for a good few years, but the whole property redress landscape has changed since an announcement from the Government last November.
When making a speech on the Government's commitment to reforming housing, Secretary of State for Housing, Communities and Local Government Sajid Javid said his department was 'looking at bold options to improve redress in the New Year'.
He said the Government was considering having a single ombudsman and promised a consultation this year. Since then, the situation has been developing quickly.
What happened next?
Following the Government's announcement in November 2017, Ombudsman Services: Property announced in February that it was quitting the redress sector and that it was backing the proposals for a single ombudsman.
The scheme is planning to cease all its current property-related activities by August, with many commentators suggesting that it is gearing itself up for a bid to be recognised as the single provider of redress for the industry.
At the time of its withdrawal, Ombudsman Services: Property referenced the other sectors it works in such as energy where there is just a single ombudsman supported by 'a strong advice and advocacy service for consumers'.
The organisation claims that having three separate schemes is 'confusing' and makes it difficult for consumers to navigate. It said it was withdrawing its operation as it does not feel it’s adding value and does not want to continue offering a 'broken solution to a broken market'.
Just 12 days later, the Government launched a consultation on the property redress system which runs until April 16th. One of the key issues the consultation is addressing is whether there should be a single ombudsman covering the whole of the housing market.
Upon opening the consultation, Sajid Javid said that consumers have 'navigated multiple complaints procedures' for too long and that the Ministry of Housing, Communities and Local Government is working hard to deliver a 'better and simpler system'.
The consultation is seeking responses from consumers, existing schemes and property professionals - you can read it in full here.
What are the pros and cons of a single housing ombudsman?
The most obvious advantage of introducing a new system with just one ombudsman covering the whole of the housing sector is the clarity for consumers. At the moment, consumers who make complaints are likely to have to find out for themselves which scheme their agent belongs to. If there was just one scheme, the chances of consumers knowing where to go and therefore making their complaints heard would be vastly increased.
What's more, Sajid Javid has consistently expressed his intent to make sure all landlords are also covered by a redress scheme. Moving to a new, single ombudsman system would be the perfect time to simultaneously introduce mandatory membership for private landlords.
It's likely the new operation will have closer links to the government, which could reduce the commercialisation of the redress sector. However, whatever organisation or entity is chosen to be a single ombudsman will need to demonstrate it has the funds and resources to manage a huge workload and enforce mandatory membership among agents and possibly landlords.
A potential downside for agents of introducing a single ombudsman is reducing the choice currently available in the market. It may be disappointing for agents to have to dispense with a redress scheme they value working with.
On top of this, if there is only one provider of redress - which therefore has a monopoly – one could argue that there is no incentive to improve the service being provided to agents.
Introducing a new system of redress could also be costly and complicated and it may take time to make sure all agents are signed up with one sole provider.
If, following the consultation, the Government decides to introduce a single ombudsman system it will need to engage in a considerable public awareness campaign, which will need support from agents, landlords and the redress provider itself.
The future of housing redress
The next stages of this process rely largely on the results of the Government's consultation period.
That said, Sajid Javid has made very clear his wish to introduce a single ombudsman and so it's fair to assume that the property redress system as we know it won't remain for too much longer.
There’s no firm indication yet as to who could take over as a sole provider of redress. However, Ombudsman Services: Property is running its own research project into the problems associated with the sector and TPO has said it will put its money where its mouth is and argue its case to be the industry’s only ombudsman. As yet, The Property Redress Scheme is yet to state its case.
Whatever is decided, an overhaul of a large system like this takes time and so it's unlikely we'll see a single ombudsman for the housing sector for some time yet.