Market Forces Don't Set Standards - Deposit Scheme Chief Warns

LONDON, March 1, 2011 /PRNewswire/ --

There has been a market failure to educate the consumer in the rental market, warned the new Chief Executive of the Tenancy Deposit Scheme, Steve Harriott. He was speaking at the Annual Conference of the Association of Residential Letting Agents, ARLA, the lead professional body for the rental market, held in London today. (Tuesday March 1).

The letting agents were challenged to take the lead in educating landlords and tenants in a major drive to improve standards across the private rented sector.

"Market forces cannot be relied on to set standards. Only well informed customers can know what they should buy into and so be able to demand high standards of service and protection and understand the dangers posed by cowboy letting agents," said Mr Harriott.

He said that, with billions of pounds in rents and deposits at stake, it is surprising that tenants still do not know enough to ask if their money is safe. "Fully informed tenants would want to know about the property and the rent, the quality of the letting agent and how their rent and deposit would be protected. They would want to see league tables setting out fee levels, service standards and complaint and dispute handling performance."

"Agents are in a position of trust, just like MPs, but rogue letting agents appear to be treated more leniently. The courts are locking up MPs who steal GBP13,000 but ignoring agents who steal hundreds of thousands of pounds."

Mr Harriott reminded delegates that the Rugg Review of Private Rented Sector Housing said that market forces do not police management quality. The Review called for the mandatory regulation of letting agents and recommended that registered social landlords should be encouraged to enter the marketplace and sell their rental management skills to private landlords.

"I know that this is beginning to happen across the country and is being discussed in housing association boardrooms", he said.

Mr Harriott pointed out that mandatory tenancy deposit protection provides the only legal protection for the consumers' money that is coupled to sanctions that bite. As a result, letting agents with membership of a deposit protection scheme should put that safeguard at the forefront of all their marketing efforts.

"Uninformed customers lead to market failure. This allows unqualified rogue agents to continue in business, reduce rates to the bone to win business and drive quality firms to the wall. Then, when the going gets tough they steal their clients' money and do further damage to the reputation of regulated agents."

Mr Harriott commended the self-regulation of ARLA and its members with the code of practice, client money protection and insurance to protect landlords and tenants and its rigorous training programmes. He said that ARLA must continue to promote itself as an effective self-regulator.

"There is a twin-track approach of effective self-regulation and customer education," he said. "Tackling the issue of market failure is critical. I would like ARLA, the other professional bodies and the Tenancy Deposit Scheme to work together to solve it.

Editors' note: Steve Harriott became Chief Executive of the Tenancy Deposit Scheme last September and was appointed to the Board shortly afterwards. He has had long experience of the not-for-profit housing sector as Chief Executive of the St Pancras & Humanist and AmicusHorizon housing associations.