Any Letting Agent and anyone in Property Management need to ensure they are kept up-to-date with the extensive list of rules and regulations which govern how a property is let and managed. They also must ensure their business is also compliant under wider industry regulations. Consequences of not doing so, would be damaging and could incur financial penalties.
In this post, we highlight some of the legal requirement’s, as we often see some people managing properties without the best interests of the Client Landlord’s, not done legally and irresponsible. This is why you should always check out who you are going into business with then choosing a Letting Agent or Property Manager.
Professional Indemnity (PI) Insurance
This insurance is a prerequisite for membership of The Property Ombudsman and other trade bodies such as ARLA, NAEA, UKALA, Safeagent and Propertymark. Human errors can and do occur and can lead to a negligence claim being made. This insurance covers companies and individuals when mistakes are made as part of their job. If your Agency does not have this, you may want to consider your options further.
Client Accounting
Since 1st April 2020, it has been a legal requirement for all letting and property management companies to hold a ring-fenced client account when handling client money. This is money a business will hold or receive on behalf of a client which the agent is not beneficially entitled to. Monies include tenant’s deposits, rents and any fees. A bank will provide the agency with a letter stating the funds are ring-fenced and that the bank has no right to set off funds against any company, business or personal liabilities. Have you requested your agency to show you a copy?
Client Money Protection
Since April 2019, all lettings and management firms handling client’s money must be part of a government approved scheme in order to continue to trade. Agents who belong to an industry trade body may already be covered regardless such as Propertymark, RICS et. If an Agent isn’t part of a trade body, they can get CMP through Money Shield or Client Money Protect instead.
Money Laundering Regulations
If Agents have properties rented at or above 10,000 Euros or equivalent per month, then they must register with HMRC for Anti Money Laundering supervision and do due diligence on Landlord and Tenant carrying out the transaction.
Redress Scheme
All Letting Agents, Property Managers or Estate Agents (anyone who works in residential property), must be a member of an approved redress scheme for when complaints need addressed. Failure to comply is a fine up-to £5,000 There are currently 2 approved redress schemes – The Property Ombudsman and the Property Redress Scheme. Information of the scheme should be passed onto Clients when entering into an agreement.
Deposit Protection Scheme
All AST Assured Shorthold Tenancies must have any deposits taken, protected in once of the government approved schemes within 30 days of receipt. Failure can result in a fine up-to 3 times the amount and may invalidate a Section 21 notice in future for gaining possession of the property.
Information Commissioner’s Office
Every organisation or sole trader who process personal information, need to pay a data protection fee to register with the ICO and this is done yearly. Failure to do so, can result in a penalty of up-to £4,000
Other compliance requirements
Agents must clearly display in the office and on their website which redress scheme they belong to with logo and membership number, name and logo of CMP provider with certificate, a list of fees and charges for Tenants and Landlords.
To comply with GDPR, they also should state they are registered with the ICO and publish a privacy statement.
This article covers the many aspects of legislation relating to Agencies, but not everything.
In Property Law, there is extensive legal requirements, rules and regulations and if in doubt as a self-managing Landlord, you should seek advice from a qualified agent. If you are in doubt about the agency you are using, always check to ensure the above is done at a minimum to guarantee a professional is managing your investment correctly.