Letting agents are busy enough dealing with their portfolios and keeping on top of their heavy workload. Worrying about compliance and legislation can only add to the stress.
If agents are found to not be compliant, they can face hefty fines. This guide outlines important legislation to take note of, and how agents can avoid these fines.
CMP scheme:
Letting agents working in the private rented sector have a legal obligation to join a ‘Client Money Protection’ scheme. The purpose is to protect your clients’ money and ensure they’ll be compensated should anything happen, for example, if the agency failed.
Once confirming their membership with an approved CMP scheme, agents will receive a free certificate as proof. To avoid a £5,000 fine for not providing a certificate, agents must have it readily displayed on their website and in the office to show authorities when requested.
Agents found to not be a member of an approved CMP scheme can face a maximum penalty fine of £30,000. Therefore, it is vital agents make sure they’re fully registered, and have physical proof displayed.
Redress scheme:
Agents are also required by law to join an authorised Property Redress Scheme (PRS). This must be an approved scheme by the Ministry of Housing, Communities, and Local Government (MHCLG) and the National Trading Standards Estate and Letting Agency Team (NTSEALT).
The PRS’ function is to offer a resolution service for complaints, aiming to provide clients with better service and give them confidence in their letting agency. Agents joining the scheme must agree to resolve issues using the PRS’ process, and agree to any final decisions made where legally required.
In England, agents found to not be registered with an approved redress scheme can be issued a £5,000 fine by local authorities. If they’re once again found operating illegally without a redress scheme, they can be shut down altogether.
Scheme membership only applies to agents working ‘in the course of business’, which refers to agents who carry out lettings and are paid for the role which is their usual line of work. ‘Informal arrangements’ are not seen as ‘in the course of business’, such as those looking after the letting of a rented property on behalf of friends or family members without pay.
Tenant fees act:
Letting agents operating within the private rented sector have a legal obligation to comply with the Tenant Fees Act 2019. This applies to assured shorthold tenancies, (excluding long leases and social housing), student accommodation tenancies, and licences to occupy housing in the private rented sector.
Under this legislation, Trading Standard Authorities have the power to deliver large fines to negligent agents requesting prohibited payments.
According to this legislation, the only charges in connection to tenancies agents can request are:
- Rent
- Refundable tenancy deposit: capped at 5 weeks’ rent where annual rent is less than £50,000, and 6 weeks’ rent for rent above £50,000 annually.
- Refundable holding deposit
- Payments to change the tenancy
- Payments relating to early termination of the tenancy
- Payments relating to utilities, communication services, TV licence, and council tax
- Default fee for late rent payment and key/security device replacement where required under the tenancy agreement.
Requesting prohibited payments can lead to a £5,000 penalty fine. If agents are later found to continue breaching legislation within 5 years of the initial fine or conviction, they will be seen as committing a criminal offence. This will usually result in an unlimited fine. It is also important to note agents cannot issue an eviction via a Section 21 notice until any unlawful charges have been repaid to the recipient.
Agents can protect themselves against being given such hefty fines by ensuring they know what is considered a prohibited payment and avoid requesting them. These include viewing fees, tenancy set-up or check-out fees, third-party fees, and anything else not mentioned in the accepted list. If you’re unsure if a payment request is prohibited, you can contact your local trading standards authority to double-check.
Data Protection:
Ever since the renewal of the Data Protection Act in 2018, letting agents have been responsible for data privacy and protection. Personal data can be gathered from different individuals, including tenants, landlords, or external contractors, in different ways.
When gathering sensitive personal data, agents must gain consent from the individual. Even on websites or marketing emails to stakeholders, a privacy notice is required to inform users where their data will be stored, and who it is shared with.
Agents must follow strict protocol when gathering and storing data. The rules state agents must be transparent and lawful with data usage, only use it for necessary explicit purposes, keep data accurate, and delete it when no longer needed.
Arguably, the most important rule is to handle data securely to avoid risk, and protect individuals against ‘unlawful or unauthorised processing’. This refers to if consent has not been given by the individual whose data is being processed and stored.
The consequences of breaking GDPR law can be severe. The minimum penalty for negligence is a fine of up to 10 million euros, followed by an inspection by data protection authorities if clients make a complaint. The maximum penalty fine for breaking GDPR law can be up to 20 million euros.
To avoid fines, agents should:
- Create a privacy notice tailored to your agency, with specific branding and terms of use.
- Create a data protection policy outlining the ways you intend to organise and handle personal data.
- Register with the Information Commissioner’s Office (ICO) if you’re collecting /storing data on electronic devices.
- Use cloud-based software to collect and store data. Software is a safe, secure solution for agents to protect themselves and their clients.
Find out more about data protection for letting agents in our eBook, Managing privacy and data protection safely for letting agents.
Deposit protection:
Letting agents and landlords may decide to request a security deposit from tenants renting assured shorthold tenancies. This is typically to protect landlords against potential damages/other issues. If a deposit is taken, it must be protected using one of the three government-approved schemes; the Deposit Protection Service, MyDeposits, or the Tenancy Deposit Scheme.
Within 30 days of the deposit being taken, tenants must be informed of important details like the amount of deposit paid, how it is being protected, the name and contact details of the deposit protection scheme being used, the letting agent and/or landlord’s details, and much more. Once the tenancy has ended, letting agents/landlords have 10 days to return the deposit unless there are disputes over deductions. The tenant’s deposit remains in the protection scheme until the dispute is sorted, after which the deposit will be returned.
If the deposit is found to not be protected, tenants can force repayment of either the original amount or up to three times the original amount.
To avoid such financial penalties, it is highly important to make sure the tenants’ deposit is protected using one of the government-approved schemes, and that the deposit is returned within the 10-day window.
Gas Safety:
Landlords and/(or letting agents, if specified in their contract) are responsible for carrying out gas safety checks on any gas appliances in the property, and ensuring they have the correct certification available when needed. Letting agents who are specified as responsible for the checks must follow the same duties as a landlord under the Gas Safety (Installation and Use) Regulations 1998.
Gas Safety checks must be completed every 12 months by a Gas Safe registered engineer, according to the Gas Safety (Installation and Use) Regulations.
Once completed, whoever is responsible for the gas safety compliance checks must keep a copy of the check for 2 years. They must also ensure a copy of the record is given to the tenants within 28 days of the check, to any new tenants within the property.
Agents or landlords are responsible for carrying out the checks on any gas appliance within the property they have provided. If a tenant has provided themselves with a gas appliance, agents or landlords are only responsible for the parts of the associated installation, and the pipework, but not the physical appliance itself.
If the responsible agent/landlord is found to be negligent in gas safety compliance and cannot provide a gas safety record, the consequences are severe. Either an unlimited fine or even a 6-month prison sentence.
To avoid either severe consequence, agents/landlords should ensure they complete gas safety checks thoroughly, using a certified engineer, and in time to ensure they’re covered. They should also make sure to keep a copy of the safety check record and give it to all relevant tenants.
*Disclaimer: please note this blog is merely a guide, and should not be seen as legal advice. For legal guidance on this subject, please visit gov.uk.*
