Starting up in Lettings?
Running a successful business depends not only on the performance of the company but also on its ability to identify and move with changes in the marketplace.
With the future state of the property market being uncertain many established estate agents are now seriously considering the possibility of adding residential letting to their existing sales business.
While recognising the obvious potential of residential lettings, experienced estate agents are equally aware of the additional staffing and capital outlay required. In addition to agents expanding their services, the industry is seeing a steady stream of new letting agents entering the marketplace.
Starting in lettings or expanding existing services to include lettings is both exciting and daunting at the same time.
The Letting Partnership understands the difficulty in getting to grips with the multitude of mandatory legislation requirements, so to ensure you are compliant and above all trading legally when starting your lettings business, here’s an overview of the basic requirements:
> Designated Client Account
In April 2021 it became compulsory that all letting agents must hold a segregated, ring-fenced client account. The account is for sole purpose of handling and distributing client money such as deposits, rents and fees.
> Client Money Protection (CMP)
All letting agents must be part of a government approved CMP Scheme in order to continue to trade. CMP ensures that landlords and tenants are compensated if the agent cannot repay their money, for example if the agent goes into administration.
Joining an industry trade body such as Propertymark, RICS, UKALA or SafeAgent will include CMP, however agents in England and Wales who don’t have membership of a professional body can get their CMP through Money Shield or ClientMoney Protect instead.
All deposits for Assured Shorthold tenancies must be protected in one of the Government approved deposit protection schemes: Mydeposits, Tenancy Deposit Scheme (TDS) & Deposit Protection Service (DPS).
> Membership of a Property Redress Scheme
Any property agent or other professional carrying out estate, lettings and property management work in the property industry must join an authorised redress scheme. There are currently two schemes: The Property Ombudsman (TPO) and the Property Redress Scheme (PRS).
> Information Commissioner’s Office (ICO)
The Data Protection Act 2018 says that every organisation or sole trader which processes personal information needs to register with the ICO, unless they are exempt, and renew every year.
Starting in lettings is both exciting and daunting at the same time!
> Professional Indemnity (PI) insurance
However experienced or skilled you are there is always the risk that human error could lead to a negligence claim against you/your company. Therefore, whilst PI insurance is not currently a legal requirement it is strongly recommended, and is actually a prerequisite for membership of TPO as well as most other recognised industry trade bodies.
It is important to note that PI only covers you for what you disclose when you arrange the policy. Unless you disclose the full extent of your business activities you may find yourself exposed and at risk of invalidating your policy. So check that it covers ‘Lettings’ as a business activity.
> Documents & Supporting Information
A tenancy agreement is a contract between the landlord and the tenant and sets out the legal terms and conditions of the tenancy. There are different tenancies for different situations and it is important to get it right as this is what would be relied on in any dispute or claim for possession.
There are also additional prescribed documents that must be provided at the start of some tenancies, and ongoing documentation such as gas safety and electrical certificates. The correct documentation must be used at the end of a tenancy too.
Failure to use the correct documents could result in a claim for possession, for example, being thrown out of court.
Using fit-for-purpose industry specific software enables an agent to manage their portfolio and daily administrative tasks efficiently. There is a huge selection of lettings software on the market so do your homework and ask for a thorough demonstration before jumping in feet first.
> Referencing Tenants
Thorough referencing and full due diligence are key when finding a suitable tenant for the property. Getting this part right will impact on the rest of the tenancy and on an agent’s reputation.
> Rent Guarantee
In light of the current cost-of-living crisis it could be beneficial to have a policy where rent guarantee is applied to every tenancy. This will put landlords’ minds at rest and is a great USP.
The above is not an exhaustive list of all things you need to consider when new to lettings; just a few to get you started.
If you are feeling somewhat overwhelmed or not sure where to start, The Letting Partnership are here to support you. Let us take away the pain and help you begin to build your business. We can:
- Open a designated Client Account for you
- Assist with CMP membership (with certain schemes)
- Register your deposits
- Pay your landlords on time
- Provide tenancy documentation
- Offer Referencing and Rent Guarantee
- Work on your existing software or provide our own
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