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Moving into lettings - potential pitfalls

publication date: Sep 9, 2009
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Mark DuruvallaThe upsurge in agents moving into lettings reflects the continuing growth in the sector but many are ill-prepared for the legislative requirements. Christopher Hamer, The Property Ombudsman, reports a 200 per cent annual increase in lettings related complaints. The list of legal requirements for agents seems endless, but non-compliance can bring severe penalties with fines and even business closure.


This requires agents to register the start and end of all new tenancies with the DCLG within 14 days. If it isn’t, the tenant can demand three times the amount of deposit in compensation.


HMRC performs random spot checks on lettings agents to ensure that end of year tax reports are fully compliant. Agents must provide an annual tax report that shows which landlords own which properties and the income received on their behalf. The onus is entirely on the property agent. Agents with non UK Resident Landlords are obligated to provide three further forms – the NRLQ (agents must pay due tax quarterly), the NRLY Annual Return (agents complete this form) and the NRL6 (non-resident landlord’s tax deduction certificate).


It is vital to have a tenancy agreement signed before a tenant occupies a property. This must make the tenant’s obligations clear, as well as the limitations of their rights. Common details include: names and addresses of tenant and landlord, address, date of entry and termination, rental amount and frequency of payment, the deposit required, type of tenancy and notice period.


Professional accounting practices are vital to ensure full compliance with HMRC and Companies House. Attention to detail is vital, particularly with reconciling balances and making landlords aware of all commissions, especially on property maintenance work. Finance and accounting will help lettings agents when it comes to sorting out VAT from landlords – many agents are unaware that they are responsible for paying VAT for landlords and should complete a VAT invoice and agents must be able to produce a list of all landlords’ monies handled by them.


Agents must ensure that the management contract specifies arrangements for maintenance and safety checks on gas equipment and records. Where specified by the management contract, gas appliances and flues must be serviced at least annually or at any other time if there is a safety doubt and they must only carried out by a GAS SAFE registered installer. Although there is currently no specific legal requirement for a qualified electrician to carry out an inspection and issue a safety certificate, it is accepted that to avoid the risk of neglecting a ‘duty of care’, an inspection and certificate should be arranged annually. Portable electrical appliance safety tests (PAT) and wiring should be checked at least every five years to obtain a Periodic Inspection Report. There is no legislation requiring smoke alarms to be fitted in ordinary tenanted properties, but landlords and agents have a ‘duty of care’ and could be liable should a fire cause injury or damage.


For new entrants into the lettings market, these legislative requirements can be a minefield and without the proper specialist software to ensure compliance. Good software should ensure that legislative and legal compliance matters are taken care of, easing pressure on agents and leaving them with one less thing to worry about. CFPwinMan software is the most audited software package, facing regular checks from bodies such as ARLA, RICS, NAEA, NALS and Inland Revenue CNR; it has never failed an audit. Mark Daruvalla is Managing Director of CFP Software Ltd