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It is terrifyingly easy for letting agents to incur huge fines for minor breaches of compliance legislation. The biggest fine that I know of was £162,000 imposed on Jackson Grundy in Northampton for breaches of the money laundering regulations. The fine was so savage that their local MP is helping them fight it.

There are countless other ways to incur a massive fine. For example, if a letting agent fails to ensure that they have the correct documentation from HMRC for all their overseas landlords, they can be held personally liable for their unpaid tax.

Another huge area for potential liability is failing to issue the prescribed information to tenants at the start of the tenancy. If this is not done in the correct format and before the statutory deadline, the landlord will be liable for a fine of 3 x the amount of the deposit.

This is an extraordinary example of how legislation that was introduced to solve a genuine problem can be misused for a wholly difference purpose. Until a few years ago, rogue landlords routinely refused to return the tenants' deposits without any justification and many of them got away with it. This was clearly wrong and the compulsory protection of tenants' deposits was welcomed by the vast majority of reputable agents and landlords.

However, as a result of the Superstrike case, this well-intentioned legislation has now morphed into something altogether different. The consequence of this case is that the prescribed information must be reissued at the start of each new tenancy even if the tenancy goes periodic. Failure to do so will trigger a penalty of three times the deposit. If a landlord has stolen the tenant's deposit, they deserve a fine of this size. On the other hand, a fine of up to four months' rent for forgetting to inform the tenant that their deposit is still held in the same place as it was held before is simply draconian.

The only way to protect yourself against this blizzard of new regulations and potential fines is to retain an experienced compliance expert to visit your business in order to conduct a risk assessment. It will cost you at least £2,000 but that is less than one of my clients has just paid out for misspelling a tenants name on a section 21 notice.

The regulations and the cost of complying with them have become so onerous that some business owners are deciding that they no longer wish to offer a lettings service. I have sold a dozen small lettings businesses recently for exactly this reason. The writing really is on the wall and there are only two choices: get qualified and compliant, or get out.

*Adam Walker is a business transfer broker, management consultant and trainer and has specialised in the property sector for more than 25 years.

Comments

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    We have just given our staff up to date money laundering training and information. It was a real eye opener! So important to keep on top of this.

    Underwoods Town & County

    • 12 July 2014 14:24 PM
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