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Property Agents Need to Ensure They Don’t Fall Foul of Legal Compliance

CFP Software, the market leader in lettings and property management software, is urging all lettings agents to be prepared for potential changes from HM Revenue & Customers (HMRC) which could dramatically increase the amount of tax raised from landlords.

HMRC are currently consulting on changes that could see lettings agents forced to give details of all the landlords on their books, even those that they do not currently collect rent for, to help HMRC improve taxpayer compliance as part of the Property Project, which targets non-compliant landlords.

In light of these potential changes, now is as good a time as any to get your house in order! Mark Daruvalla looks at the legislative requirements for lettings agents to help you meet all the compliance necessities.

Finance and Accounting:

Professional accounting practices are vital for letting agents to ensure their business is fully compliant with HM Customs and Excise, Inland Revenue and Companies House. Lettings agents must place a great deal of importance on attention to detail for all aspects, such as reconciling balances and making landlords aware of all your commissions, especially on property maintenance work.

Finance and accounting will help lettings agents when the time comes for them to sort out VAT from landlords – not all agents are even aware that they are responsible for paying VAT for landlords and should complete a VAT invoice, otherwise the agents themselves are liable for any VAT owed. Lettings agents should be able to produce a list of all the money they have which is the landlord’s rent and deposits as evidence.

For new entrants into the lettings market also, these legislative requirements can be a minefield and without the proper specialist software to ensure compliance, agents run the risk of being caught out and facing monetary penalties, as well as ruined reputations.

It is not permitted to overdraw client’s money, either by way of an overdraft or by paying Landlord A’s expenses from Landlord B’s income. If there has been any loss to clients' money as a result of banking errors, overdrawing , incorrect withdrawal or, administrative errors, the agent should immediately reimburse it from office funds.

Tenant Deposit Schemes:

The Tenancy Deposit Scheme is part of legislation requiring letting agents to register the start and end of all new tenancies with the Department of Communities and Local Government. If a tenant’s deposit is not registered with a scheme within 14 days, the tenant can legally demand three times the amount of deposit in compensation, highlighting the importance for all agents to register to an approved scheme.

Section 19(1) (c) Annual Tax Reports:

The Inland Revenue does random spot checks on lettings agents to ensure that their end of year tax reports are fully compliant. All property agents need to provide an annual tax report that shows which landlords own what properties and how much income the agent has received on their behalf for the year. The onus is entirely with the property agent to provide this completed form.

Agents of Non UK Resident Landlords:

There is further legislation for lettings agents of non UK Resident Landlords. These agents are obligated to provide at least three further forms – the NRLQ (letting agents must pay the tax due quarterly), the NRLY Annual Return (letting agents must complete this form) and the NRL6 (non-resident landlord’s tax deduction certificate).

Tenancy Agreements:

It is vital to have a tenancy agreement signed before any tenant occupies a property. A tenancy agreement is vital for making the tenant’s obligations clear, as well as the limitations of their rights.

Although contracts vary on aspects such as property type and price, there are several common details to all, which include:

  • Names and addresses of both the tenant and the landlord
  • The property address that is being let
  • The date of entry into the let property and the termination date
  • The rental amount and frequency of payment
  • The amount of deposit required
  • The type of tenancy e.g. short term or assured tenancy
  • Details of the notice period needed to leave the property

However, too many lettings agents are making the mistake of not running their agreement template past a solicitor, which can result in restricted rights to either the tenant or the landlord.

Energy Performance Certificates:

It has now been a year since the introduction of the Energy Performance Certificate (EPC) to all rental properties with a new tenancy in England and Wales, meaning that prospective tenants will be able to see at a glance how energy efficient and environmentally friendly an agent’s properties are.

Whilst we do not believe that the introduction of EPC’s for the rental market has had a real benefit on the industry, the launch of the new legislation did highlight the increasing pressure facing agents, who now have to deal with more and more legislation.

The list of requirements for agents seems endless but these are an essential part of today’s industry that all agents must fully comply with. However, it is apparent that some lettings agents are failing to comply with all of the legal requirements and the penalties can be severe with fines and, ultimately, business closure for extreme cases.

Gas Safety Checks

By law agents must:

  • Ensure that the management contract clearly specifies who is to make arrangements for maintenance and safety checks on gas equipment and for keeping the necessary records
  • Where specified by the management contract ensure gas appliances and/or flues are serviced at least once every 12 months or at any other time if there is a safety doubt
  • Ensure that maintenance and safety checks on gas appliances/fittings and/or flues provided for tenants use are only carried out by a CORGI registered installer

Electrical Appliances, Equipment and Wiring Testing

Although there is currently no specific legal requirement for a qualified electrician to carry out an inspection and issue a safety certificate, as in the case of gas appliances, it is now widely accepted that the only way to ensure safety, and to avoid the risk of being accused of neglecting a 'duty of care', is to arrange such an inspection and certificate. It is recommended that appliances should be annually PAT tested (portable electrical appliance safety test) and wiring of the property should be checked at least every 5 years to obtain a Periodic Inspection Report

Smoke Alarms

Although there is no legislation requiring smoke alarms to be fitted in ordinary tenanted properties, it is generally considered that Landlords and their Agents have a 'duty of care' and that the Landlords and their Agents could be liable should a fire cause injury or damage in a tenanted property where smoke alarms are not fitted.

For further information, please contact CFP on 08446 626 460.


"I had been using CFP for about ten  years  with a previous employer so it was the natural choice of software for me when I started my own agency. I recently had a computer failure which meant I had to reload Winman andall the associated data.  The help I needed was clear, precise and readilyaccessible. 

The software is my ‘unpaid assistant’ and I would be lost without it"

Yvette Creighton, Rosette Residential Lettings


"It is about five years since we installed CFPWinman. Managing some 500 plus properties we would be utterly lost without the comprehensive property management system that CFP gives us.

With the continuous development of the product coupled with excellent system and customer support, we would wholeheartedly recommend CFP to any agent, even our competitors"

Peter Newman - Partner, Arena Lettings


"I spoke with a few companies, but CFP won my business hands down! Sara has been brilliant and has kept in touch with me since I started building my new business.

After speaking with Hannah today, I couldn't be more pleased that I went with CFP, she was very informative and polite. Thank you very much to Sara and Hannah! 

Selina Thomas – Director, Selina's Lettings

Selina Thomas, Director at Selina's Lettings


"CFP Winman has been a fantastic choice.Their product is slick and efficient. It helps our small business stay in control of communications from clients, contractor payments, tenant deposits and landlord statements.Their after-sales support is superb and they resolve our queries quickly.  A definite asset to the smooth operation of our company, and I would highly recommend it"

Mark Hastie, Director at Alba Residential

Disclaimer: The Institute of Chartered Accountants in England and Wales has accredited CFPwinMan v4, from CFP Software, under the terms of its Accreditation Scheme. Purchasers should ensure that the software, its security features and related support meet their own specific requirements, as the Institute will not be liable for any damage whatsoever, incurred by any person, occasioned by the use of the software, or any related products or services howsoever caused.