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Why landlords need to work with a compliant letting agent

Fri 05 Oct 2018

The title of this blog might sound obvious – that landlords need to work with an agent who plays by the rules – but it's something that has become even more important given the deadline has now passed for the submission of applications to the Scottish Letting Agent Register.

Those currently carrying out letting agency work in Scotland who wished to continue to do so, needed to submit an application to join the register by October 1 2018.

What is the register?

The Register of Letting Agents, run by Scottish Ministers, ensures every letting agent is fit and proper to do the job and has met minimum training requirements.

For those who aren't on the register, it is now a criminal offence to carry out letting agency work, unless an application was submitted by the deadline and has yet to be determined.

Failure to sign up to the register brings with it potentially hefty punishment, with those convicted of carrying out illegal letting agency work facing a fine of up to £50,000, up to six months in prison, or both.

What did the registration process involve?

Letting agents had to prove that the correct steps had been put in place to meet the requirements of the new Code of Practice, itself only applicable from February 1 2018. All staff also needed to be clear on what the Code of Practice involves.

In addition, anyone in the business who required certain qualifications needed to attain them, while agents were also required to have at least one separate and dedicated bank account to hold client money. What's more, agents needed to be part of a client money protection scheme and hold professional indemnity insurance.

Furthermore, those applying had to pass a 'fit and proper person' test, with Scottish Ministers deciding whether those carrying out letting agency work were suitable to do so. This involved Ministers conducting tests on a number of people in a company and the company itself. Typically, the tests were carried out on the most senior person in the organisation's management structure, anyone who owns 25% or more of the business and any other person or business who is (or will be) directly involved in the control or governance of the business's letting agency work.

Agents were required to give information about themselves and their business, including contact details, type of organisation, info about those in charge of the company, any membership of an industry or professional body and whether there had been any convictions of certain offences.

The importance of training and qualifications

Crucial in the process, too, was agents proving that everyone in their business who needed the correct training had received it.

Those who needed to be trained as part of the registration process were required to have a relevant qualification covering vital parts of letting agency work at (or at the equivalent of) Scottish Credit and Qualifications Framework (SCQF) level 6 or above.

Equally, those who already had a qualification – but which was over three years old – needed to have some additional training on letting agency work to ensure they were up to speed.

The people requiring the qualification plus the necessary training were the person holding the most senior position in the organisation's management structure (unless this person wasn't involved in day-to-day running of letting agency work), as well as every person directly concerned with managing and supervising the day-to-day running of the organisation's agency work.

For those already qualified, but who received their qualification more than three years ago, an extra 20 hours of fresh training on letting agency work was required, including at least 15 hours of formal training. This could include courses, conferences, seminars, webinars and lectures, with documented evidence (such as a certificate) to prove that the training had been undertaken or delivered.

The other hours could be made up by informal training, such as shadowing and coaching, reading and writing articles on letting agency work, informal teaching for others, interactive discussions with experts and informal learning within the company.

Insurance and protecting client money

As part of the new Code of Practice, which letting agents on the register need to adhere to, there is a requirement for professional indemnity insurance. This ensures a lettings business is protected if a claim is made against it by a dissatisfied customer.

Additionally, letting agents must adequately protect client money and hold client money in one, or more, separate bank accounts. The client account must be separate from the agency's business or private accounts, only contain clients' money and nothing else, and be held with a bank or building society approved and recognised by the FCA (Financial Conduct Authority).

Client money must also be protected, which can be achieved through a specialist insurance broker or by becoming a member of an industry or professional body. Bodies who offer client money protection include ARLA Propertymark, the Royal Institution of Chartered Surveyors (RICS), the Law Society of Scotland and Money Shield. One form of protection is Client Money Protection Insurance (CMPI) which is a specialised insurance that protects the money of landlords and tenants against theft or misappropriation by the owners of a letting agent whilst it is in their custody or control.

Why is the register important?

Along with the new Code of Practice, the Register of Letting Agents is designed to drive up standards in the Scottish private rented sector and root out rogue operators. It's there to ensure that agents are carrying out best practice at all times, are fit and proper to run an agency, have the required training and meet minimum standards.

As a landlord, you need to ensure you are working with a reputable, fully compliant letting agency – one who plays by the rules, is signed up to the register and adheres to the Code of Practice. At Letting Solutions, West Lothian's first dedicated lettings agency, we can help you get the most from your rental properties.

To find out more,  please get in touch with us on 01506 425693. We also offer free and instant online valuations to give you an idea of how much your rental home is currently worth.