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Property agents - a regulatory minefield! - news article image

Property agents - a regulatory minefield!

17 May 2016

3 minute read

In contrast to the legal profession and recent relaxations in reporting requirements, property bodies remain 'old fashioned' and are actually imposing increased regulation and reporting requirements on their industry, including specifically in relation to client money. 

A couple of quick points for agents (and their advisers!) to remember:

  • There is still no specific regulator which covers all property professionals but since 2014, all sales / estate agents and lettings agents are compelled by law to join an ombudsman or similar redress scheme
  • Over recent years a misconception seems to have grown that the Estate Agents Act 1979 (EAA) and the 1981 Regulations are no longer applicable - any individual or business dealing with the sale or purchase of real property on behalf of a client will be caught by the provisions of the EAA, no matter what they call themselves 
  • The report under the EAAR is the only statutory report that estate agents require (other than the normal audit report for non-exempt limited companies). It must be made by a statutory auditor 
  • RICS members must account for all clients' money, including statutory clients' money in accordance with RICS guidance, which has recently replaced its previous prescriptive Members' Accounts Rules with more principles based regulation
  • RICS members do not currently have to submit any report from an external auditor but some agents still ask their accountants to review their accounting systems, either as part of their annual accounts visit or anticipation of the RICS visit
  • NFoPP (NAEA or ARLA) members / firms who are also subject to regulation by RICS (or the Law Society) will be considered to have satisfied NFoPP's client money reporting requirements and no additional report will be required
  • NFoPP members who are members of more than one division may choose which division they wish to submit their report to, according to their main affiliation 
  • NALS members who are also regulated by RICS or NFoPP are required to comply with the requirements of those regulatory bodies, rather than those of NALS
  • ARMA members who are regulated by RICS can fulfill ARMA's requirements through that membership status but it does not currently recognise any of the other regulatory bodies
  • Where an agent is managing residential leasehold properties that legislation will be found in the Landlord and Tenants Acts 1985 and 1987
  • Managing agents and their advisers who refer to service charge accounts may mean one of two completely different things - the service charge account which is presented to the leaseholders or the annual statutory accounts of the limited company such as a Residents Management Company
  • The principal governing force behind the production of service charge accounts is still the lease - watch for references to audit! The terminology used in some instances governing annual statements of account, particularly in older leases, may be quite general. A decision to procure another type of examination could be challenged by a lessee and if the case were taken to tribunal, the landlord / agent might fail to recover service charges on this basis
  • The TDP applies whenever a deposit is taken in regard to all assured short-hold tenancies. Two types of scheme are available being the custodial scheme where the landlord pays the deposit received into a scheme or the alternative insurance based scheme where the landlord retains the deposit and pays a premium to an insurer 

And if you do not recognise any of the acronyms above they hopefully do not apply.. yet!

Property agents - a regulatory minefield! - news article image

Author:

Sarah Gardener

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