LEGAL
Moving into lettings?
then tread carefully
There may well be tempting
commercial opportunities, but you
could be walking into a legal minefield
says Mark Daruvalla.
T
he upsurge in agents moving into lettings reflects the maintenance work. Finance and accounting will help lettings
continuing growth in the sector but many are ill-prepared agents when it comes to sorting out VAT from landlords – many
for the legislative requirements. Christopher Hamer, The agents are unaware that they are responsible for paying VAT for
Property Ombudsman, reports a 200 per cent annual landlords and should complete a VAT invoice and agents must be
increase in lettings related complaints. The list of legal able to produce a list of all landlords’ monies handled by them.
requirements for agents seems endless, but non-compliance can
bring severe penalties with fines and even business closure. GAS AND ELECTRICAL SAFETY CHECKS
Agents must ensure that the management contract specifies
TENANCY DEPOSIT SCHEME arrangements for maintenance and safety checks on gas equipment
This requires agents to register the start and end of all new and records. Where specified by the management contract, gas
tenancies with the DCLG within 14 days. If it isn’t, the tenant can appliances and flues must be serviced at least annually or at any
demand three times the amount of deposit in compensation. other time if there is a safety doubt and they must only carried out
by a GAS SAFE registered installer.
HMRC Although there is currently no specific legal requirement for a
HMRC performs random spot qualified electrician to carry out
checks on lettings agents to an inspection and issue a safety
ensure that end of year tax
The legal requirements
certificate, it is accepted that to
reports are fully compliant. avoid the risk of neglecting a
Agents must provide an annual
seem endless, but
‘duty of care, an insp’ ection and
tax report that shows which certificate should be arranged
landlords own which properties
non-compliance can
annually. Portable electrical
and the income received on appliance safety tests (PAT) and
their behalf. The onus is
bring severe penalties
wiring should be checked at least
entirely on the property agent. every five years to obtain a
Agents with non UK Resident
with fines and even
Periodic Inspection Report.
Landlords are obligated to There is no legislation requiring
provide three further forms –
business closure.’
smoke alarms to be fitted in
the NRLQ (agents must pay ordinary tenanted properties, but
due tax quarterly), the NRLY landlords and agents have a ‘duty
Annual Return (agents complete this form) and the NRL6 of care’ and could be liable should a fire cause injury or damage.
(non-resident landlord’s tax deduction certificate).
MINEFIELDS
TENANCY AGREEMENTS For new entrants into the lettings market, these legislative
It is vital to have a tenancy agreement signed before a tenant requirements can be a minefield and without the proper specialist
occupies a property. This must make the tenant’s obligations clear, software to ensure compliance. Good software should ensure that
as well as the limitations of their rights. Common details include: legislative and legal compliance matters are taken care of, easing
names and addresses of tenant and landlord, address, date of entry pressure on agents and leaving them with one less thing to worry
and termination, rental amount and frequency of payment, the about. CFPwinMan software is the most audited software package,
deposit required, type of tenancy and notice period. facing regular checks from bodies such as ARLA, RICS, NAEA,
NALS and Inland Revenue CNR; it has never failed an audit.
FINANCE AND ACCOUNTING
Professional accounting practices are vital to ensure full Mark Daruvalla is Managing Director of CFP Software Ltd
compliance with HMRC and Companies House. Attention to
detail is vital, particularly with reconciling balances and making
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landlords aware of all commissions, especially on property
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16 JULY-AUGUST 2009 PROPERTYdrum
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