THE LETTING PARTNERSHIP
Banks are closing their doors to Letting Agents
19 December 2022 8015 Views
UK banks are closing client accounts held by established letting agents and refusing to open accounts for new businesses.
A growing number of estate agents are taking the business decision to expand into lettings, particularly in light of current market conditions and forecasts for 2023. However, these agents are often finding it near impossible to open a client account.
Furthermore, banks continue to close the client accounts of established letting agents, some of whom have been trading for decades.
This causes a worrying cascading effect. Without a client account, agents cannot get Client Money Protection (CMP). Without CMP they will be trading illegally. Trading Standards carries out spot checks and can impose a fine of up to £30,000 on agents trading without CMP.
All letting agents must also join one of the two ombudsman schemes to trade legally, run either by The Property Ombudsman or the Property Redress Scheme. Each of these, however, have their own entry requirements intertwined with CMP which in turn leads back to the client account.
With these barriers to entry and no clear path, at The Letting Partnership we are receiving calls on a daily basis from agents large and small who are at a loss as to what to do. They are working very hard to be compliant but are hitting a brick wall.
The Banks’ Angle
Looking at the issue from the banks’ perspective; estate and letting agencies are not regulated by the Financial Conduct Authority (FCA), which makes our industry less appealing to banks which value the rigours of the FCA highly.
One major high street bank recently wrote to an agent that “pooled client accounts are outside of our risk appetite” and advised that the agent could either open individual client accounts for each landlord or take their business elsewhere!
Of course, any business can open a bank account and call it a ‘client account’ but that does not make it one in the eyes of the law.
Some banks will open ‘business accounts’ for letting agents, but not ‘client accounts’. This is worrying because it could be tempting for agents to use a business account as a client account which would put them in breach of CMP rules.
The solution for letting agents and estate agents is to shop around until they find a bank which will help them, though these are becoming fewer and further between. Alternatively, agents can look for a reputable outsourced provider who will be able to provide expert advice and set up a client account on their behalf.
If you are experiencing problems opening or keeping your client account open give The Letting Partnership a call on 01903 477900 or visit our website. We provide cost-effective reliable client accounting services to agents throughout the UK and can open designated ring-fenced accounts for agents who use our services.
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