Client Account Procedures

Published on 2015-08-15

Client Money

Agents must keep client money (rent, deposits or other money collected by an agent for a landlord) in a separate client account and be able to identify the money allocated to each client, applicant, tenant or ex-tenant. The money cannot be used for any other purpose and must be forwarded to the relevant party as soon as administratively possible when it is due to be returned. The client account cannot be used for the deduction of fees unless the agent has consent from the person concerned.

Rent Processing

An agent must process rent to the landlord once it has been received. It should be passed on as soon as administratively possible after the money has cleared and sent to the landlord in line with the agent’s terms and conditions.

A landlord should receive rental statements in line with the agreed agency terms and conditions. These statements will detail the amount received, deductions, retentions, VAT and the balance to be forwarded to the landlord. It is a legal requirement to keep all invoices for six years for tax purposes.

Paying Contractors

An agent should only instruct contractors when the funds to pay for this are available, or will be received shortly. It is not sufficient to rely on the next rental payment to pay contractors.

However, there may be circumstances when an agent has to instruct a contractor in a genuine emergency when funds are not available. Agents can, without consent, retain money from the rent on a monthly basis to accrue funds for future agreed works.

Rent Arrears

If tenants are late with rental payments, an agent will write to them at set internals to remind them the rent is due and they are in breach of their tenancy. Agents should ensure they are aware as soon as possible of any rent arrears and should keep the landlord informed. They should follow the process for chasing rent arrears as per their terms and conditions. Agents must make sure they do not harass tenants particularly if arrears are being chased over the phone. A tenant may be charged interest on late payments so it is essential that accurate records of payments, part payments and arrears are kept.

Deposits

Deposits must be held in line with the requirements of the Housing Act 2004 for ASTs (see Tenancy Deposit Schemes). Since April 2007 deposits must be held in an insurance scheme or a custodial scheme if there is an AST.

Overseas Landlords

The Finance Act 1995 places obligations on agents regarding overseas landlords’ tax. Overseas landlords must register with the Personal Tax International (PTI) department and obtain an approval number. If an agent does not receive an approval number from the PTI department, they are obliged to deduct an amount equivalent to the basic rate of tax from the rental income and account to HMRC on a quarterly basis.

HMRC can withdraw an approval number if the landlord fails to submit their returns in line with requirements. If a tenant pays the rent directly to an overseas landlord and does not have an approval number, the obligation to account to HMRC falls to the tenant. Overseas landlords must still submit tax returns to HMRC and pay any income tax due, although they may be able to offset some expenses.

Categories: Residential Lettings Property Management