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Make sure you business is compliant

The punishment must fit the crime, of course, but the penalties that can now be imposed for tiny infringements of the law can be absolutely terrifying.

Adam Walker

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Imagine what would happen if the government decided to change the motoring laws. Imagine that instead of an errant driver getting a £100 fine and three points on their licence, the new legislation stated that any driver caught doing more than 31 miles per hour in a 30 mile an hour limit should have their car confiscated and crushed and that both their eyes should be put out with a red hot poker so that they could never drive again! Ridiculous? Well, maybe, but this seems to be exactly what is happening in the lettings industry.

Draconian penalties for minor misdemeanours
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Adam Walker

The penalties that can now be imposed for tiny infringements of the law can be absolutely terrifying. For example, we recently agreed the sale of a business for a client who had misunderstood the process for issuing the prescribed information. She was sending out the summary pages but not the statutory additional information that should accompany this. As a consequence, she was liable for a potential fine of £837,692 on a business that she was selling for £475,000. This is calculated as three times the deposit on every property that she has currently let. The buyer pulled out and the business owner now wakes up in the night worrying about the potential fine that she may have to pay.

There are agents who blatantly flout the regulations, let out sub-standard homes and steal deposits. They too should be fined.

The mistake was an innocent one, no-one has lost any money, no harm has been done to anyone and every deposit was properly protected… but nevertheless the owner is left facing a fine that exceeds the value of both her business and her home combined. The things that she has worked hard for all her life are now in jeopardy. How can this be fair?

Explosive scenarios

Another client has been caught in a nightmare scenario because due to a misunderstanding, a tenant was allowed to move into a property that did not have a current gas safety certificate. A gas safety check was carried out a few days later but the tenant has claimed that because it was not enforced on the day that she moved in, the landlord cannot ever serve a Section 21 notice on her and she therefore intends to remain in the property forever. The landlord is blaming the agent for this and threatening to sue the agent for the reduction in the value of their property that has occurred because it now has a protected tenant. The amount of money being claimed is over £200,000.

There are of course landlords who rent out disgusting properties that are completely unfit for human habitation and may have some very dangerous defects. They deserve to be fined. There are also agents who still flout the regulations blatantly, let out substandard properties and even steal the deposit money. These characters deserve to be fined as well. But they are a tiny minority of the profession. In an attempt to punish a small number of rogue agents and landlords, legislation that was designed for a legitimate purpose is now being abused to threaten innocent agents with astronomical fines for making genuine mistakes that have caused no harm to anybody. This cannot be right.

An increasing number of agents are so frightened by the ever-increasing regulations and the savagery of the fines that they are selling up many years before they would normally have retired. This is a terrible shame but who can blame them?

Lobbying for change?

I would like to think that some of the larger agents or perhaps one of the trade bodies or even a landlords’ action group could lobby parliament to demand more appropriate fines for landlords and agents who make innocent mistakes. Unfortunately, I don’t think this is realistic. Landlords and letting agents are seen as pariahs right now and our new government wants to secure more votes from generation rent.

So, for those independent agents who wish to remain in the business, the best and probably only effective protection is a regular compliance audit from one of the many specialist companies that have set up recently to do this. This really is the only way to ensure that your business is absolutely compliant. It will be expensive but it is much cheaper than paying the potential fines.

Adam Walker is a business transfer agent and consultant who has specialised in the property sector for more than 25 years.


February 27, 2020

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