Letting Legislation & CMP

Client Money Handling Procedures

CLIENT

Any member of the public which is a client of Lockstones Sales & Lettings and includes any person, firm, trust, body corporate or other organisation.

CLIENT MONEY

Money of any currency (whether in the form of cash, cheque, draft or electronic transfer) which we hold or receive for or from a client, including money held as stakeholder and which is not immediately due and payable on demand to us for our own account, and excludes money held as a deposit protected by a Government Deposit Protection Scheme.  It includes fees paid in advance for professional work agreed to be performed and clearly identifiable as such.  Commissions and other pecuniary reward or other advantage for which we have to account to the client will be regarded as client money.

CLIENT MONEY ACCOUNT

In respect of the scheme an account which does not contain any sums other than the whole or any part of client money paid into it, or such sums of money as may be necessary to replace any sum which by error has been withdrawn from the account together with accrued interest on such amounts.

THE FIRM OR WE

Lockstones Ltd Sales & Lettings and any other associate trading styles.

SCHEME MEMBER

Deposit Protection Scheme (DPS)

COMPLIANCE

The written procedures are set forth to ensure compliance with The Client Money Protection Schemes for Property Agents (Approval and Designation of schemes) Regs 2018 and any other Regulations and statutory requirements as necessary, and to maintain best practice.

HANDLING OF CLIENT MONEY WRITTEN PROCEDURES

We use the following procedures to ensure compliance.

  1. All Client Money is held in a Client Money Account with a Bank or Building Society authorised by the Prudential Regulatory Authority (PRA), the Bank of England, and the Financial Conduct Authority (FCA) in England, Scotland, Northern Ireland and Wales.
  2. As a Scheme Member we maintain one or more Client Money Accounts into which all client money is paid, we ensure that all Client Money Accounts are designated as such and easily distinguished from other accounts, we advise clients of Client Money to be held in a Client Money Account and notify Clients of the details of that account. We confirm in writing with the Bank with which it holds a Client Money Account that the Bank acknowledges that monies in the Client Money Account must not be combined with or transferred to, any other account maintained by the Member, and the Bank shall not be entitled to exercise any right of set up or counterclaim against money in that Client Money Account in respect of any sum owed to it in respect of any other account by the Member Firm. We keep records and accounts which show all dealings with Client Money and demonstrate that all Client Money held by the firm is held in a Client Money Account.  We publish our procedures for handling client money on our website.  We provide a copy of our procedures for handling client money to any person who may reasonably require a copy Free of Charge. We repay any Client Money, including where feasible any interest earned, without delay if there is no longer any requirement to retain that money or the relevant client requests it. We hold and maintain Professional Indemnity Insurance cover that is appropriate to our size, income, type of work, and amount of client money held. In the event that we receive surplus client money in a client account, we follow best practice and ensure that all efforts are made to trace clients or owners of the money, hold the surplus money in a client suspense account, and hold it for at least 6 years.  After 6 years the money will be donated to a registered charity and a receipt obtained which, if a true claimant comes forward, will be available to them. We will request that the receiving charity should offer an indemnity to enable us to recover a donation in the event of a claim.

 

GENERAL CONTROLS

We ensure that Employees have a clear segregation of duties and responsibilities and that a Principal or appropriately qualified individual oversees the client accounting function.

We ensure that our staff are competent and knowledgeable.

We ensure that Accounting systems and client data are securely controlled and protected.

Computer systems are adequately protected for access, firewalls, back-ups and disaster recovery.

We ensure there is adequate back up for holiday and long term absence.

Principals cannot and do not over-ride controls surrounding the accounting system.

All areas of the business apply the same level of controls in relation to the Client Accounting Function.

CLIENT ACCOUNTING SYSTEMS AND CONTROLS

We ensure that accounting  records and systems are appropriate to the nature and volumes of client account transactions, that systems provide details of all money received into and paid from all client accounts and show a running balance of all client money held in that account.

We ensure that systems identify all receipts and payments to the client to which they relate, for example by means of client ledgers showing cash balances held on behalf of clients at all times.

The current balances at the total and client levels are always available.

Accounting records are completed chronologically and promptly. All ledgers have the client name and an appropriate description e.g. property address.

Overdrawn balances on Client Ledgers are prevented by the systems or controls in place and where they do occur are investigated and rectified immediately.

A central list of client bank accounts is maintained including dates of opening and closing of accounts.

A “Three way” reconciliation is completed at least once every month where client money is held in a general client account. This is produced as a formal statement and any unresolved differences or adjustments are fully investigated and explained. Any errors identified in the reconciliation process are promptly rectified.

General Client Account reconciliations should include a full list of client ledger balances and the total of the balances; dated unpresented cheques; dated outstanding deposits; details of any other reconciling items; system reports supporting reconciliation figures as appropriate.

For discrete accounts the monthly reconciliations should agree the cash book or system balances and include a full list of dated unpresented cheques; dated outstanding deposits; details of any other reconciling items; system reports supporting reconciliation figures as appropriate.

Reconciliations should not include regularly occurring adjustments or reconciling items more than 3 months old, except for unpresented cheques which should not be more than 6 months old.

Reconciliations are reviewed and signed off by a Principal or an appropriate independent senior member of staff. Client accounting records, including copies of reconciliations are securely kept for at least 6 years plus the current year.

CONTROLS OVER THE RECEIPT OF CLIENT MONEY

The firm ensures that post is only opened by a Principal or appropriate staff independent of accounting staff.  That procedures exist to ensure all client’s money is banked within 3 working days, all cash and cheques received by post or by hand are promptly recorded; a reconciliation is performed between money received by post and that day’s banking; procedures exist to identify and distinguish between client’s and office money; Mixed monies are initially paid into a client account and the office element paid to the office account when the receipt has cleared the bank. Fees received in advance for professional work not yet billed are paid into a client account pending completion of the work; duplicate receipts are issued for cash received and controls over the physical security of cash are effective. Unbanked client money receipts are kept secure.

CONTROLS OVER THE PAYMENT OF MONEY

Checks are made to ensure that sufficient funds are held on behalf of the client before payments are made. A copy of the Bank Mandate is held and up to date. Adequate authorisation and supervision procedures are in place for payments made by cheque, bank transfer and electronic methods.  Insurance and adequate Principal supervision is in place where payments are made by non-principals. Blank cheques are not signed and unused cheques are kept securely. Effective systems are in place over the setting up of new supplier accounts on the system. Cash payments are avoided.

 

TENANT FEES ACT (2019): WHAT LANDLORDS NEED TO KNOW

Lockstones 

Tenant Fees Act (2019): What Landlords Need to Know

The Tenant Fees Act will come into force on 1st June 2019. At the center of the new legislation is a ban on Tenant fees, including admin and agency fees. However this only touches the surface on the changes and their implications for you the Landlord and us as your Agent.

I fully understand that with the ever changing world of lettings legislation it can sometimes be difficult to keep up to date with how the changes affect you. To assist with the impacts of the Tenant Fees Act, we have broken down the changes into sections to help you understand the impacts and our responsibilities:

 

Summary of Tenant Fees Act (2019) and what is changing:

  • Prohibited and Permitted Payments
  • Tenancy Deposits
  • Rules on Holding Deposits
  • Returning of Holding Deposits

 

Prohibited and Permitted payments

As Agents will no longer be allowed to charge tenants for anything except: the rent, the tenancy deposit and a holding deposit and three other exceptions. This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. You also won’t be able to charge check-in, inventory or admin fees.

Details of the permitted payments now allowed are detailed as follows:

Before the tenancy starts

  • Holding Deposit: when applicable, a refundable holding deposit (to reserve a property) capped at no more than one week’s rent of a property
  • Cash Deposit: a tenancy cash deposit capped at the equivalent of ‘five weeks’ rent for a property (previously ‘6 weeks’)

During the tenancy

  • The agreed rent for a property
  • Payments to change the tenancy, when requested by the tenant, for alterations to the tenancy agreement or tenant swaps, capped at £50.00
  • Payments associated with early termination of the tenancy, when requested by the tenant
  • Payments in respect of utilities, communication services, TV licence and council tax
  • A default fee for late payment of rent, charged at 3% of the rent amount due (when payments are over 14 days late)
  • Payment for the reasonably incurred costs for the loss of keys/security devices

 

Cap on Cash / Security Deposits

From 1st June 2019 there will be a 5-week cap on security deposits meaning this is the maximum Agents and you as the landlord can request from your tenant, unless the rental exceeds £50,000 per year. If rental exceeds £50,000, 6 weeks can be taken as a deposit.

In addition it has previously been acceptable to take more than a 6-week security deposit to hold against damage occurring from the keeping of a pet. Once the Tenant Fees Act is in place Landlords will not be able to take more than a 5-week deposit.

Current tenancies and the deposits we are holding.

Landlords and Letting Agents are not obliged to immediately refund part of a tenancy deposit that is above the cap if paid by the tenant before 1st June 2019. If a tenant signed a tenancy agreement before 1st June 2019 (and that tenancy is continuing or is a statutory periodic agreement) then the tenant will be bound by the terms of that contract until it is either renewed or terminated.

As part of our responsibilities as an Agent we are obligated after the 1st June, that any Tenancy that is renewed, we are required to reduce the deposit to 5 weeks. We will be writing to all tenants prior to renewal to reduce the deposit amount to five weeks and refunding the balance to the tenant accordingly, ensuring you are informed at every step of the way.

Where tenancies have fallen into a Statutory Periodic Tenancy, we will be contacting you to discuss this as the transition period in which to get the deposits compliant with the law will end on 1st June 2020.

 

Rules on Holding Deposits

Holding deposits will be limited to one week’s rent.

This is a significant change, since most holding deposits are currently much more than a week’s rent. The Tenant Fees Act includes new rules about how holding deposits must be treated.

Landlords will now have 15 days to enter into a Tenancy Agreement with a tenant once a holding deposit has been received by the landlord or agent unless this is extended by mutual written agreement and a ‘deadline’ date is agreed. At or before the ‘deadline’ date, contracts need to be signed and the tenant must pay their initial monies, comprising of a 5 week deposit and a month rental.

During the agreed ‘deadline’ date, the property will be removed from the market.

Returning of Holding Deposits

The holding deposit must be returned to the tenant: either in payment back to the tenant, or being put towards the first rental payment, or the security deposit relating to the Tenancy.

However, there are some exceptions. In the following cases the landlord can keep the holding deposit:

  • The tenant provided false or misleading information which in turn affects the Landlord decision to let the property to the tenant
  • The tenant failed a Right to Rent checks
  • The Tenant failed to take all reasonable steps to enter into the agreement
  • The Tenant decided to withdraw from the proposed agreement

Agents and Landlords must refund a tenant’s holding deposit in full within 7 days of:

  • Entering into a tenancy agreement with the tenant
  • You choosing to withdraw from the proposed agreement; or
  • The ‘deadline for agreement’ passing without a tenancy having been entered

The decision of whether to choose to accept a Holding Deposit or not is the choice of the landlord. However this does mean that we as the Agent are required to stop advertising the property. It also means that all documents need to be signed, property vacated and monies paid within the ‘deadline’ date which is not always possible.

In Summary we understand that there are a number of changes that need to be taken into consideration, however if you would like more advice or guidance please don’t hesitate to get in touch with one of the Lockstones team.