Private Rented Sector Code Industry consultation draft April 2014

Acknowledgments

Technical author: Christina Hirst Working group:

Mike Basquill, Southern Housing Group Michele Hancock, Bozzuto Tracey Hartley, DCLG Taskforce Geeta Nanda, Thames Valley Housing Theresa Wallace, Savills Mark Wilson, My Leasehold

Contents
1 Introduction 2 General responsibilities 2.1 Legislation 2.2 Care and skill 2.3 Health and safety 2.4 Responsibility for others 2.5 Corporate social responsibility 2.6 Sustainability 2.7 Advertising and marketing 2.8 Social media 2.9 Risk management 2.10 Performance management 2.11 Communication 2.12 Discrimination 2.13 General property management responsibilities 2.14 Complaints 3 Engaging a managing agent 3.1 Selecting a managing agent 3.2 Conflict of interest checks 3.3 Confirming identity 3.4 Agreeing the scope of work 3.5 Terms of engagement 3.6 Fees, charges and taxes 3.7 Itemised costs 3.8 Timings 3.9 Penalties 3.10 Commissioning other documentation 3.11 Use of sub-agents 4 Lettings 4.1 Marketing 4.2 Advertising 4.3 Viewings 4.4 Agreeing the letting 4.5 Deposits 4.6 References and credit checks 4.7 Inventory 4.8 Formal agreement 4.9 Subletting provision 4.10 Sharers 4.11 Company lets 5 Property management 5.1 Actions following a new letting 5.2 Mixed tenure schemes 5.3 Creating a sense of place 5.4 Housing health and safety rating system 5.5 Houses in multiple occupation 5.6 Rent 5.7 Inventory 5.8 Service charge 5.9 Services 5.10 Repairs 5.11 Access 3

5.12 Insurance 5.13 Anti-social behaviour 5.14 Disputes 5.15 Recovering outstanding debts 5.16 Terminating a tenancy 5.17 Tenancy renewals 5.18 Obtaining possession 6 Handling other peoples money 6.1 Money laundering 6.2 Client accounts 7 Overview of legislation

Glossary of terms
The glossary will include definitions of key terms used in the guidance.

1.0 Introduction
This Code has been prepared to promote best practice in the letting and management of residential property. It seeks to ensure a sustainable private rented sector where flexible and longer leases are available, with high quality management and the provision of long term homes for rent. The Code embraces: quality openness innovation individual responsibility fairness respect Empowerment Passion Flexibility Pride Sustainability Provision of a community for all

The success of the Code and its associated guidance will result in a sustainable private rented sector that meets the requirements of all its stakeholders. The Code seeks to recognise the different sectors of the residential property market, from single lettings by a landlord to large portfolios. The Code is for use by landlords, letting and managing agents and will also form a useful point of reference for tenants. The Code and its associated guidance directs its advice to you as the responsible person in terms of the management or letting of a residential property. That person could be the landlord or a managing or letting agent. In the Code, there are legal obligations to act in accordance with statute and best practice. The word must is used to indicate a legal requirement and the word should is used to indicate best practice. Where compliance with the Code is not set by statute, the responsible person should be able to justify reasons for departure from it. Where procedures are recommended for specific professional tasks, these are intended to represent best practice, i.e. procedures which, in the opinion of the property management industry, meet a high standard of professional competence. When an allegation of professional negligence is made against a responsible person, a court or tribunal is likely to take account of the contents of the Code and associated guidance in deciding whether or not the responsible person had acted with reasonable competence. In f o l lo wi n g t he practices set out in the Code, the responsible person should have at least a partial defence to an allegation of negligence if they have followed those practices. Alternatively, it does not follow that a responsible person will be found negligent if they have not followed the practices recommended in this Code. It is for each responsible person to decide on the appropriate procedure to follow in any professional task. However, where actions do not comply with the practice recommended in this Code, they should do so only for a good reason. In the event of a legal dispute, a court or tribunal may require the person to explain why they decided not to adopt the recommended practice. 6

Landlords and agents (the responsible person) adopting the Code undertake: 1 2 To let and manage properties in an honest, fair, transparent and professional manner. To manage properties with due skill, care and diligence, and ensure that staff employed have the necessary skills to carry out their tasks. To ensure that tenants are provided with details of complaints handling procedures and, where existing, an appropriate redress scheme, and to meet all other legal requirements and relevant codes of practice. To do the utmost to avoid conflicts of interest and, where they do arise, to deal with them openly, fairly and promptly. Not to discriminate unfairly in any dealings. To ensure that all communications are fair, clear, timely and transparent in all dealings with tenants and that all material information is provided to tenants . To ensure that all advertising and marketing material is honest, decent and truthful. To ensure that any client money is held separately from other monies, and is covered by adequate insurance. To offer tenant-friendly leases that give the opportunity for tenants to ask for longer leases. To provide safe, sustainable tenant communities.

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Throughout the Code, users are signposted to related legislation, regulations and other guidance. The final chapter provides a full summary of relevant legislation.

2.0 2.1 2.2

General responsibilities Legislation Care and skill

In undertaking a management function you must comply with the law.

must ensure that you always act with reasonable care and skill. What is reasonable is measured by the standards of a reasonably competent and experienced responsible person. The duty of care and skill applies to every aspect of your management.

2.3

Health and safety

You must comply with Health and Safety legislation and regulations, ensure a safe working environment for your staff and others and take sensible, proportionate actions to protect people.

2.4

Responsibility for others

You should ensure that your staff receive regular training and keep records of that training and who received it. You should supervise staff adequately You should ensure the personal safety of your staff and all others involved in management at al times.

2.5

Corporate social responsibility

You should ensure that you integrate Corporate Social Responsibility into all your activities and the organisation makes a positive contribution to society. You should manage the social, environmental and economic impacts of your activities and be responsive to all your stakeholders always behaving ethically and responsibly. You should ensure that you: operate responsibly value your employees serve your communities make sustainability a priority

2.6

Sustainability

You should have an environmental policy in place, ensuring that your management activities are undertaken in the best interests of the environment, with all possible steps taken to minimise environmental impact. When letting properties or renewing leases, you should pursue opportunities to introduce covenants that improve the environmental performance of a building. Covenants could require the sharing of data regarding energy consumption, waste sent to landfill and the recycling of waste and use of water. You should aim to set targets with tenants regarding the minimising of energy consumption, and recycling, ensuring that a waste strategy is in place for multi-let buildings. Any such targets should recognise that variations may occur due to changes in the occupancy or use of the building.

Decisions regarding alterations and changes to the building should be considered in the context of their effect on the environmental performance of the property. You should aim to create a tenant community where all tenants feel a sense of belonging and value their environment.

2.7

Advertising and marketing your business

Any marketing material should be honest and professional and you should not seek business by improper means. All advertisements must be fair, decent, accurate and honest, and meet requirements of any relevant legislation. You must ensure that information about your business does not mislead consumers and provides material information. You should consider obtaining a formal Quality Assurance accreditation such as ISO9001.

2.8

Social media

You should develop a corporate communications strategy that takes account of the risks and opportunities offered by social media. Adequate training and support should also be provided for your staff to ensure their online communications retain a quality profile for your business and make appropriate use of social media.

2.9

Risk management

You should undertake risk assessments covering all areas of your business. You should review your risk assessments on any material change of circumstances and at least every 12 months. In terms of bribery risks under the Bribery Act 2010 you must have adequate procedures in place to prevent bribery.

2.10

Performance management

You should plan, monitor, evaluate and report the performance of your property or property portfolio.

2.11

Communication

You should ensure that the name and contact details of the person whom the tenant should contact regarding repairs and maintenance is given. You should respond to queries or requests promptly, indicating a timescale by which requests from tenants will be actioned and reminding them of the requirement to give access when necessary. You should be accurate, clear, concise and courteous when communicating with tenants. You should dispatch communications by appropriate means (registered or recorded delivery for key communications) so that they reach the intended recipients promptly. There may be the need to prove the service of certain documentation to the satisfaction of a court.

2.12

Discrimination

You must ensure you do not discriminate on the grounds of age, disability, gender reassignment, race, religion or belief, sex, sexual orientation, marriage or civil partnership, pregnancy or maternity You must ensure that you do not discriminate unfairly against any party: a) in the terms on which a property is offered; b) by refusing to lease the property; or c) in your treatment of persons in need of property for occupation You must ensure that you do not discriminate against vulnerable tenants or potential tenants either explicitly or implicitly by your actions.

2.13

General property management responsibilities

You must let and manage properties in accordance with legislation and regulation. You should ensure that you comply with this Code. Properties should always be managed on an open and transparent basis, subject to maintaining confidentiality in respect of personal information. You must provide material information for tenants and potential tenants and not mislead by omitting to provide such information. You should use your professional judgment to assess the credibility of information you receive and to determine whether it needs further corroboration before you decide whether to disclose it. You should signpost tenants to publically available information where this may help with their transactional decision making. If a tenant makes a decision that may have legal connotations, you should explain that they should seek legal advice. You might also consider speaking to their legal advisers if you are concerned about any decisions that are being taken. You should not carry out any activity likely to interfere with the peace or comfort of tenants, or withdraw or withhold services reasonably required for the occupation of the premises with the intent of causing the tenants to give up possession. You should have policies and procedures in place for responding to incidents of harassment by any parties. You should have effective and fair policies and procedures for dealing responsibly with management matters. You should be available: to be contacted during normal working hours, including by telephone to meet tenants; and to inspect the property at reasonable times and intervals. The responsible person must not cause or permit a dwelling to be overcrowded as defined in relevant legislation. Every rent book or similar document should contain a statement on the number of persons permitted in the dwelling. 10

So far as it is reasonably practicable and consistent with statutory and contractual obligations, you must keep personal information confidential and not disclose any about tenants to other people without consent. If requested, assist tenants towards understanding their tenancy agreement or other terms of occupation, and refer them to www.direct.gov.uk for independent advice. You should not give advice about the tenants legal rights, and should avoid a conflict of interest when giving any advice. You should deal with written applications for permissions to make changes to the property quickly and, when an application is refused, give reasons for the decision. Unless the tenancy agreement or lease specifically authorises it, there should not be any charges for considering an application or granting permission. You must levy rents and other charges, as well as manage the property, in accordance with the law, the clauses of the relevant tenancy agreement. You should also be mindful of issues regarding Houses in Multiple Occupation (HMOs) and the Housing Health and Safety Rating System (HHSRS). You should maintain efficient records relating to the building and decide how long to keep records during the periods of statutory limitation of action. You must ensure that any personal information held about tenants or others is In accordance with legal requirements You should recommend tenants to seek advice from their local Citizens Advice Bureau, local authority or other advice agency where it appears they may be entitled to housing benefit or other statutory benefits. You should take steps to keep yourself informed of developments in legislation affecting residential management to keep wholly within the law.

2.14

Complaints

You should operate a complaints handling procedure and make this available to any tenant. Your complaints handling procedure must be in writing, and should explain how to complain to your organisation (i.e. to a senior member of the firm, or to the firms designated complaints handler) and what to do if a tenant feels the complaint has not been ealt with adequately. You should draw a complainants attention to your complaints handling procedure, which should first require formal complaints to be made in writing (by email, letter or fax). You must acknowledge all complaints in a timely manner. This should generally be within three working days. You should try to resolve any complaint internally through your published complaints handling procedure. You should provide a formal written outcome of your investigation to the complainant within 15 working days. If the complainant remains dissatisfied you should explain how they can pursue their complaint within your organisation. You should ensure that either a member of staff who was not involved with the transaction, or ideally your designated complaints handler, deals with the complaint. Following this investigation you should send the complainant a formal written statement expressing your final view and including any offer made. This statement must also tell the complainant how they can take their complaint further and any deadline for doing this. Some discretion may be adopted in terms of the timescale for the investigation outcome, but it should be within a reasonable period of time. You should record all complaints whether verbal or written at the time they are made. 11

3 Engaging a managing agent 3.1 Selecting a managing agent

Landlords should only engage managing agents who hold appropriate professional qualifications, such as membership of the Royal Institution of Chartered Surveyors, Institute of Residential Property Managers (IRPM), Association of Residential Letting Agents (ARLA) and/or are licensed by the National Approved Letting Scheme (NALS). Agents should also be a member of an independent redress scheme.

3.2

Conflict of interest checks

Before confirming instructions, agents must check that they will not have any conflict of interest. They should declare any possible conflict of interest and gain written permission from the landlord to act in these circumstances. Agents must promptly disclose any interest in the property in writing. They should have regard to the particular circumstances of the situation in which they are involved before deciding whether to disclose any interest. Agents should disclose all interests. In all cases they should consult with the landlord, take their instructions and keep a full note of the discussion and instructions in their file. If the landlord agrees to the agent continuing to act where there is a conflict of interest then , before negotiations begin, they must give all the relevant facts, in writing, to the prospective tenant. When disclosing any interest while acting for a landlord, the agent should make this declaration on the property particulars and ensure that any prospective tenant has a copy of them.

3.3

Confirming identity

As required under money laundering Regulations 2007, agents must use every reasonable effort to confirm a landlords identity before accepting instructions. If the landlord operates as a business, the agent must identify the firm itself to confirm who has the authority to act on behalf of the firm.

3.4

Agreeing the scope of work

The agent should agree the scope of work in heads of terms before receiving terms of engagement. This should set out the detail of the duties the landlord expects the agent to perform.

3.5

Terms of engagement

Agents must give landlords written confirmation of their instructions to manage a property on their behalf. This should include details of their fees and expenses, business terms and the duration of their instructions. The agent must give these details to the landlord before the landlord is committed or has any liability towards them. Terms of engagement should clearly state the scope of the business the agent will carry out and specify which activities are not included. The terms should be fair and the documentation s h o u l d b e written in plain English. The terms of engagement should state that a copy of the agents complaints handling procedure is available on request. Both parties should sign and date the terms of engagement. Any future changes to terms of engagement must be confirmed in writing and signed by both parties.

3.6

Fees, charges and taxes

Agents must provide full and clear written details of their fees and expenses. This should include: 12

1 details of the circumstances in which the landlord will become liable to pay a fee or commission 2 details of the fee 3 particulars of any payments which do not form part of the payment for carrying out the management work but which may be payable; 4 particulars of the circumstances in which the payments outlined in (3) above will become payable; and 5 particulars of the amount of any payment outlined in (3) above or, if the agent does not know the amount at the time, an estimate of that amount together with details of how it will be calculated. Agents should make clear reference to whether the commission or fee and/or any expenses are exclusive or inclusive of tax.

3.7

Itemised costs

If the agent intends to charge anything over and above the basic fee, details of these charges must be provided.

3.8

Timings

The terms of engagement should specify the point at which the agents entitlement to the commission or fee is to be triggered. The terms of engagement should also specify the duration of the instruction.

3.9

Penalties

Any contractual right to interest on late payment should be included in the terms of engagement.

3.10

Commissioning other documentation

Legislative requirements regarding documentation to be provided at the point of marketing or during the marketing process must be followed. This must include an Energy Performance Certificate (EPC). Where gas is provided to the property, a Gas Safety Certificate (CP12) must be completed by a Gas Safe registered engineer prior to letting.

3.11

Use of sub-agents

Agents wishing to appoint a sub-agent must first obtain the landlords authorisation. The appointment of a sub-agent without authorisation may be considered a breach of duty unless it is contained within the agents terms of business.

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4 Lettings 4.1 Marketing

Before marketing a property you should evaluate your target market and set out a marketing strategy. You should obtain a realistic assessment of the likely rent from a valuer. You must obtain any necessary consents, e.g. joint owners, lender, insurance company, local authority, superior landlord or freeholder and must comply with the obligations and requirements of the various safety legislation, standards and regulations that apply to rented property.

4.2

Advertising

You must take reasonable steps to ensure that all statements made about a property, whether oral, pictorial or written, are correct and not misleading. You must not make any material omissions from the information provided. You must not exert undue pressure on any potential tenant and must always act with the standard of care and skill that is in accordance with honest market practice and in good faith. You must not engage in any of the 31 specific practices that the Consumer Protection from Unfair Trading Regulations 2008 ban outright You must ensure that you do not engage in any unfair commercial practice by saying, doing or omitting to do something which causes, or is likely to cause, the average consumer to take a different transactional decision. A transactional decision is not limited to a consumers decision to use your services or to buy a property. It can also relate to decisions taken before they actually make this final key decision. For example, decisions to view a property, commission a survey or accept an offer can all be considered transactional decisions. The property particulars and any advertisements must include the energy efficiency A-G rating from the EPC. To let boards must comply with planning requirements.

4.3

Viewings

You should check the tenancy agreement regarding provision for access. When responding to questions from potential tenants you must ensure that you advise them of all relevant issues and do not make any material omissions from the information you provide. Where you are arranging for a potential tenant to view an already tenanted property, you should ensure that the existing tenant is given appropriate and reasonable notice of the appointment, unless other arrangements have been made. When accompanying a potential tenant on a viewing you should ensure your personal safety and that of any of your staff.

4.4

Agreeing the letting

You should be as flexible as possible in agreeing terms with tenants. You should aim to provide a tenant friendly tenancy option that allows: Tenants to ask for longer term tenancies Rent reviews to give greater financial certainty to both parties. Reviews could be linked to inflation or average earnings, to a fixed uplift each year or to market rents. 14

You should send a heads of terms letter to the potential tenant confirming tenancy terms costs for which the tenant would be responsible the deposit the total sum required on signing the method of payment; and the procedure to be followed when the tenant comes to sign the tenancy agreement.

4.5

Deposits

Tenancy deposits must be protected in a government authorised scheme and you should provide evidence of the registration of the deposit within 30 days of registering the deposit. You should consider what is an appropriate deposit to hold for the property. Any deposit should be reasonable in relation to the potential liability of the tenant. The tenancy agreement must make provision for the holding of any deposit, specifying: how the deposit is to be held the tenancy deposit protection scheme that the deposit is held under; and who is to take any interest earned on it.

The tenancy agreement must also state why the deposit is being held and the circumstances in which it is to be released, in whole or in part. Where a deposit is held by an agent, this must be held as a stakeholder on behalf of both parties. These matters should be made clear to the prospective tenant before the deposit is paid and the tenancy agreement is signed. When holding deposit money, you must deal with it in the same way as other client money . The letting commission or other charges must not be taken from the deposit. You must ensure that the deposit is released only in compliance with the terms under which the deposit was originally held.

4.6

References and credit checks

References should be obtained in writing by letter or email to individual referees. You should also ask the tenant to agree to a credit check.

4.7

Inventory

Prior to the commencement of the tenancy, an inventory and schedule of condition of sufficient detail should be prepared. The extent of items to be included in the inventory should be made clear immediately to the potential tenant. You should consider using an independent inventory clerk to ensure transparency.

4.8

Formal agreement

The tenancy agreement should be prepared well in advance of the letting. A prospective tenant should be given at least five days to read the agreement prior to signing and should also be given a copy of the gas safety record (CP12) and the EPC (if not previously provided). You should ensure that the tenant has the opportunity to raise queries in order to clarify the rights and 15

obligations set out under the tenancy agreement. A standing order or other appropriate payment method should also be set up and evidenced at this time for the rent payments.. You should provide the tenant with a notification of the landlords name and address for serving notices. Any appropriate notices must be issued prior to execution of the agreement. The tenancy agreement must be signed by the landlord or his or her representative. The counterpart tenancy agreement must be signed by all the tenants and dated to effect execution. You should give the tenant the tenancy agreement duly signed. The responsible person should then retain the counterpart agreement. You should arrange for the inventory to be signed and provide the tenant with at least one complete set of keys that is recorded in that inventory.

4.9

Subletting provision

New leases should restrict subletting to allow the landlord the opportunity to review the profile of incoming tenants and to prevent inappropriate occupation. Sublettings should be subject to landlords consent, not to be unreasonably withheld or the lease should contain a requirement to register the subletting with the landlord within 28 days.

4.10

Sharers

Where you are letting to tenant sharers you should ensure that all tenants sign the tenancy agreement. If you are seeking guarantors then they should sign a limited deed of guarantee for each tenant. You should identify a lead tenant to whom key correspondence and enquiries are directed and who arranges rent payments.

4.11

Company lets

Where residential properties are let to a company rather than an individual, the company is responsible for all of the tenants obligations under the terms of the lease in the same way as an individual tenant would be. The tenancy agreement should include a clause making clear that money paid by the licensee towards the rent will be paid as an agent on behalf of the company and will not give the licensee rights as a company tenant. You should request sufficient details to legally identify the company, such as the company registration number. You should be informed of the identity of the licensee of the company tenant, and the tenancy agreement should allow the property to be occupied by the permitted o ccupier together with his or her family.

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5 Property management
5.1 Actions following a new letting

Rent books must be issued to weekly tenants, and a receipt issued for any initial payments made. You should ensure that the tenant has a copy of the inventory, together with a copy of the schedule of condition, and that these have been signed by (or on behalf of) both the landlord and tenant. If the tenant is in need of any necessary reconnection of services, you should offer assistance so that initial readings of meters can be recorded on the inventory. You should ensure that the tenant registers as the customer for services from the commencement of the letting and, where applicable, take meter readings. A copy of the gas safety record should be provided to the tenant, and the local authority should be informed of the date of commencement for council tax, water, sewerage, gas, electricity and telephone purposes. You must provide the tenant with an address for the service of notices. This address must be within the same legal jurisdiction as the property and could be your own address. Until such information is provided, any rent is deemed not to be lawfully due from the tenant. Where a written demand is issued to a tenant, it must contain your clients name and address. If the address is not in the UK, an alternative UK address at which the tenant may serve notices of proceedings should be provided. Within 21 days of any written request, you must give the tenant the landlords name and address. Failure to do this without reasonable justification is a criminal offence. If you operate as a company and the tenant makes a further request for more information after receiving the name and address of the landlord, then you must also give the name and address of the directors and secretary of the company within 21 days of that request.

5.2

Mixed tenure schemes

Where properties include affordable or social housing alongside private housing, arrangements should be established with the registered provider (of the social housing) for exchange of information and attendance by the responsible person at joint management meetings.

5.3

Creating a sense of place

It is important that tenants feel part of a community and take pride in their home and their immediate environment. You should consider ways to foster this in your properties and portfolios.

5.4

Housing health and safety rating system

You must comply with the Housing Health and Safety Rating System (HHSRS) .

5.5

Houses in multiple occupation

You should consider whether any letting will create multiple occupation. You must ensure that the property and all equipment meets the requirements of the relevant Regulations and lisencing.

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5.6
5.6.1

Rent
Rent payments and review of rent

Rent demands should be clear and easily understandable by tenants, avoiding the use of codes and abbreviations if possible. Where they are used they should be explained. You must ensure that any rent book is kept up to date. Where payment of rent is handed over in person, a receipt should be given. In other cases, a receipt should be given if requested and sent by post if the tenant provides a prepaid envelope. Once a year you should make a statement of rent payments received available to tenants upon request. You must follow the required procedure for any review of rent. 5.6.2 Local housing allowance and rent

You must co-operate, where appropriate, with a tenants claim for housing benefit and supply any necessary information promptly to ensure that the claim can be processed as quickly as possible. When signing the agreement tenants should be made aware that they are committed to pay the rent, whether or not they are entitled to receive housing benefit. In addition, a shortfall of housing benefit may result in you pursuing them directly for recovery. If you receive payments from the local authority you should hold this in a separate account so that you can individually account for them. 5.6.3 Arrears

You should ensure that you have an efficient system to monitor rents collected and those that go into arrears, and to send standard letters chasing payments not received. Where rents are not received when due, you should communicate promptly with the tenant. Where Local housing allowance (LHA) is being paid directly and payments cease or are varied, you should inform the tenant and the LHA as soon as possible. To avoid legal costs, you should make direct contact with tenants in cases where arrears continue to accumulate and recommend that they seek independent advice (e.g. from the Citizens Advice Bureau or a legal adviser). You must not evict a tenant without a possession order.

5.7

Inventory

You should ensure that you hold an accurate and appropriately detailed inventory and schedule of condition. Both should be formally agreed between the parties, and you should maintain a record of all agreed amendments that occur during the course of the tenancy. The inventory should be compiled by a qualified independent inventory clerk.

5.8

Service charge

If you are administering a service charge you should refer to the RICS Service charge residential management code for guidance as this is outside the scope of these this Code. 18

The range of services will normally be governed by the terms of the lease. The responsible person should explain the respective areas of management responsibility for the property to the tenant.

5.9

Services

5.9.1 Fire safety and testing You must comply with all relevant legislation. You must maintain electrical equipment to ensure its safety to those using it and provide and maintain a safe system of work in connection with electrical systems. All properties should have a fire blanket to BS EN1869:1997. This should be mounted on a wall away from the cooker in the direction of the exit. Fire extinguishers should also be provided and maintained and serviced in line with BS 5306. 5.9.2 Smoke alarms All properties should be fitted with a mains-interlinked smoke detector with integral battery back-up on each floor level, and to the living room, interlinked with a heat detector to the kitchen with integral back-up in accordance with the current British Standard BS 5839-1. 5.9.3 Carbon monoxide alarms Carbon monoxide detectors should be provided in all properties where a gas appliance is present. The detectors must comply with BS EN 50291-1. The detector must be placed in an appropriate position in accordance with the manufacturers recommendations. As a minimum requirement, one carbon monoxide detector should be provided for each floor where there are bedrooms. 5.9.4 Electrical A full-fixed wiring check should be undertaken every five years and a visual wiring check should be undertaken on any change of tenancy. Any fixed electrical installation should be inspected and tested at intervals not exceeding five years by a suitably qualified person. An appropriate electrical certificate should be provided. Any alterations to the fixed electrical system should comply with the latest edition of Part P of the Building Regulations. All repairs/improvements must comply with the latest Institution of Engineering and Technology (IET) Wiring Regulations. All electrical items or equipment provided by the landlord, including kettles, fridges, cookers etc., should have a portable appliance test (PAT) by a competent person at least once every two years or at an appropriate date set by the tester. Brand new electrical items should be tested no later than two years from purchase or at an appropriate date set by the tester. 5.9.5 Gas A gas safety check must be carried out every 12 months by a Gas Safe registered engineer, and a record kept for two years. The responsible person must issue a copy of this safety check to each existing tenant within 28 days of the check being completed and to any new tenants before they move in. All gas appliances, flues etc. must be maintained in a safe condition in accordance with the Gas Safety (Installation and Use) Regulations 1998. New tenants should be shown how to turn off the gas supply in case of an emergency. If a fault is reported, this must be dealt with immediately.

5.10

Repairs
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You should take account of the character and prospective life of the property (or the relevant part), as well as the locality within which it is situatedwhen deciding on the appropriate level of repair. You should ensure a safe environment for the tenants and consider potential demands for improvements by the local housing authority under the HHSRS. The duties of the parties should be stated in the tenancy agreement, as set out in relevant legislation. You should be aware of repairing obligations imposed by statute and common law. You must take reasonable care to ensure paths, driveways and car parking areas are repaired so that they are safe to use. Gutters, downpipes and gullies should be cleared when necessary. You should notify tenants how and to whom repairs are to be reported and have an established procedure for dealing with urgent requests for repair work, particularly for out-of-office hours. You should deal with tenants reports of disrepair promptly, define the remedy which is the landlords responsibility and deal with this in a manner appropriate to their urgency. The tenancy agreement may stipulate the procedure for you to inspect the property and to view its condition, where under its terms or by statute for repairs, the landlord is responsible for repairs. If this is not stated, then you should inspect the condition and state of repair of the property at normal times of the day, provided that reasonable notice in writing (at least 24 hours) has been given to the tenant. If in doubt about the condition, you should recommend that a condition report be obtained from a qualified surveyor. You should arrange for repairs to be undertaken to completion within a reasonable time and, if necessary, to a pre-agreed programme. You should give a minimum of 24 hours notice before entering a property except in the case of an emergency. Emergency repairs, where there is an imminent risk to health, should be handled appropriately to reduce the risk, as soon as you are notified. Reasonable action should be taken within three hours and the issue should be remedied within 24 hours subject to the availability of parts. Urgent repairs should be assessed and categorised according to their severity and dealt with in an appropriate timescale. Non-urgent repairs should be dealt with within 28 days subject to the availability of parts. You should have a policy for undertaking works of let properties. Works should be carried out so as not to cause undue inconvenience to tenants. In the unlikely event that the works require tenants to be rehoused while they are undertaken, this should be negotiated with the tenants. This would only relate to urgent, unplanned major works or works required for health and safety reasons. Statutory codes of practice must be followed to ensure the safety of tenants and the workforce, and for efficiency of repairs. You should consult tenants before a programme of works is commenced, unless urgency or the tenancy agreement dictates otherwise. Works should be carried out to a reasonable minimum standard so that they do not need to be repeated within a short period of time relative to their nature and reasonable expectations of them. You should ensure that you have sufficient funds available prior to instructing a contractor and that the method of payment has been agreed between all parties prior to works commencing. You should agree a programme of cyclical maintenance for parts of the buildings, including plant and services, that require 20

regular maintenance. The programme should realistically reflect the cost of maintenance, including periodic redecoration work. When arranging construction works, you should be aware that tenants are entitled to the quiet enjoyment of their homes. You should seek to minimise disruption and consult tenants on the details and programme for carrying out such works. Reasonable allowance should be made in the programme for tenants absence, for example, when they are away from the property when the works are being undertaken and access is required.

5.11

Access

The tenancy agreement should contain provision for entry in emergencies. In the event that you hold a spare key, entry should only be with the express consent of the tenant, or in the case of a genuine emergency. Forced entry should only be considered if: it is an extreme emergency event such as a fire in the event of problems with gas, electrics or escape of water that pose real risk of injury or significant damage to the property or adjoining properties; or in the event that the tenant is unavailable or does not respond.

5.12

Insurance

The insurance obligations of the parties should be set out in the tenancy agreement. You should make the tenant aware of their responsibilities and the benefits of obtaining insurance, and send a copy of any relevant insurance policies to the tenant. When dealing with insurance issues,you should be mindful of the insurance regulations on regulated activities. Further guidance can be obtained from the Financial Conduct Authority (FCA) website (www.fca.org.uk). Where the obligations are not set out in the tenancy agreement and the FCA authorises you to do so, you should ensure there is appropriate insurance in place. You should have sufficient detail of the building insurance available to enable a claim to be made if necessary. When a claim arises and you are authorised to do so by the FCA, you should process it promptly and may charge for this service, depending on your terms of engagement. You should notify insurers of claims at the earliest opportunity. Tenants also have a right to notify insurers of possible claims where they pay the premium directly or it is recovered through a service charge. Claim settlements are normally payable to the insured, but should be treated as belonging to the persons suffering damage. Unless otherwise agreed, you should not deduct arrears or other payments due when passing them on to the claimant. Any arrangements regarding payment of any excess should be clearly set out in the tenancy agreement.

5.13

Anti-social behaviour

Anti-social behaviour should not be tolerated. Preventative measures should be taken, including work to build tenant communities which, by their nature, dissuade any form of anti-social behaviour. Where reports of such behaviour are received, these should be dealt with promptly and interviews held with all parties with referral to the appropriate agencies where necessary.

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5.14

Disputes

You should have written policies and procedures for handling disputes between occupiers and complaints of nuisance from neighbours. These procedures should be made available, their existence made known and the response times for their various stages included. You should deal with all parties fairly. On receipt of a written complaint you should investigate and, if under your control, enforce the conditions of occupancy on other residents in the building, subject to cost implications. If not under your control, you should advise the tenant to notify the local authority. The wide powers of local authorities are there to deal with antisocial behaviour, but you should have particular regard to complaints of racial harassment. In considering enforcement action you should have regard to the availability of supporting evidence and the willingness of others to attend any hearing that may be necessary. You should consider other methods of dispute resolution, such as mediation. For disputes between landlord and tenant, the tenancy agreement may contain a disputes procedure such as arbitration. Such formal arrangements may involve extra costs. You should try to resolve the dispute by informal means before turning to any formal provision in the tenancy agreement. Where not provided for in the tenancy agreement, you may consider suggesting arbitration or mediation by agreement, rather than litigation, as a means of settling particular disputes. However, the tenant should seek legal advice on any such suggestion. For disputes regarding tenancy deposits you should refer to the tenancy deposit protection scheme. You must respond promptly to complaints about your work. You must also have a formal written complaints handling procedure in place to deal with complaints about your work.

5.15

Recovering outstanding debts

If you do not receive payment of an invoice within the time period specified you should write a reminder that this is outstanding and give the tenant a further reasonable period in which to pay. If you intend to charge interest you should also refer to this in your letter. If you still do not receive payment this should be followed up with a telephone call to make sure that the tenant has received the invoice and to agree when this will be paid. If you still do not receive payment you could consider taking legal advice. Alternatively, you could consider: negotiation mediation conciliation; and arbitration.

Whichever method you use to recover outstanding debts you should continue to seek payment by way of telephone follow-up and to maintain contact with your client. If you are aware that your tenant is in financial difficulties you should try to negotiate a payment plan. If you intend to take any legal action you should firstly seek advice from your legal advisers.

5.16

Terminating a tenancy

To terminate a tenancy, the prescribed statutory notice must be served and, where necessary, court action taken to obtain possession. You should deal with matters fairly, promptly and in accordance with the tenancy agreement. In obtaining estimates for restoring the property and contents, fair wear and tear aside, you should ensure that all your actions are duly recorded. 22

There should be a system in place to monitor the response from a tenant regarding the vacation of a property when notice has been served. This procedure should be set out in the tenancy agreement. You should receive/collect all keys relating to the tenanted property on the day the tenancy terminates. The vacated property should be thoroughly inspected within 24 hours following vacation or on the next working day, to establish whether it has been returned to the landlord in the condition specified in the tenancy agreement. Regarding the inventory check-out, you should ensure that the tenant is given every opportunity to attend to this. The local authority and utility companies should be notified of the change in, or discontinuance of, occupation on the day the tenancy terminates. The tenants deposit should not be refunded until the final inspection has taken place and you are satisfied that the deposit should be refunded. You should aim to refund the deposit within a maximum of 10 working days. Partial or total non-return must be in accordance with the initial agreement. The grounds for any retention must be provided to the former tenant, in writing, if requested. You must comply with legislation in respect of the tenancy deposit protection scheme. If the tenant fails to vacate on the due date, you should investigate this immediately and take legal advice if necessary. Legal protection insurers should be advised, if such a policy is in existence.

5.17

Tenancy renewals

Where a tenancy is to be renewed you should obtain all the necessary consents. Where the tenancy is to be renewed by contract, a procedure should be in place for consulting the landlord well in advance of serving statutory notices. You should seek legal advice in connection with company tenancies, as the legal requirements for them will be different in many respects to lettings to individuals. Tenants and other residents may have a statutory right to remain in the property, therefore legal advice may also be required regarding this.

5.18

Obtaining possession

You must obtain a court order to enforce any right to possession of, or re-entry into, the property. You must serve a notice on the tenant of the intention to bring possession proceedings. The notice varies depending on the type of tenancy, the route adopted and the grounds used, but it must be served on all the tenants. It may be hand-delivered to them personally, or sent by post if the tenancy agreement allows for this. If serving by post, you should ensure you have proof of posting. Under relevant legislation, such as the Housing Act 1988 notices are prescribed and must be served in the correct form. You should seek legal advice regarding this.

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6 Handling other peoples money

6.1 Money laundering
You must have procedures in place to prevent and identify money laundering. You should put in place anti-money- laundering controls in order to anticipate and prevent your business being used by criminals to launder money or to fund terrorism. You should refer to the RICS publication, Money laundering guidance, July 2011 for further information.

6.2

Client accounts

6.2.1 General Sufficient accounts and records should be kept to show that money has been paid into a formal client account and to explain all dealings with that money. Client money should be held separately from other monies and agents must be able to account immediately for all the funds held. No deductions should be made from clients money without written permission. You should also ensure that you obtain your clients consent at the time of any deduction, or that you give your client sufficient notice prior to the deduction to object to it. You must be able to account immediately for any money that you hold on behalf of a client. You should advise your clients in writing that you would not be liable to repay lost money through bank failure. Money should only be withdrawn from a client account in the following cases: where it is properly required for payment to, or on behalf of, the person entitled to ask for it for payment of any remuneration or reimbursement of expenses in carrying out estate agency services to which the estate agent is entitled, with the written agreement of the client in the exercise of any lien to which the agent is entitled; for transfer to another client account; and when non-client money was used to open or maintain the account.

Bank charges should not be debited from a client account. Bank charges should be debited from your office account. In the case of a dedicated client bank account, it is common practice to debit bank charges, however, it is advisable to get the written permission of the client in advance and to take steps to ensure that the account does not go overdrawn as a result of the charges. A client account should at all times be in credit. There must not be any borrowing from one clients fund to pay another client or those entitled to receive money from the latters account. You should deposit your clients money into an FCA authorised bank or building society. The FCA regulates its authorised firms (banks) and protects the rights of customers. If an FCA authorised firm is unable, or is likely to be unable, to pay claims against it because of its financial circumstances, then the Financial Services Compensation Scheme (FSCS) may pay compensation. The FSCS is the UKs statutory fund of last resort for customers of authorised financial services firms. Claims for compensation arising from bank failures should be made to the FSCS if the claimant is eligible, however, you should give no guarantee as to the success or amount of any claim. More information about the scheme can be found on the FSCS website (www.fscs.org.uk).

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6.2.2

Deposits

Tenancy deposit money is a form of client money. The letting commission or other charges must not be taken from the deposit. Where the deposit is held as stakeholder, you are entitled to any interest earned. However, if you retain the interest, this should be set out in your terms of engagment with the landlord and stated in the tenancy agreement. You should exercise care at all times to ensure that the deposit is released only in compliance with the terms under which the deposit was originally held. 6.2.3 Statutory client accounts

Apart from deposits, the only money that can be paid into a statutory client account is: any minimum amount required to open or maintain the account, in which case it should be paid out again when it is no longer required for this purpose; and any amount needed to restore money that has been wrongly paid out of the account.

Interest earned on deposits should be credited, not to the statutory client account itself but to another account, which is normally the agents general client account. If you receive a sum of money where only part of it is a contract or pre-contract deposit, it should be split so that only the deposit is paid into the statutory client account. In the unlikely event that the sum cannot be split, the whole sum should be paid into the statutory client account and the balance then paid out. If you receive statutory client money the necessary accounts and records that may be required for inspection can include: cash books and ledger accounts for the statutory client money; supporting property files, which should include copies of all correspondence such as letters of instruction from the client (if any) and confirmation of instructions and letters to legal advisers counterfoils or duplicates of receipts issued for the statutory client money transfer journal showing the transfer from one statutory client account to another; and the latest auditors report relating to the accounts.

All accounts and records must be retained for a period of six years after the end of the accounting period to which they relate. Concerning payments into a statutory client account, the accounts and records must be able to show, in any particular case: 1. 2. 3. 4. 5. 6. 7. 8. 9. the amount received the name and address of the payee whether the sum received is a contract or pre-contract deposit, and whether it includes any sum in respect of a connected contract whether the sum includes any money that is not the statutory client money and, if so, for what purpose and in what form that part is received the interest in land to which the sum relates the identity of the person wishing to dispose of the relevant interest in land the capacity in which the sum is received the identity of the person from whom the sum is being received, if different from ( 2 ) ; and the date of receipt.

Concerning payments out of a statutory client account, the accounts and records must be able to show, in any particular case: 1. the amount 2. the identity of the payee 25

3. the date of payment; and 4. details of the interest in land to which the payment relates, together with information that may be necessary to identify the corresponding receipt in the statutory client account. In respect of payment of fees and commission for, or reimbursement of money expended in carrying out estate agency work in the exercise of any lien, accounts and records must be able to show the particulars necessary to verify to the client the reasons for such payment, e.g. a commission account or statement. Statutory client accounts should be audited within six months of the end of each accounting period, which must not exceed 12 months. You must obtain the necessary auditors report and to produce it on demand to a duly authorised officer of an enforcement authority, which is usually the local trading standards officer. In multi-branch practices, a copy of the auditors report should be sent and kept in each branch office, so that it can be produced on demand if necessary. For ease, this can be stored with the particulars of ownership. 6.2.4 Accounting for interest

You must account for interest to any person who is, for the time being, entitled to the money. Since the identity of the person entitled may change while the money is being held, there may be a duty to account to more than one person in respect of different periods of time. You can make an agreement in writing with your client regarding interest. However, to avoid the calculation of payment of very small amounts, interest is not payable in any case where the amount of the sum held is 500 or less, or where the interest payable to any particular person is less than 10.

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7 Overview of legislation
To be added following consultation.

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Private rented sector guidance

This guidance should be read in conjunction with the Private rented sector Code. Sections and numbers in the following guidance reflect those in the Code. The guidance provides additional advice and information to support the responsible person in complying with the requirements of the Code.

2 General responsibilities
2.2 Care and skill
The responsible person has both legal and ethical responsibilities. The legal responsibilities are set out within relevant legislation. Ethical obligations impose a higher level of responsibility and may have, not only legal, but also moral obligations. The resolution of issues often involves a subjective decision based on personal ethical values and those ethical rules set out in professional codes of conduct. Laws may also set out the legal responsibilities regarding the conduct of the responsible person. Professional ethics and the Real Estate Management Code set out the standards of performance and service the general public can expect to receive and ensure that the responsible person acts professionally at all times. There are many definitions of professionalism. A good example is as follows: Professionalism is the giving of ones best to ensure that clients interests are properly cared for, but in doing so the wider public interest is also recognised and respected. (Land and Brown, Professional Ethics and the Rules of Conduct of the RICS, College of Estate Management, 1997).

2.7

Advertising and marketing your business

Direct marketing via email must only be sent to an individual recipient (i.e. a customer, a sole trader or a partnership) who has consented, or opted-in, to the email being sent. Furthermore, the identity of the sender must be clearly provided, together with a valid address to which the recipient can send a request for such communications to cease. An exception to the opt-in requirement is when there is an existing customer relationship with recipients. In such cases, businesses may continue to market their own similar products and services to the recipients on an opt-out basis. This is where the recipients must be given a simple means of refusing the use of their contact details for direct marketing at the time when the details are collected and in each subsequent communication.

2.8

Social media

Social media, such as Twitter, Facebook, LinkedIn and blogging sites, are becoming increasingly mainstream tools for all aspects of business, but particularly in agency where networking is important. You should ensure that you do not unnecessarily restrict the use of such media, but remain mindful of the potential risks of staff spending excessive time on these websites and the need to retain a professional image. Social media offer significant opportunities for businesses to grow their brand capital. Such tools have also made it increasingly straightforward for individual employees to network with peers, create content online and comment upon anything they find in the virtual world.

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2.9

Risk management

In terms of bribery, what counts as adequate will depend on the bribery risks you face, and the nature, size and complexity of your business. You should follow six key principles to help you decide what, if anything, you need to do to manage the risk of bribery: 1 The action you take should be proportionate to the risks you face and to the size of your business. 2 You should ensure you have top level commitment to preventing bribery. 3 You should undertake a risk assessment and think about the bribery risks you might face. 4 Due diligence should be exercised. Knowing exactly who you are dealing with can help to protect your organisation from taking on people who might be less than trustworthy. You should ask questions and undertake checks before engaging others to represent you in any business dealings. 5 Communicating your policies and procedures to staff and others whom you work with will enhance awareness and help to deter bribery by making clear the basis on which your organisation does business. You should consider whether additional training or awareness raising would be appropriate or proportionate to the size and type of your business. 6 The risks you face and the effectiveness of your procedures may change over time. You should keep an eye on the anti-bribery steps that you have taken and ensure that they keep pace with any changes in the bribery risks you face.

2.10

Performance management

2.10.1 Asset management This section provides guidance on the management of individual assets to ensure maximum performance. 2.10.1.1 Performance measurement It is important to understand and measure the performance of individual real estate assets in terms of financial performance, which can include: rental growth capital growth return on capital employed; and operational costs.

Softer measures can also be taken into account, such as: occupier satisfaction employee satisfaction (of those working within the building); and accurate and timely actions.

Other measures might include: environmental performance; and service charges.

All these measures should be benchmarked to comparative data.

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2.10.1.2 Security of capital Capital value, in both nominal and real terms, is a critical consideration. It is acknowledged that leasehold interests are effectively wasting assets. At some point in the future they will come to an end and will therefore have no capital value. For these interests, it is necessary to ensure that you receive sufficient returns to compensate for the ultimate loss in capital. This can be achieved by way of a sinking fund. Capital values should be reviewed regularly and opportunities to increase them should be considered. Such opportunities may include: development redevelopment extension of the building; and lease restructures.

2.10.1.3 Security of income or indexation It is vital to ensure the real value of future incomes and this may involve some capital investment. To ensure security of income, the following should be undertaken: the availability of long leases regular rent reviews, at least in line with inflation lease restructures following negotiations with tenants planned maintenance programmes environmental management; and an active disposal and acquisition programme.

2.10.2 Portfolio management This section provides guidance on the management of property portfolios. 2.10.2.1 Introduction to portfolio management Portfolio management seeks to ensure the optimal performance of a real estate portfolio. The concepts can be applied equally to occupier and investment portfolios and should aim to: develop the portfolio strategy determine the optimal portfolio composition undertake portfolio analysis, comprising both a retrospective analysis of performance and an assessment of potential future performance in terms of both returns and risk undertake portfolio rationalisation and adjustment based on the results of the portfolio analysis; and review the strategic and tactical investment, or occupier objectives and decision criteria.

2.10.2.2 Portfolio strategy Prior to developing a portfolio strategy you should set your ultimate vision for the portfolio. You must: clearly understand what you wish to achieve acknowledge the culture of your organisation be prepared to prioritise and take decisions 30

be equipped to learn lessons from past projects and programmes; and evaluate your attitude to risk

The vision should set a clear direction and goal, and should be challenging but achievable. From the vision, you can then agree key objectives in terms of the performance of the portfolio over time. It is against these objectives that performance will be measured, so you should ensure that these are:

SMART:

Specific Measurable Attainable Relevant Timely

SMARTER:

They should also be capable of Evaluation Revaluation

These objectives can be set out as key performance indicators and should give a required rate of return for the portfolio or the individual assets within it.The strategy itself should comprise three stages: 1. Selection: the selection of the particular type of portfolio that appears to be the most appropriate to achieving your objectives and the selection of individual assets for this portfolio. 2. Allocation: a decision as to the appropriate level of capital to be expended on the portfolio as a whole, and on its individual sectors and assets. 3. Timing: a decision on the timescales for the acquisition, disposal and any restructuring of the portfolio and its individual assets.

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The implementation of the portfolio strategy may then involve acquisition, management and disposal of the individual properties within the portfolio. 2.10.2.3 Portfolio composition The key objective of any portfolio should be to maximise returns for an appropriate and agreed level of risk. You should set a required level of return and acceptable level of risk and include this within the portfolio strategy. You should also consider diversification of the portfolio in order to minimise risk. 2.10.3 Measurement and analysis of performance Performance is about achievement against targets and objectives. The degree of achievement should be expressed in quantitative terms. Some examples of what this may be are covered below. 2.10.3.1 Measurement of performance of investment portfolios For this type of portfolio, your required rate of return should be used as a key measure of performance; this return can be either time-weighted or money-weighted. In addition, you should assess the risk associated with the portfolio. This includes the following factors: variability of return on individual assets, groups of assets or sectors of the portfolio, and of the portfolio as a whole volatility of the rate of return on the portfolio (this will indicate the sensitivity of the rate of return on the market) diversification of the portfolio; and downside risk of the portfolio or the probability that the specified rate of return will not be achieved.

If it is found that the portfolio has not performed to the targets set, or met the objectives, you should not automatically consider this as a failure of the portfolio. You should consider unforeseeable changes that occurred during the period and any external circumstances that could have had an effect. Performance should be measured not just against internal targets, but with regard to external benchmarks. There are a range of market indices available and you should benchmark performance to those that are appropriate to your portfolio. When considering an appropriate index or indices, to adopt, you should take into account: the size of the underpinning database (this should be sufficiently large to allow reliable samples to be drawn) data obtained from a representative sample of competent valuers, ensuring that this is sufficiently wide; and the independence of the sources of data.

There are three main types of index: whole fund derived from special index portfolios; and based on data drawn from special locations. 2.10.3.2 Measurement of performance of corporate real estate portfolios For the measurement of performance of a property portfolio, it is unlikely that you will be able to use one single measure. A balanced scorecard approach should be used that encompasses wider performance measures in addition to financial measures. The measure of performance should be linked to the 32

corporate strategy. An example of a balanced scorecard approach is shown belowTable 1: Sample balanced scorecard approach Financial perspective How does the portfolio look to the shareholders or financial stakeholders? Measured by affordability ratio (total occupancy costs as a percentage of gross income). Customer perspective How do customers view the portfolio? Measured by an assessment of the perception of your tenants experience of your properties.

Internal business perspective What must the portfolio excel at? Measuring how the physical environment influences business performance.

Innovation and learning perspective Can the portfolio continue to improve and create value? Measured by the flexibility of assets and how quickly change can be accommodated.

(Source: Kaplan and Norton (1992) (adapted))

An alternative approach is to adopt a performance matrix focusing on measures for the key organisational stakeholders. These could include: employees facilities management and real estate teams business units; and corporate stakeholders. 2.10.4 Action planning and prioritising Following an appraisal of portfolio performance, the next stage should be to establish an action plan to focus on important areas of improvement, rationalisation requirements and restructuring of the portfolio and to maintain progress that has been made. The plan should set out clear actions, identifying who will take responsibility for each action, with a timetable for progress and achievement. 2.10.5 Reporting The appraisal and measurement of the portfolios performance should be reported to your primary stakeholders, importantly including your tenants. It is vital that all parties identified in the action plan have the opportunity for input into this process. Good communication should ensure that progress against objectives is clearly reported. There will be a need to ensure communication to different stakeholders with different messages and reporting structures simultaneously.

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2.12

Discrimination

Vulnerability can include anything that may have an impact on a persons ability to make a sound and reasoned decision. Assessing the potential vulnerability of a tenant can be a sensitive matter and may require you to make a judgment. Staff should understand their obligations in this area and you should have in place appropriate procedures and relevant training to deal with these matters. You must be willing and able to offer appropriate advice about the transaction process to all potential and actual tenants. You should not make assumptions about the degree of knowledge that a person has, but be prepared to set out all the necessary information, and explain what you will do and what others (e.g. legal advisers, surveyors, financial advisers, lenders) will do. If, in your opinion, the tenant may be vulnerable you should take this into account in any information or guidance you give particularly if any decision the tenant makes is based solely on that information or advice. If a tenant makes a decision that may have legal connotations, you should explain that they should seek legal advice. You might also consider speaking to their legal advisers if you are concerned about any decisions that are being taken. Examples of vulnerability may be: unfamiliarity with, or difficulty in understanding, the letting process physical disabilities mental disabilities language barriers personal circumstances (e.g. divorce, bereavement) the elderly duress or pressure from another person; and financial circumstances forcing a decision to rent.

Of course, tenants have the ultimate responsibility for their decisions, but you should ensure that each individual is given all the relevant information necessary to make as informed a decision as possible in the circumstances. The key questions to consider in relation to vulnerable c ons um ers are the following: Were you aware that the tenant had any special difficulty? If so, did you take this into account and provide the t e n a n t with appropriate information and advice? Are you satisfied that the tenant has made his or her decision independently and based on the correct information?

2.14

Complaints

Records of complaints should include: the time and date of the complaint; the name of person who made the complaint; the name of any properly appointed representative of the complainant; the address and contact details of the person who made the complaint and any representative; the person to whom the complaint was made; the exact details of the complaint 34

the date that an acknowledgment of receipt was sent details of the internal investigation the n a m e o f t h e person who undertook the internal investigation the outcome of the internal investigation a copy of the written outcome of the investigation as sent to the complainant details of any further internal investigation; and

a copy of the written statement advising the complainant of the outcome and of the steps the complainant could take to refer the complaint to a redress scheme.

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3 Engaging a managing agent

3.2 Conflict of interest checks
A conflict of interest is anything that impedes the agents ability to focus on their clients best interests. This is a matter for their judgment, not the clients. The agent must make every attempt to avoid any conflict of interest that might not be in your best interest. Agents must mitigate conflicts of interest and deal with them openly, fairly and immediately as they arise.

3.3

Confirming your identity

If you are an individual this will include asking for your full name, residential address and date of birth and verifying this information through the use of documents, data, or information such as: a passport a photo card driving licence; or a national identity card.

If you do not have these documents then the agent may ask for the following: a government issued document (without a photo) which includes a full name an old-style driving licence; or recent evidence of entitlement to state- or local authority-funded benefit such as local housing allowance, council tax benefit or pension tax credit.

This will need to be supported by secondary evidence such as: a utility bill a bank, building society or credit union statement; or the most recent mortgage statement from a recognised lender.

If you operate as a business the Agent will wish to identify the firm itself and to ensure that you have the authority to act on behalf of the firm.

3.5

Terms of engagement

Terms of engagement can include a single document, or a number of documents, which are to be read in conjunction with each other. The terms should be fair and the documentation s h o u l d b e written in plain English. If an agent offers standard terms of engagement, landlords should ensure that they are given an opportunity to negotiate individual terms.

3.7

Itemised costs

These charges might include the costs of to let boards, brochures, property particulars and photography. The figure will be based on either the actual cost of providing each service as it occurs, or the average cost of providing each service on a regular basis. Where such expenditure is involved, the agent must identify each item, together with the actual or estimated charge for it, to the client at the outset. This must then appear in itemised form in the final account. All charges given should include value added tax (VAT).

3.10

Commissioning other documentation

There is no defined form of procurement for these documents, but agents must make it clear how these will be produced within the terms of engagement. In some cases they may be produced by the 0gent, 36

while in others they must be externally produced. The agent should be satisfied with the ability of any external provider to meet the necessary timescales. The method of payment for these documents should also be clearly set out in the terms of engagement. When marketing a property, you must ensure an Energy Performance Certificate (EPC) is available. The requirement for the provision of an EPC may also necessitate additional items to be added to the terms of engagement. An EPC presents a buildings energy efficiency in the form of an asset rating. This is similar to the system used to rate white goods, such as fridges and washing machines. It will also highlight recommendations which are not mandatory but, if carried out, will make the property more energy efficient and reduce heating costs. An EPC will include: recommendations for measures to improve the energy efficiency of the property, with an indication of the notional energy savings whether the measures meet the requirements of the Green Deal; and details, if applicable, of whether there is a Green Deal already on the property. An EPC and its recommendation report is valid for ten years from the date of issue. In England and Wales, the EPC must be provided by a domestic energy assessor (DEA) who is a member of a government-approved accreditation scheme and is therefore qualified to carry out inspections.

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4 Lettings
4.1 Marketing

Targeting a specific market does not mean that you have to exclude people that do not fit your criteria. It does, however, allow you to focus your communication to a specific tenant market. In order to link your product to your market you will first need to identify your target market. In identifying your target market you should have regard to: Your current tenants Your competitors The key features of your portfolio

You should then consider any market segmentation including: age groups education or interests occupations average incomes lifestyle requirements

Specific market sectors might include: Young professionals Students The retired Young families working towards ownership in the future

The facilities offered will then be linked to the chosen sector. For example:Young professionals Gyms, meeting rooms and an additional bedroom for sharers. Club room. ConciergeStudents Club room and inter room communications and social networking. Fast broadband and free Wifi. Retired Larger rooms, ensuite bathroom, service provision for maintenance and home help. Concierge. Young families working towards ownership two bedrooms, room for family growth and provision of investment advice (subject to financial regulations). A marketing strategy should include: your analysis of the current market (local and national) for the property; the likely rent; your opinion of the average timescale for lettings from marketing to completion; your approach to marketing, for example: sales particulars, office/window displays, to let boards, inclusion on your website and/or others (as appropriate), 38

 newspaper advertisements (e.g. number, newspaper, timescale), newspaper editorial columns, in-house property guides, specialist publications, video presentations, 360-degree photography, and/or other methods of advertising and promoting the property (e.g. open days); the mechanism for reviewing the marketing strategy which could include: periods for reviews, reasons why changes may be needed. This assessment will be based on market evidence and will take account of the proposed period and nature of letting. You may ask for both a recommended marketing rent and the likely contract rent.

4.2

Advertising

Reasonable care should be taken when describing property as unfurnished, furnished, part furnished or fully furnished so that potential tenants are not misled as to what fixtures and fittings might be included. Whenever possible, marketing particulars should be drafted by a member of staff who has inspected the property and reliance should not be placed on information in old particulars or from a previous letting. Where any information given in particulars cannot be checked, this should be clearly stated. It is vital that particulars are checked thoroughly against the original inspection notes. 4.2.1 To let boards The majority of to let boards benefit from deemed consent and do not, therefore, require planning consent. However, the boards must comply with the following criteria: No more than one advertising board can be displayed on a property, unless it includes two different advertisements joined together as one board. Therefore, if you are using joint agents, the two boards should be joined together, one to the front and one to the back. This applies even if the property has two separate frontages. The first to be displayed shall be taken to be the one permitted. Boards must not exceed 0.5m in area, or a total of 0.6m for two joined boards. No board advertising a property for sale can exceed 4.6m in height above ground level. The only exception is where the building on which the board is displayed already exceeds that level, for example, a flat/office at first floor level or above. There may be other exceptions in areas of special control (for example, conservation areas). You should check specific requirements with the local authority. Any board displayed on a building must not project from the face of the building by more than 1m. Any board advertising property to let must be displayed on the property to which it relates. This is quite specific and, in the case of a block of flats, would mean on the flat that is for sale or to let, or in any part of the grounds that are enjoyed by that flat. The display of a number of boards on the communal area of a block of flats, or at the entrance to the access road from a public highway, would be in contravention of legislation. One board indicating flats for sale could be displayed, with the for sale board on the respective flat or its grounds only. A board positioned on a highway verge advertising an adjacent property would also be illegal as the board is not being displayed on the property advertised. It would also contravene highway legislation and frequently causes obstruction and danger to users of the highway. Any board advertising a property for sale must be removed within 14 days of the completion of the sale. Care should be taken with placement of sold boards where the sale has not yet completed, as 39
2 2

the local authority is entitled to assume once a sold board is placed that the sale has finished and that the 14-day time period has begun. Where a third-party contractor is employed to deal with boards, you still retain the primary responsibility for the status of boards, so the contractors work should be checked regularly.

4.3

Viewings

Viewings can either be on an individual basis or as an open house. Individual viewings can be very useful in helping you to qualify buyers by finding out details of their personal and financial circumstances. You should seek to ensure that only staff with personal knowledge of the property provide information beyond that stated on the written particulars. Material omissions would include issues that you are either aware of, or should reasonably be aware of, and that would or could influence the tenants decision. All questions should be answered truthfully When accompanying a potential tenant on a viewing you should: record the name, address and phone number (including a land line) of the potential tenant in a book or on a system that is available to all staff; redial the number to check the authenticity of the person before leaving for the appointment; obtain as much information as possible from the tenant (e.g. employment details, car registration), and ask if he or she has property particulars so you can check those against your mailing list; whenever possible, arrange to meet the tenant at your office f i r s t and not at the property; enter the property after the potential tenant and keep yourself between the exit and him or her, so if you do have to leave in a hurry, you have as few obstacles as possible in your way; advise your colleagues of your anticipated time of return to the office; implement a callback system so that you can report back to the office soon after the completion of the viewing; make sure other members of staff are aware of a distress code so that you can report to the office by phone and alert help without further compromising your safety; never give out your home phone number; take a second person with you if there is the slightest feeling of risk; carry a personal alarm and a charged mobile phone, and pre-programme it with an emergency number; and if in doubt, ask tenants for additional means of identification (e.g. drivers licence).

4.4

Agreeing the letting

The use of an assured shorthold tenancy will allow you the flexibility to reflect individual requirements and your own objectives. Longer term fixed term tenancies will: avoid potential periods of vacancy between tenants reduce the costs of having to find new tenants and other reletting costs; and give a greater incentive to tenants to take good care of the property as their long-term home. Generally, heads of terms letters should be marked subject to contract. You should consult an accountant 40

with regard to income tax, particularly if you are resident overseas, as special rules apply in this situation.

4.5

Deposits

A tena nc y de pos it is defined as money held as security against the failure of the tenant to perform an obligation under the tenancy. It is not necessarily the same as rent in advance, which is a pre-payment of rent, however, the court will look at each situation individually. Rent taken far in advance of a period to which it applies (e.g. where the last months rent is taken at the start of the tenancy) may well be viewed as a deposit. If a deposit has not been protected you can be ordered to repayup to three times the amount of the deposit and a LL cannot serve a Section 21 notice terminating the tenancy until certain procedures have been followed. There are some no deposit schemes enabling accommodation to be let without asking for any deposit as an alternative to the government schemes. An insurance policy can be purchased, usually for a fixed fee, instead of having to provide a deposit or bond.

4.6

References and credit checks

You should obtain the following references in writing: Bank/credit references: these can be limited, so if you feel more detailed information is required, other financial checks should be considered. Current employer: the employer should confirm whether the tenant is in permanent employment or otherwise, how long the tenant has been in employment and the level of remuneration. Previous/present landlord: confirmation should be given from the landlord that the rent was/has been paid promptly and is not owing, and that the property was/is being kept in satisfactory order. Proof of previous residence: this is needed if there is no previous landlord, for example, a mortgage statement. Solicitor/accountant: this is appropriate if the applicant is self-employed, however, like bank references these are often limited and other financial checks may also be necessary. The checking of an individuals credit record is controlled under the Consumer Credit Act 1974. If you cannot fully reference a potential tenant because, for example, the tenant has just started working, you should consider: if asking for six months rent in advance, although you may need to see the mortgage consent this has other legal implications; seeking a higher deposit; granting a six-month tenancy only and then re-referencing at its expiry; or

seeking a guarantor for whom you should also take up references. Legal advice should be sought when choosing this course.

4.7

Inventory

The inventory, with a schedule of condition as to that of the dcor, fixtures, furniture, equipment and effects, should be prepared to ensure that the prospective tenant knows what is to be included. Ideally, this should be checked with the tenant, who should then sign the document at the time of checking. If this is not possible, you should provide the tenant with a copy to report any alterations and subsequent adjustments as appropriate, which should be returned within a reasonable period after commencement of the tenancy. In any case, it will be very difficult for a landlord to prove any claim against the tenants deposit without a reliable inventory and schedule of condition taken at both the start and end of the tenancy. 41

You can find further guidance regarding inventories in A guide to best practice for inventory providers published jointly by RICS, ARLA, Asset Skills and NAEA.

4.8

Formal agreement

There are a number of different types of tenancy agreement available that may be appropriate, depending on your specific requirements and those of the potential tenant. The assured shorthold tenancy (AST) is the standard form of letting for new tenancies in England. Landlords of ASTs are entitled to regain possession of their property at the end of the term, subject to the following statutory notice requirements: the landlord must give at least two months notice that possession is required; and possession will only be awarded after the tenant has occupied the property for at least six months. These restrictions do not apply to situations where the landlord can make out one of the grounds for possession. The tenant may apply to a rent assessment committee to have the rent considered if the tenant believes the rent to be significantly higher than that for comparable tenancies in the area. If the landlord is to sign the agreement personally but will not be present when the tenant signs it, either two counterpart copies should be signed by the tenant and the original signed by the landlord and exchanged, or two identical copies should be used and one sent to each party to sign and then exchange. Any appropriate notices must be issued prior to execution of the agreement. The liability for stamp duty land tax (if appropriate) will be that of the tenant. Further details can be found on the HMRC website (www.hmrc.gov.uk). For a managed property, it is recommended that you hold a set of keys in the office for emergencies. However, you should be aware of any possible insurance implications of this and should also explain to the tenant any circumstances in which any keys you hold may be used.

4.11

Company lets

A company here is construed widely and may include a partnership (both conventional and limited liability), as well as a limited or public limited company. It is often the case, however, that under the companys license agreement the licensee (the occupant) is required to pay council tax and utilities, while the company pays the rent. You should always ensure that the company tenant is liable for any default of payments of any costs, whatever arrangement is made by the company with its employee. Generally, the landlord should not have much involvement with the relationship between company and licensee, and should focus on holding the company responsible for all defaults. Lettings to companies fall outside the Housing Act 1988 and so ASTs should not be used for company lets. Therefore, company lets will have their own tenancy agreements and, in many cases, the company itself will have its own form of agreement. The agreement must be a common law letting agreement, which allows the company employee to occupy the premises as a licensee only. You should reserve the right for your client to review and propose amendments to any standard agreement, or should provide your own agreement approved by your legal advisers. You should ensure that the company does not allow a business to be carried out from the premises, as 42

this could in effect become a business tenancy and could, therefore, provide security of tenure under the Landlord and Tenant Act 1954. A reasonable amount of home-working by the employee is permissible, however. The tenancy agreement should include a clause making clear that money paid by the licensee toward the rent will be paid as an agent on behalf of the company and will not give the licensee rights as a company tenant. This is to prevent the employee from making a payment and then asserting that he or she is a tenant with protection under the Housing Act 1988. The tenancy agreement should also make clear that it is for the company tenant to provide the landlord with vacant possession of the property at the end of the tenancy. This avoids the situation of the employee no longer working for the company, and the company then ending the tenancy with the employee remaining in the property and refusing to leave. Letting to a small or new company, or one that is incorporated or has the majority of its assets overseas, may be more risky, therefore in these circumstances you should seek personal guarantees from the directors. Generally, rents for company lets are payable quarterly, although some companies prefer to pay rent as a lump sum in advance. Many companies like to have built-in flexibility due to movement of their staff and may, therefore, require a break clause. It may be more appropriate to negotiate conditions for such a clause, for example, that the clause be operated only if the licensee is being relocated outside a certain radius of the property or is no longer employed by the company. Many companies will also seek an option to renew on specified terms. You should make sure your client understands that he or she will be bound by an option to renew and that the option is that of the company tenant and not the landlord. However, you should ensure that the option is limited in scope, cannot be exercised if the company tenant is in breach of the terms of the tenancy and includes a mechanism for increasing the rent. It is common practice to reserve the right to replace one licensee with another employee of the company, but you should seek to negotiate a clause that the LL has the right to approve any replacement licensee. It is important to remember that if the property is occupied by a number of individuals who do not form a single family, it may then become an HMO and the provisions relating to that legislation will apply. It is important therefore to ensure that the company does not replace a family with a group of sharers without consent. You should ideally seek a security deposit. Where a cash deposit is paid this should be held by a stakeholder, independent of both parties, who will only release the funds upon approval by both parties. The security deposit does not require protection under the Housing Act 2004 as the tenancy is not an AST. As with individual lettings you should arrange a formal inventory check at the start and end of the lease.

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5 Property management
5.1 Actions following a new letting

The address for the service of notices must be within the same legal jurisdiction as the property and could be your own address. Until such information is provided, any rent is deemed not to be lawfully due from the tenant. Where a written demand is issued to a tenant, it must contain your clients name and address. If the address is not in the UK, an alternative UK address at which the tenant may serve notices of proceedings should be provided.

5.4

Housing health and safety rating system

The Housing health and safety rating system (HHSRS) is used to assess conditions in all private properties, including those that are owner-occupied or rented to single people and families, and HMOs. Properties are assessed against 29 potential hazards, such as excess cold, falls on stairs, damp and mould growth and noise, against which local authorities can, in some circumstances, take action. When a hazard is identified in a property, two tests must be applied: What is the likelihood of a dangerous occurrence as a result of this hazard? If there is a dangerous occurrence, what would the likely outcome be? Based on the likelihood and severity of the outcome, a hazard score is generated. Hazard scores are divided into ten bands, with band A being the most serious and band J being the least serious. Those that fall into bands A to C are further classified as category 1 hazards, and those in bands D to J are category 2 hazards. Local authorities have a duty to take some enforcement action where category 1 hazards exist, and have a discretionary power to act where there are category 2 hazards. Enforcement action involves the local authority serving legal notices on the owner and/or manager of the property and requiring certain works to be carried out within a specific timescale. As the manager of the property is considered to be the person receiving the rent on behalf of another, you should be aware that this legal obligation may be served to estate agents. Therefore you should ensure that your terms of engagement allow you to carry out such works and to recover the costs of doing so. If you feel a property has category 1 or 2 hazard, the landlord should be recommended to rectify them before the property is let. A category 1 or 2 hazard will not prevent a property from being let or necessarily give rise to any liability to the tenant. However, it might prove difficult to obtain access to complete the required works if a formal notice is served upon a local authority inspection. Further information regarding the HHSRS can be found at www.communities.gov.uk.

5.5

Houses in multiple occupation

For town and country planning purposes in England, use class C4 covers all shared dwellings occupied by three to six unrelated individuals who share basic amenities. Where there are more than six unrelated people, the property is then classified as a large HMO and does not fall within any use class, but is a sui generis use. A family dwelling (in use class C3) may change to a small house in multiple occupation of up to six 44

people in use class C4 as permitted development without the need for planning permission. Similarly, no planning permission is required to change from a HMO (use class C4) to a family dwelling house (use class C3). However, where local authorities determine that a local need to control the spread of HMOs is present, they can use existing powers granted by article 4 Directions to remove this form of permitted development. Therefore, in these in specific locations, such a change between a family dwelling house and small HMO will require the submission of a planning application to the local authority. You should check with the relevant local authority to confirm if it has used these powers. The definition of HMOs for town and country planning purposes is the same as that contained in section 254 of the Housing Act 2004, but a need to obtain planning consent does not also mean that there is a need to obtain a property licence. Therefore, care should be taken to distinguish the two requirements, particularly as this may be confusing for your client. For Housing Act 2004 purposes, a building is considered an HMO if: an entire house or flat is let to three or more tenants who form two or more households and who share one or more basic amenities (e.g. kitchen, bathroom or toilet) a house that has been converted entirely into bedsits, or other non-self-contained accommodation, is let to three or more tenants who form two or more households and who share one or more basic amenities a converted house that contains one or more flats, which are not wholly self-contained (i.e. some basic amenities are shared), is occupied by three or more tenants who form two or more households; or a building is converted into self-contained flats, more than one third of the flats are let on short-term tenancies and the conversion does not comply with Building Regulations 1991 or subsequent building regulations. These properties do not fall within the C4 use class. A house or flat let to friends would meet this criteria and would therefore be considered an HMO. A HMO licence is mandatory for properties of three or more storeys occupied by five or more people in two or more households. Local authorities are also able to apply additional licensing requirements for other types of HMO. You should refer to the relevant local authority to find out whether it has additional licensing requirements. Where the property is an HMO, there are two sets of standards: the governments national standards which set the broad overall requirements; and additional standards that have been devised and set by local authorities. It is essential that: the property and all equipment meets the requirements of the relevant regulations the property is reasonably suitable (or will become so through works required by a condition) for occupation by the number of persons permitted under the licence, with regard to prescribed standards the property has a satisfactory HHSRS rating (this is separate from the licence and is often assessed by the local authority later) the applicant and anyone associated with the management of the HMO are fit and proper persons; and 45

 the property is suitable for the number of occupiers stated by the landlord. Where a property is being let to a tenant who has a tenancy for only part of a building, the primary liability for council tax will fall to the landlord, even if the tenancy agreement specifies that it is to be paid by the tenant. (The exception is where a building has been specifically designed or adapted to be let as multiple dwellings.) The landlord can seek reimbursement from the tenant provided the tenancy agreement allows for this.

5.6

Rent

5.6.1 Rent payments and review of rent The rent review procedure may be a statutory notice otherwise it may be the procedure set out in the tenancy agreement. You should refer to the relevant legislation for further guidance. You should consider the implications of increasing rent on your tenant since you may prefer to keep a reliable tenant at a lower rent rather than risk losing this tenant due to a rent increase. 5.6.2 Local housing allowance and rent A qualifying tenants housing benefit will be based on the appropriate local housing allowance (LHA). The monies will normally be paid directly to the tenant, whose responsibility it will be to pay those monies to you or the landlord. In certain limited circumstances, such as when the tenant is consistently failing to pass the money on, payments can be made directly to the landlord. You should make tenants aware of the guidance available from their local authority. Where you receive payments directly from the local authority, circumstances can arise where the tenant is not entitled to those payments. In such case, the local authority can claw back the payment not from the tenant, but from the person to whom it has been paid. A payee who knows of a relevant change in a tenants circumstances but does not inform the LHA is likely to face a claw back for which the local authority is not time-bound. Therefore, while direct payment from the local authority is a good way to collect rent, may be liable to repay any overpaid monies and will then need to proceed against the tenant to recover any underpayment for rent resulting from this. When signing the agreement, tenants should be made aware that they are committed to pay the rent, whether or not they are entitled to receive housing benefit. In addition, a shortfall of housing benefit may result in you pursuing them directly for recovery. You are advised to obtain a suitable indemnity from your client in connection with the recovery of clawback. 5.6.3 Arrears ASTs contain mandatory grounds for possession when the tenant is two months in arrears, while for tenancies that fall outside the Housing Act 1988, any rent arrears form grounds for possession. It is a criminal offence to evict a tenant without a possession order. In addition, the tenant will be able to pursue you for damages through the court, which will probably exceed any arrears of rent that exist.

5.9
5.9.3

Services
Carbon monoxide alarms

The carbon monoxide detector should be close to the bedrooms so that it is audible and capable of waking a sleeping person, and ideally on a wall 1.6m above floor level or on the ceiling. In rooms with 46

sloped ceilings, the detector should be located at the high side of the room. The alarm detector should be placed at least a metre away from boilers, fires, cookers or heaters and should not be installed in any of the following areas: in or below a cupboard in a damp or humid area directly above a sink or cooker next to a door or window or anywhere that would be affected by draughts where the airflow to the detector would be obstructed by curtains or furniture in an area where the temperature could drop below -10C or above 40C; or where it could be easily knocked or damaged.

5.12

Insurance

Where the obligations are not set out in the tenancy agreement and the FCA authorises you to do so, you should: check the risks against which the property and all its facilities should be insured; ensure that there is appropriate insurance for a let property, particularly where a former owneroccupied property is being let for the first time, and arrange for the various insurances in accordance with your clients instructions and in compliance with the tenancy agreement; periodically review the extent of cover and the level of premiums; consider insuring for the provision of alternative accommodation (if necessary, over and above that provided for in a standard household policy) and, where appropriate, for the employers liability, legal fees, fidelity, engineering, public liability and communal contents to protect the parties from unexpected liabilities have regard to your experience of specific insurance companies handling of claims and general terms, as well as the premium being charged when selecting an insurance company; and recommend an independent insurance broker where appropriate. When a claim has to be made for an insured risk on a buildings policy, it is increasingly common for the claim to be subject to an excess imposed by the insurance company. This should be considered as part of the cost of insurance otherwise it would be impossible to insure certain buildings without a n excess, or the premium would be extraordinarily high and uneconomical. You should consider including in the terms of the tenancy agreement a provision that entitles you to recover the excess from the tenant where an insurance claim is the result of a negligent act by the tenant. Alternatively, where the tenant has paid a deposit, you may consider including a provision entitling you to deduct the excess from the deposit. In all cases, this should be clearly set out in the tenancy agreement.

5.15

Recovering outstanding debts

You should consider involving: your accountant, who may offer debt collection services as well as advice on credit control and debt collection procedures; or your legal advisers, who will be able to issue a letter that may be more persuasive than one that you send. You should agree a fee for any debt collection service in advance. However, in some cases it might be most beneficial to use a debt collection agency. The advantages of using an agency are that: it has the time, expertise and resources needed for the job 47

 it can be a fast method of recovering debts if the agency is polite and professional, you may maintain relationships with the person owing you money, assuming you want to, which is less likely to be the case if you take legal action; and the agency can instruct solicitors on your behalf The disadvantages are that: an agency can be costly, as it generally will charge a commission on the money recovered; this may affect your future relationship with the person owing you money; and an agency can be perceived as heavy-handed and can have a detrimental effect on your reputation. If you decide to use this option, you should check that the agency is registered with the Credit Services Association (see www.csa-uk.com). If you decide not to use any of the methods, or the debt remains outstanding, you may need to consider court action as a method of last resort. Before taking this step you should determine whether this will be cost effective and the effect it may have on your reputation locally. It might be cheaper, and have less effect on your future business, to write off small sums. If you are considering legal action, you provide advice about any redress scheme. You should do this before issuing proceedings. If court action still seems to be the best solution, before you take this step you should ensure that you have resolved any dispute there might have been over your service. If you do not do this, the debt will be difficult to recover.

5.18

Obtaining possession

Under standard procedure, the court will issue a summons to the tenant. Depending on the availability of the local court, it generally takes about two to three months to obtain a hearing date. The tenant will be required to attend and, under an informal procedure, the judge will ask the landlord to explain the possession claim. The tenant will then be asked to submit any defence against the claim. If the claim is successful, the judge will award a possession order to the landlord, plus a judgment for any rent arrears outstanding, court fees and any other reasonable costs claimed by the landlord. The tenant will then be required to leave the property on or before the date given on the possession order. If a tenant fails to leave on that date, it will be necessary to instruct the court bailiff to evict the tenant.

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6 Handling other peoples money

6.1 Money laundering

Money laundering is the way criminals conceal the origin and true ownership of the proceeds of their criminal activities so that it appears to have come from a legitimate source, thereby changing the proceeds from dirty money to clean.

6.2
6.2.3

Client accounts
Statutory client accounts

The auditor must report whether, in his or her opinion, the manner in which statutory client money is handled substantially complies with the requirements of the legislation. You can still be in compliance if the auditor finds certain trivial breaches due to clerical errors or mistakes in bookkeeping, as long as all breaches are rectified on discovery and none have resulted in any loss to the person entitled to the money. You will have to supply the auditor with details of all bank accounts maintained during the appropriate accounting period. You must also allow the auditor to examine all the relevant accounts and records, and must supply whatever information and explanations that are requested by the auditor. There is no particular required form for the auditors report, but the Consultative Committee of Accounting Bodies (CCAB) produces a model form that could be instructive. The Regulations do not require the report to be sent to anyone (including the OFT). 6.2.4 Accounting for interest Interest is calculated in the following ways: Where the money is held, or has been held, in a separate account on its own at an authorised institution, the interest payable is the interest actually earned. Where the money is held, or has been held, in a general statutory client account at an authorised institution, the interest payable is what could have been earned had the money been kept in a separate deposit account. In this event, there is no obligation to obtain the best rate, but merely the actual rate of interest payable by the institution at which the account is held. Where, in contravention of the legal requirements, the deposit has not been paid into a client account, then the interest payable should be calculated at the highest rate offered at any of the institutions with which you maintain a client account. Where you do not maintain any client accounts at all, the interest payable must be calculated at the highest rate offered during the relevant period by any of the authorised institutions.

The liability for interest on deposits is most likely to arise when there is a pre-contract deposit of more than 500, or a contract deposit of more than 500 held as agent for the seller. In this connection, it is important to ensure that if a deposit is to be paid to the auctioneer upon a sale by auction, then the special conditions of sale should provide for the deposit to be held as stakeholder, thus avoiding any problems of interest. In order to make a calculation of interest simple, deposits of more than 500, except perhaps those to be held as stakeholder, could be paid into separate and designated deposit accounts. This might be sensible if the payment is large (e.g. more than 1,000), but is perhaps unnecessary in the case of smaller payments.

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7 Overview of legislation
To be added.

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