From January next year, anyone who carries out letting agency work will have to comply with a new Code of Practice. Letting agency work entails either or both of the following, carried out in the course of business:

  • working on behalf of a private landlord who has granted or is seeking to grant leases or occupancy agreements over their property to a tenant for use as their home; or
  • managing residential property that is leased or is going to be leased to a tenant. Managing would include collecting rent, inspecting the property and arranging for repairs and maintenance and insurance for the property.

Standards of practice

The overarching standards of practice set out in the Code call for letting agents to deal honestly, openly and transparently with their current, former and prospective clients. Communications with clients should be clear and accessible; never false or misleading or abusive; and, private information handled sensitively and in line with legal requirements. Unlawful discrimination is banned and the agents should provide services and deal with complaints within reasonable timescales. They must also make sure that their staff and sub-contractors are fully aware of the Code and all legal requirements on the letting of residential property.

The other sections of the Code deal with the engagement of landlords; how lettings should be advertised and agreed; management and maintenance of the property and collection of rent; how the tenancy should be brought to an end; and dispute resolution. The Code also spells out how landlords’ and tenants’ money should be handled.

Changes are being considered for those who do not hold client money but for those letting agents who do hold money, they will have to:

  • lodge client money in a separate dedicated account with a bank or building society authorised by the Financial Conduct Authority that contains only client money; and
  • hold client money protection which can be obtained by becoming a member of a relevant industry or professional body or through specialist insurance brokers.

All letting agents will have to hold professional indemnity insurance on a full civil liability basis, which should be retroactive where possible.

The Register of Letting Agents

There will also be a mandatory Register of Letting Agents in Scotland and training requirements for at least one person in every office carrying out letting agency work.

Training requirements

Before registering, letting agent organisations must ensure that the following people have the necessary qualification and, if applicable, further training:

  • the person who holds the most senior position in the organisation’s management structure and is involved in the day-to-day running of the letting agency work; and
  • every person directly concerned with managing and supervising the day-to-day running of the letting agency work.

All persons in an organisation with the above responsibilities must meet the training requirements. It is also necessary for each office carrying out letting agency work to have at least one person who meets the training requirements. This applies to all organisations doing letting agency work in Scotland, including those based outwith Scotland.

The Scottish Government guidance advises that there are currently three qualifications that are considered acceptable:

Those already holding the relevant qualifications will have to show that they have undertaken at least 20 hours training on letting agency work if their qualification is more than three years old.

Who must register?

It will be mandatory for the business or, if the business is a sole trader, the individual carrying out the letting agency work, to register. Any business based outside Scotland carrying out letting agency work in Scotland will also have to join the Register. Those directly employed to let and manage property that is owned by their employer will not have to join the Register but the Scottish Government warns that each person’s circumstances will have to be taken into account and the exact terms of their employment should be checked.

A fit and proper person test will form part of the registration process. If a company is applying, the company itself will be assessed and also the following people:

  • the person who holds the most senior position in the organisation’s management structure; and
  • anyone who owns more than 25% of the business; and
  • any other person or business who is directly involved in the control or governance of the letting agency work carried out by the business

It should be noted that there is a difference between the need to register as a landlord and the need to register as a letting agent. Private landlord registration and holding HMO licences do not relieve a letting agent from the obligation to register in the Letting Agents Register.

Applications for registration in the new Register will be accepted from early 2018 and must be submitted by 30 September 2018.

If an application for registration is accepted, the letting agent will be issued with a “letting agent registration number”, which should appear in all correspondence, documentation, adverts and promotional material issued by the letting agent. Registration must be renewed every three years.

Dispute resolution and sanctions

Letting agents should keep appropriate records evidencing compliance with the Code including written procedures for dealing with complaints and how complaints have been handled. Any disputes that arise in relation to the Code may be referred to the First Tier Tribunal.

It will be a criminal offence to carry out any letting agency work for any person not on the Register. Such an offence could result in a fine of up to £50,000 or up to six months’ imprisonment or both.

Click here for Scottish Government guidance