Another industry body has joined in the clamour for constructive changes in the requirements of banks in respect of letting agents’ client accounts.
Earlier this week, Propertymark wrote to the Chancellor to highlight the serious detriment some letting firms are facing in trying to comply with misguided banking diktats that see client accounts being unexpectedly shut, leaving agents in limbo. The requirements of banks, HMRC and client money protection are at odds, creating a somewhat ‘Kafka-esque’ situation for the affected agencies.
In light of the Treasury’s recent announcement of reforms aimed at enhancing customer protections for personal bank accounts, safeagent – the not-for-profit accreditation scheme for lettings and management agents in the Private Rented Sector (PRS) and an approved Client Money Protection Scheme operator – is calling upon the City Minister to consider extending these reforms to cover business accounts; particularly client accounts held by lettings and management agents.
By doing so, safeagent says that the Government can demonstrate its commitment to supporting the PRS and ensuring that agents can operate with stability and confidence whilst upholding the highest industry standards.
“To ensure the proper functioning of those operating within the PRS, it is imperative to address the challenges that agents face concerning the sudden and unexplained closure of their client accounts by banks,” explains Isobel Thomson, Chief Executive of safeagent.
“These accounts securely hold landlords’ rental income and tenants’ deposits, as is legally required, and we have seen a a number of instances where these accounts have been subjected to unexpected closures, significantly disrupting business operations.”
“The current situation forces agents to navigate a labyrinth of obstacles when attempting to open new client accounts with other banks; most notably the stringent criteria set, rendering the process nearly unachievable for many agents, especially small businesses.”
“If the Government is committed to elevating industry standards within the PRS, swift action must be taken to address this pressing issue.
“The inability of lettings and management agents to access reliable and compliant client accounts hinders their ability to operate effectively and ethically, undermining the Government’s goal of fostering a thriving and secure rental market.”
The letter from Isobel Thomson, chief executive of safeagent, to Andrew Griffith MP, the City Minister reads as follows:
Dear Minister
I am writing on behalf of safeagent, a not for profit accreditation scheme for lettings and management agents operating UK wide in the Private Rented Sector and a Government approved Client Money Protection Scheme operator.
We have read with interest the Treasury’s recent announcement of reforms designed to give banks’ customers greater protections against having their accounts closed. We urge you to extend these reforms beyond personal accounts to encompass business accounts and, in particular, client accounts.
Safeagent has experience of lettings and management agents being faced with the unexpected closure of their client account(s) by banks without explanation. These accounts hold landlords’ rent and tenants’ deposits which agents have placed in a ringfenced client account as is legally required. The agents operate professionally to industry standards and it is a threat to the operation of their business to have their accounts closed in this way. Clearly this has implications for both landlords and tenants as well as agents.
Agents are then faced with trying to open an account with another bank where further obstacles are placed in their way.
The criteria set by the banks to open a new client account is often unachievable e.g registration with HMRC for anti-money laundering is required by banks. This is not a legal requirement for agents unless they reach a certain threshold on rental income. HMRC will not accept agents’ application for AML if they do not meet this threshold. This leaves the agent, particularly small businesses, in an impossible position and potentially puts their business in jeopardy.
The system is failing them. If the Government’s avowed aim is to raise standards in the PRS is to be achieved, then this needs to be urgently addressed.
We would be happy to provide you with further examples of difficulties agents face in relation to the banks and I look forward to hearing from you.
A copy of this letter goes to Matt Abbott, Head of Private Rented Sector Policy, DLUHC.
Appeal to Chancellor over banks closing letting agents’ undesignated client accounts
