Breaking Down the New Compliance Landscape for Agents
The property management landscape is changing rapidly with new compliance and AML legislation that directly impacts letting agents across the UK. Let's get straight to the point: the government is essentially outsourcing compliance responsibilities to agencies at their expense, with the risk of £1M fines and imprisonment for non-compliance.
The market's solution? The 'Compliance Fee'.
Forward-thinking agencies like Leaders have already implemented a 'Compliance Fee' for landlords at £11.00 per month. Here's why this approach makes business sense.
Why Charge a Compliance Fee?
- AML-OFSI Checks: Legal requirement to perform initial checks on landlords and tenants, plus continuous monitoring every 24 hours against sanction registers
- Payment Verification: Confirmation of Payee checks to ensure rent payments come from authorised tenants tenant accounts
- Mandatory Reporting: Quarterly and annual submission requirements to HMRC via the Letting Agents Reporting Requirement (LARR)
- Hidden Overseas Landlord Monitoring: Obligation to track bank accounts, addresses and international numbers to identify potential tax avoidance landlords
- Regional Compliance: Various reporting requirements across UK regions including licensing schemes in England, Scotland, Wales and Northern Ireland
The Economic Impact & Future Challenges
The domino effect is clear: Government outsources compliance costs to agents → Agents introduce new fees → Landlords increase rents to cover costs → Government potentially responds with rent controls. This creates both challenges and opportunities for forward-thinking agencies and is a good point to use when debating rent controls.
Transform Burden into Benefit: The Revenue Opportunity
By implementing a Compliance Fee structure, you can turn these regulatory requirements into a new revenue stream:
Model 1: £11.00 monthly OFSI & Compliance Fee
- 100 landlords + Calmony.co client account = £10,839 annually (after Calmony's £1,932 fees)
Model 2: £15.00 one-off + £12.50 annual AML-OFSI charge
- 100 landlords + Calmony.co client account = £6,050 first year, then £1,775 annually (after Calmony's fees)
The Technology Solution
Our cutting-edge technology makes implementing and managing these fees effortless:
- Calmony.co client accounts and AML-OSFI solution automates the checking of your May 14th legal obligations
- AgentOS CRM automates applying and invoicing these fees
Need Expert Guidance?
"Calmony is an OFSI-ready client account in the UK. Our solution helps you avoid violations while creating new revenue streams, transforming regulatory compliance from a burden into a business benefit." - Glyn Trott, CEO
Don't let compliance slow you down. Turn it into your competitive advantage.
Further support: Landlord Terms of Business - OFSI Compliance Fee Clause
Based on the OFSI compliance requirements, here are straightforward bullet point legal terms that letting agents should consider adding to their landlord terms of business:
OFSI and AML Compliance Terms
Compliance Fee: A monthly fee of £11.00 will be charged to cover mandatory AML-OFSI compliance requirements. Including;
- Initial AML Checks: All landlords must undergo initial Anti-Money Laundering (AML) and Office of Financial Sanctions Implementation (OFSI) checks before onboarding.
- Continuous Monitoring: Landlords will be subject to continuous sanctions monitoring every 24 hours as required by law.
- Confirmation of Payee: All rent payments will undergo Confirmation of Payee checks to verify the source of funds.
- Tax Reporting: We are legally obligated to report landlord rental income exceeding £1,000 per year to HMRC via the Letting Agents Reporting Requirement (LARR).
- Overseas Landlord Monitoring: We must monitor for undeclared overseas landlord status through bank account details, correspondence addresses, and international contact information.
- Local Authority Compliance: We must confirm and report landlord compliance with relevant local licensing schemes, including Selective Licensing and HMO requirements.
- Energy Efficiency Standards: Wpe will maintain records of property EPC ratings to ensure compliance with Minimum Energy Efficiency Standards (MEES).
- Non-Compliance Consequences: Failure to comply with these requirements may result in reporting to relevant authorities, including potential listing on the Rogue Landlord and Agent Database.
- Information Sharing: By accepting these terms, landlords consent to their information being shared with relevant regulatory authorities as required by law.
- Fee Adjustment: The Compliance Fee may be subject to adjustment based on regulatory changes and additional compliance requirements.