Appointing an unlicensed agent in Wales could cost you 12 months’ rent
In Wales, landlords and agents who undertake “letting and management work” are legally required to have a Rent Smart Wales licence, ensuring they’re suitable and appropriately trained in their rights and obligations. This is a legal requirement that comes from the Housing (Wales) Act 2016.
There are two types of Rent Smart Wales licence: a landlord licence and an agent licence.
A landlord managing their own properties obtains a landlord licence.
Landlords who are not involved in letting and managing do not need a licence, but they must appoint a licensed agent if the agent is collecting rent or doing more than one of these activities. The term “agent” doesn’t just apply to commercial agents. It also applies to friends, family, partners – basically anyone who is not the landlord.
So, if you’ve appointed a friend or relative to look after your property, it’s vital you check they have an agent licence. To appoint an unlicensed agent is an offence under the Housing (Wales) Act 2014, for which you as the landlord would be prosecuted. You wouldn’t want Rent Smart Wales writing to your tenant advising them that they’re able to apply for a Rent Repayment Order of 12 months’ rent – which is exactly what happened to this landlord.
Agent exemptions are available in the following situations:
- An agent manages no more than two properties on behalf of a single landlord to whom they are not related. In this case, the agent must sign a declaration confirming they will not take on any further properties, and each landlord must also sign to confirm they agree to waive the requirement for the agent to have business safeguards in place (see the end of this article for details on business safeguard requirements).
- An individual agent manages fewer than five properties for their family, and no property has more than four tenancies. Evidence of the family relationship between the agent and each landlord must be provided to Rent Smart Wales.
- An individual agent manages fewer than five properties for a maximum of two landlord companies, where the agent is the sole director of those companies, and no property has more than four tenancies. Rent Smart Wales will carry out checks to confirm that the agent is indeed the sole director of the landlord company or companies.
- A company agent manages fewer than five properties for a landlord who is the sole director of that agent company, with no more than four tenancies per property. Rent Smart Wales will verify that the landlords of the managed properties are directors of the agent company.
- A company agent manages properties for a landlord who is the sole director of that agent company, where the landlord has suitable buildings insurance or another valid insurance policy that includes minimum third-party liability cover of £1 million per rental property. The agent must provide Rent Smart Wales with proof that the landlord’s insurance meets the required coverage level – for example policy documents, schedules, or certificates.
If the agent doesn’t qualify for any of the above exemptions, they must obtain an agent licence and the following business safeguards. If they don’t obtain the necessary agent licence, it’s the landlord who carries the can.
The cost of obtaining an agent licence depends on how many properties the agent is responsible for. It starts at a few hundred pounds, but quickly rise to several thousand pounds once managing more than a handful of properties, so it’s important agents understand the scale of their obligations before taking on work.
- Client Money Protection
Client Money Protection is an insurance product designed to safeguard landlords and tenants if an agency becomes insolvent or improperly uses client funds. In this context, “client money” refers to any rent, deposits or other payments (whether received in cash, cheque, bank transfer, or similar) that the agent holds on behalf of a client and which are not immediately owed to the agent for its own purposes.
If an agent does not handle any client funds, they do not need this insurance. However, they must provide a signed declaration confirming that they do not deal with client money.
- Professional Indemnity Insurance
This type of insurance covers the legal costs and any compensation owed if a claim is made against an agent because they have failed to meet a professional duty – for example, if incorrect advice or information has caused loss or inconvenience to a landlord, tenant or another affected party.
The required minimum level of cover depends on the total number of properties let or managed by the agent:
- Up to 100 properties: at least £100,000 cover
- 101 or more properties: at least £500,000 cover
- Membership to an Independent Letting and Management Redress Scheme approved by Rent Smart Wales
Redress schemes offer an unbiased and independent service to resolve complaints or issues raised by users of the agent’s services, including landlords, tenants and prospective tenants.
Beyond Rent Smart Wales’ licensing and insurance requirements, agents who are collecting rent and deposits are also likely to need a dedicated client bank account, separate from their own funds. If they’re dealing with tenancy deposits, they must not only register each deposit but also have their own active account with a government-approved deposit protection scheme (unless the landlord will take and protect the deposits themselves). As they will be handling tenants’ personal information, they must also register with the Information Commissioner’s Office (ICO) as a data controller.
If you’re not 100% sure whether your current arrangements meet the legal requirements – or if you’d just like some advice on staying compliant – we’re here to help. Drop an email to lettings@cpshomes.co.uk or call 02920 668585.
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
