With the New Year approaching, PayProp says letting agencies could benefit from reviewing their banking and payment systems.
The rental payment platform suggests that the impact of COVID-19 and a recent regulatory update relating to Client Money Protection (CMP) makes now the right time for agencies to audit their financial processes.
Neil Cobbold, Chief Sales Officer at PayProp, says: “Reviewing and modernising payment processes can help letting agencies avail themselves more fully of the available protections to themselves, their landlords and tenants, whilst also reducing late payments.”
Pandemic puts payment systems in the spotlight
PayProp research found that 14.1% of tenants were in arrears at the end of August, owing an average of 127.2% of their rent. PayProp believes the second national lockdown and the enforced closure of many businesses mean rent arrears look set to continue for the foreseeable future.
Cobbold says: “The pandemic has highlighted the importance of tenant finances and how they are managed by letting agents and landlords. Over the course of the year, the best letting agencies have been able to prove their worth to landlords by demonstrating that they have systems in place to protect their investments.
“Agencies that have experienced trouble with managing arrears this year should consider how they can improve their processes in 2021 as landlords are relying on them to protect their investments.”
New guidance will help with PCA problems
In September new guidance was published by the Joint Money Laundering Steering Group (JMLSG) in response to letting agencies having problems opening Pooled Client Accounts (PCAs) with banks.
PayProp highlights that many agencies had been struggling to open PCAs, which are required under CMP regulations, as banks have identified them as higher risk unless registered with HMRC for anti-money laundering supervision. However, the new guidance acknowledges that agents are only required to register with HMRC for AML if they handle one or more transactions above €10,000 per month.
Cobbold explains: “Letting agencies have had numerous issues with setting up bank accounts in recent years. Last year, many firms faced the threat of banks closing undesignated client accounts and asking them to open separate client accounts for all of their individual landlords.
“Both of these problems stem from a conflict between CMP and AML rules, so it’s positive news that this issue has been acknowledged and updated guidance has been published by the JMLSG.
“However, agencies must continue to monitor the situation with the banks and do all they can to comply with CMP legislation. Any letting agencies experiencing problems with PCAs or CMP rules should seek expert advice and review their existing systems.”
How can agents review payments and banking?
Cobbold says letting agencies can improve their management of payments and arrears by automating repetitive or time-consuming processes. He also advises that agencies keep digital records of all payment activity to provide their landlords with peace of mind and the necessary evidence should they need to take further action against renters.
Cobbold concludes: “With banking guidance changing once again, agencies should also review their current banking and financial providers.
“Although there may be hesitation to change, switching to a better provider can help letting agencies to provide a more streamlined management process.”