Legal 101

Clauses missing in your letting agency’s terms of business template (Part 1) 

Lorraine Dindi
September 18, 2021

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Is this in your letting agency’s terms of business template?

As the middleman between tenant and landlord, a letting agency handles myriads of contracts. One very important type of contract is its terms of business (aka agency) agreement, which is what empowers a letting agency to act on behalf of the landlord. The internet boasts several free templates for such contracts, which we cannot seem to help but use, even when we know of their shortcomings. After examining some of the most popular free agency agreements on offer, here are 3 reasons (or rather 3 clauses) which are probably missing from your letting agency’s terms of business template

  1. Anti-money laundering

Money laundering is the process of disguising illegal proceeds by making them appear as though they came from a legitimate source. In response to this growing problem, anti-money laundering regulations have been enacted worldwide including in the UK. Since the real estate sector is one rife with the possibility of money laundering, current legislation requires estate and letting agents alike to undertake certain steps to be compliant, such as registering their business with the revenue authorities.

A sensible letting agency-landlord agreement will therefore address the anti-money laundering regulations, and spell out what measures the letting agent will take. Unfortunately, most of the freely available templates we found online do not contain such a clause at all. Given this and the fact anti-money laundering legislation is updated rather frequently, it is very likely that your agreement is missing a robust and up-to-date clause on the subject. 

  1. Deposit registration

The two main types of service offered by a letting agency are “let only” and “full management”, where a landlord can appoint the agency to either find a tenant and arrange for them to move into the property or to manage the entire tenancy for the duration of the lease. Depending on which service is chosen, deposit registration may become the responsibility of either party.

Due to the amalgamation of both services on offer in one contract, many of the free letting agency-landlord agreement templates we saw one are unclear as to whom, between the agency and the landlord is responsible for deposit registration. A good agency agreement will specify this and whose name the deposit should be registered with i.e. if the contract is for a let only service, then the deposit should be registered by the landlord in a TDP scheme using their own name. 

  1. Liability 

The liability of a party refers to their legal responsibility: if something were to go wrong, which party would be at fault in the eyes of the law? When you have an agency agreement, the landlord passes over the right to make contracts and grant leases over to their letting agent, but not their liability for what the agent does. This means that a landlord will, in pretty much all cases except deposit protection, be liable for what their agent does or does not do.

It is very important for both parties to an agency agreement to understand this, yet many of the commonly downloaded templates on the internet do not facilitate such understanding. This makes it difficult for a letting agency to protect their liability in case something does go wrong with the property, and for the landlord to know what they could be personally liable for. 

Legislate is a platform which does not just offer templates, but the ability to negotiate tenancy agreements. Letting agencies and landlords can create detailed and valid contracts which are right for them and their properties. To find out more, read one of our tutorials, watch a demo of Legislate or join our waiting list.

Start reading Part 2.

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‍The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.

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