Handling Client Monies

Always a sensitive issue and a frequent cause of dispute between an agent and his client. An agent is always handling money that does not belong to the business. Proper accounting procedures and an audit trail are essential. 

An agent must seek a good working knowledge of third-party accounting procedures and ensure that the boundaries are clear between his money and his clients.

The landlord must also be aware of the rules that an agent must comply with and know how and when the agent can account for rent and retained deposit monies to their client.

Where the agent is a member of a professional body, the agent must comply with the guidance around client money required by that organisation.

Essential good practice on keeping a separate client account:

• A detailed record of all transactions relating to a client account.
• Detailed receipts for all money received.
• Accounts must be examined and reported on by a qualified auditor within six months of the end of the accounting year.
• Be able to produce your latest auditor's report if asked.
• Retain accounts and records for six years after the end of the accounting period to which they relate.
• When taking over the accounts and records from someone else, ensure they are completed to the end of the transaction and are kept for six years.

Client money protection

Firms, also members of ARLA, NAEA, RICS or the Law Society, are already part of their relevant body's client money protection schemes. Membership in such a scheme is available to all agents and should be considered.

Client money protection insurance is also available to agencies, not members of any trade body - see, for example, Client Money Protect.

The list of fees that must be displayed must display a statement of whether or not the agent has client money protection and, if they have, who provides the security.

A Rent Smart Wales licence might include a condition that the agent has up-to-date client money protection throughout the licence.

Deposit protection

Agents who take deposits must be members of a deposit protection scheme, and deposits must be handled following the Renting Homes (Wales) Act 2016 and scheme rules.

Agents can be liable to the landlord for losses the landlord suffers through the agent's failure to comply with deposit legislation.