UK banks are closing client accounts

UK banks are closing client accounts held by established letting agents and refusing to open accounts for new businesses.

The Problem

A growing number of estate agents are taking the business decision to expand into lettings, particularly in light of current market conditions and forecasts for 2023. However, many are finding it near impossible to open a client account.

Furthermore, banks continue to close the existing pooled client accounts of established letting agents, some of whom have been trading for decades.

This causes a worrying cascading effect. Without a client account, agents cannot get Client Money Protection (CMP). Without CMP they will be trading illegally. Trading Standards carries out spot checks and can impose a fine of up to £30,000 on agents trading without CMP.

All letting agents must also join one of the two ombudsman schemes to trade legally, run either by The Property Ombudsman or the Property Redress Scheme. Each of these, however, have their own entry requirements intertwined with CMP which in turn leads back to the client account.

(Read more about letting agents’ compliance requirements HERE)

With these barriers to entry and no clear path, at The Letting Partnership we are receiving calls on a daily basis from agents large and small who are at a loss as to what to do. They are working very hard to be compliant but are hitting a brick wall.

The Banks’ Angle

Looking at the issue from the banks’ perspective; estate and letting agencies are not regulated by the Financial Conduct Authority (FCA), which makes our industry less appealing to banks which value the rigours of the FCA highly.

Propertymark says that banks are misinterpreting Anti-Money Laundering regulations regarding pooled client accounts, subjecting agents to unnecessary.

One major high street bank recently wrote to an agent that “pooled client accounts are outside of our risk appetite” and advised that the agent could either open individual client accounts for each landlord or take their business elsewhere!

Of course, any business can open a bank account and call it a ‘client account’ but that does not make it one in the eyes of the law.

Some banks will open ‘business accounts’ for letting agents, but not ‘client accounts’. This is worrying because it could be tempting for agents to use a business account as a client account which would put them in breach of CMP rules.

The solution

One solution, suggested by Propertymark, is for the UK government to remove the EUR 10,000 monthly rent threshold and set this at zero to create consistency and cover all tenancies let in the private rented sector. All letting agents would then be required to register with HMRC for AML Supervision – providing banks with the reassurance they need and reducing a barrier that can make it hard for agents to operate.

Alternatively agents can shop around until they find a bank which will help them (though these are becoming scarce), or look for a reputable Client Accounting Service Provider (CASP) who can provide expert advice and set up a client account on their behalf.

Need help?

If you are experiencing problems opening or keeping your client account open give us a call on 01903 477900 or email us.

We are an award-winning Client Accounting Service Provider providing cost-effective, reliable client accounting services to agents throughout the UK. We can open designated ring-fenced accounts for agents who use our services, and there is no need to even change software.

In addition we can also:

Whatever your size, outsourcing your client accounting to The Letting Partnership could be the best business decision you ever make.