What do you need in place for your rent to rent business to be legal and compliant?
What do you need in place for your rent to rent business to be legal and compliant?
Today we’re talking about the legal stuff.
What do you need to make sure you have in place when you set up a rent to rent business?
There is so much confusion around all this.
But I’m here to take you from confusion to clarity.
Let's dive in.
In our Rent to Rent Success System we have our Mind Your Business Module where we break down setting up your business.
I know that some of you have put off starting because you can’t work out what you should do and when.
We walk you through the Foundations before you set up and then the 4 Steps to success.
Step 1– Company Setup Basics
Step 2 – Contact Details
Step 3 - Clear Message
Step 4 – Compliance
You need them all in place to be successful.
Step 4 is the step I’m most asked about, because you want to get that right.
No one wants to be found to have an illegal business.
You’ll see in Episode 8 of The Rent 2 Rent Success Podcast we talk about how much it costs to start a rent to rent business.
Listen here if you missed it https://rent2rentsuccess.com/8
And today’s episode is more about the implementation and what you need to do.
Insurance
Public Liability Insurance and Professional Indemnity Insurance
What is it?
Professional Indemnity Insurance
Protects you against claims made against you for financial loss.
For example, if a landlord says a repair that you were contractually required to do wasn’t done or was repaired badly, resulting in the landlord having to fix it themselves.
Public Liability
Protects you against claims made against you for damage or physical injury.
For example, if a tenant slipped in one of your properties and they claimed against you.
It is a legal requirement to have professional indemnity and public liability insurance.
Employers Liability
Similar to Public Liability and only required if you have employees.
For example, if an employee injures themselves whilst at work.
You need a specialist insurance broker who understands rent to rent.
We found that a lot of insurers do not understand rent to rent.
Information Commissioner’s Office
What is it?
The ICO is an independent body that upholds information rights in the UK.
It is a legal requirement to be registered with the Information Commissioner’s Office.
Property Redress Scheme
What is it?
A redress scheme allows consumers to escalate a complaint against a member of the scheme.
You must join a redress scheme if you’re doing rent to rent.
The approved redress schemes are the Property Redress Scheme and the Property Ombudsman.
We choose the PRS as they offer the best value.
Any local landlord/licensing schemes in your area
You may also have some local landlord or licensing schemes in your rent to rent area(s) so you'll need to know what those are and ensure that you have registered for any local schemes that are in your area.
This is also very helpful in your marketing.
Residential Landlords’ Association and National Landlords Association
Optionally, you can join the National Landlord's Association or the Residential Landlord's Association.
A note on Client Money Protection CMP
What is it?
Client Money Protection is a scheme that reimburses landlords and tenants should an agent misappropriate their rent, deposit or other client funds.
From 1 April 2019 it has been a legal requirement for Property Agents to have Client Money Protection.
If we were a “normal letting agent” managing the landlord’s property and charging the landlord a fee, rather than paying guaranteed rent, we would need CMP for the rent we collect.
However as we do not charge a landlord fee, this is not applicable to a rent to rent business.
The PRS confirm this in their guide "An Agent Guide to Rent 2 Rent or Guaranteed Rent"
Local requirements
Although it’s worth checking the regulations in the area you are operating as some councils already make CMP mandatory as a term of giving a HMO licence.
Future changes
We are watching this closely and will let you know if there are any changes.
Summary
You need
Public liability and professional indemnity insurance
To register with the Information Commissioner’s Office
To join a government approved ombudsman e.g PRS
To check whether your local Council requires Client Money Protection
Non compliance is serious and can result in significant fines, criminal prosecution, and your business being closed down by the authorities.
Every step of setting up a rent to rent is simple and complex.
When you know what’s needed and the detailed implementation it’s simple,
but when you’re feeling your way in the dark it’s complicated.
Hey Gamechangers!
I hope you found this useful.
If you did please subscribe, rate and review the podcast.
It really does mean a lot to us.
We read all the reviews.
And I appreciate you for doing that.
It helps Apple to know that this is a good podcast.
CLICK HERE to leave a Review on Apple Podcasts
And for every podcast review you give, you’re giving to help children in the Turkana region of Kenya to have the uniform and books they need to attend school.
And remember,
Believe Bigger, Be Bolder and Be a Gamechanger!
See you next week.
Stephanie & Nicky
xx
You’ll love these too…
In this episode, we talk about the easy way to make HMO admin run simply.
Vann Vogstad join us to talk about Coho, the user-friendly, HMO software solution that streamlines property management tasks.