Letting agencies should review banking and payment systems in the light of rule changes and the ongoing challenge of the pandemic.
This advice comes from PropTech automated payments platform PayProp, which says the run-up to New Year is a good opportunity for the industry to assess possible changes.
“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” says PayProp’s chief sales officer Neil Cobbold.
Growing arrears make the issue more urgent, he suggests, with PayProp research finding 14.1 per cent of tenants in arrears at the end of August, owing an average 127.2 per cent of monthly rent. He says with the England lockdown since November 5 and the enforced closure of many businesses, increased rent arrears look set to continue for the foreseeable future.
“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” says Cobbold.
“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.”
Other changes have only added to the challenge for agents to have the most effective payment systems.
Problems for agencies wanting to open Pooled Client Accounts with banks have prompted new guidance from the Joint Money Laundering Steering Group; but this guidance says agents are only required to register with HMRC for anti-money laundering if they handle one or more transactions above €10,000 per month.
“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” Cobbold explains.
“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” he adds.
“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.”
Cobbold says agencies can improve their management of payments and arrears by automating repetitive or time-consuming processes.
He claims automation not only saves time for agency teams but can also improve accuracy and results by preventing human error and taking a data-driven approach to pinpointing problems – like non-payment – before they escalate.
Agencies must also keep digital records of all payment activity to provide 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.”
This post has originally been featured in Letting Agent Today.