ECSH55025 - Introduction to letting agency businesses
Source: gov.uk (2025-04-19)


Definition under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017)

Letting agency businesses (LABs) were first brought into scope of MLR 2017 on the 10 January 2020, specifically targeting high-end lettings.

Regulation 13(3) MLR 2017 defines a “letting agent” as:

“a firm or sole practitioner who, or whose employees, carry out letting agency work…”

“Letting agency work”, as defined in regulation 13(4) MLR 2017, means work consisting of things done in response to instructions received from:
- A prospective landlord seeking to find another person to whom to let land, or
- A prospective tenant seeking to find land to rent, and
Where an agreement is concluded for the letting of land—
- For a term of a month or more, and
- At a rent which during at least part of the term is, or is equivalent to, a monthly rent of 10,000 euros or more (or equivalent in any currency).
In addition to the financial threshold, there are two key questions to determine whether letting activity falls within scope of MLR 2017:
- Is the work done in response to instructions received from a landlord or tenant?
- Is the landlord or tenant seeking to find another person to let land to, or find land to rent?
If the answer to the above questions are both yes and the rental value is over the threshold then this is LAB activity.

The letting or rental of land includes tenancy agreements, leases, licences, or any other agreement to let or rent any land, property, building or part of a building. Therefore most, if not all, transactions will have an element of duration. Therefore, they will establish business relationships with their customers, being the tenant or the landlord.

Exemptions in regulation 13 MLR 2017

Regulation 13 MLR 2017 does not positively define “things done” for the purpose of letting agency work, however regulations 13(5) and (6) MLR 2017 set out activities which fall outside the definition of letting agency work. Those things are:
- Publishing advertisements or disseminating information.
- Providing a means by which a prospective landlord or a prospective tenant can, in response to an advertisement or dissemination of information, make direct contact with a prospective tenant or a prospective landlord – e.g. newspapers publishing adverts.
- Providing a means by which a prospective landlord and a prospective tenant can communicate directly with each other – e.g. online portals.
- The provision of legal or notarial services by a barrister, advocate, solicitor, or other legal representative, communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication.
If a businesses or sole practitioner does any of these activities, and does not do anything else which falls within the definition of letting agency work as set out above, then they do not fall in scope as an LAB.

Threshold of 10,000 euros

As explained above, to meet the definition of letting agency work for the purpose of regulation 13 MLR 2017 an agreement must be concluded for the letting of land at a rent which, during at least part of the term is, or is equivalent to, a monthly rent of 10,000 euros or more. This only applies to monthly rent, not deposits, management charges, floats or similar.

Where the monthly rent is just below the threshold, it is important for LABs to consider whether there is a realistic likelihood of the monthly rent rising above the threshold during the lifetime of the rent. If so, as they will be in scope of MLR 2017, all obligations under MLR 2017 must be carried out, including customer due diligence (CDD), which must be completed before the signing of the tenancy agreement.

For example, a let for 7 years with a value of £8,000 per month, increasing 10% per year would fall into scope before the agreement ends. Therefore, it would be necessary for the LAB to register for supervision from HMRC, if not already supervised, carry out all obligations under MLR 2017, and complete CDD at the start of the agreement.

The LAB threshold applies to individual rental agreements. For example, in a block of flats the threshold applies to each unit, rather than the building as a whole.

Types of LAB

A LAB could be:
- High Street or online letting agencies.
- Residential letting agencies.
- Commercial letting agencies.
- Land agents that do LAB activity.
- Sub-agents to a principal letting agency that does LAB activity.
- Property management agents that do LAB activity.
- A solicitors’ property centre (in Scotland), that does LAB activity.
- Holiday lets, serviced apartments and short-term rentals (if the rental term is a month or more and over 10,000 euros).
Who is not a LAB?

LABs do not include:
- Rents for a period shorter than one month.
- Rentals under 10,000 euros per month (or equivalent in any currency).
- Property management businesses who do not conduct LAB activity.
- An intermediary such as an internet property portal for private sales/lets which merely provide a platform for private clients to advertise their properties and provide a means for vendors and buyers to contact and communicate with one another.
- Work done by solicitors or their employees as part of their work as solicitors. However, if a solicitor has a separate business which provides services of a relevant business, they will fall within the definition and must register with HMRC.
What is a Letting Agent?

A letting agent’s job is to find suitable tenants for a property on behalf of its owner, or to find a tenant for a suitable property to rent. The agent would normally begin the process by visiting the property to determine its potential rental income. This valuation is usually done for free.

Once the agent and the owner have agreed on the rent, the agent will advertise the property. This could mean anything from a photo of the house with relevant details in the agent’s shop window, to an ad in the local (or sometimes national) press or a property website.

The agent will usually show the property to prospective tenants and inform the owner of any interest shown or offers made on the property. They can act as a go-between during negotiations before a tenancy agreement is signed. The prospective tenant might offer a lower rent or ask for extra furniture to be provided. The agent will then provide a tenancy agreement, a legal contract, for both parties to sign. All of this is usually done through the agent so the owner will often not meet the tenants.

There is no legal requirement for formal qualifications to become a letting agent. There are some obligations lettings agents must adhere to, which vary depending on what country you are in within the UK.

Letting agent obligations

Letting agents charge landlords fees for providing their services and as such they are contractually obliged to put their clients’ (the landlord’s) best interests first. Tenants are also charged fees for services and in return receive a duty of care; at no point can this contradict the landlord’s interests.

Right to Rent

All LABs in England are required by law to perform right to rent checks on tenants. To rent property in England, all prospective tenants need to be able to prove their right to rent. This is usually done through an ID check for a British Citizen, and through the Home Office right to rent share code scheme for non-UK nationals. More information can be found here on this in the Home Office guidance. (https://www.gov.uk/prove-right-to-rent)

Tenancies in Scotland, Wales and Northern Ireland are not subject to Right to Rent checks.

Other services offered by letting agents

Some letting agents offer a tenant vetting service, which could include taking up references or a credit check on prospective tenants, carried out in-house or by a sub-contracted company. Often, this service is either included in the basic letting fee or paid for by the prospective tenant.

Some agents also offer an inventory check service. This is a full list of the condition and contents of the property drawn up during an inspection at the beginning and end of the tenancy, in the presence of the tenant.

Many offer a management service, which involves general maintenance and organising necessary repairs over the period of the tenancy. This is hands-free way for the landlord to ensure their property is maintained and repaired if trade persons are required to attend. The letting agent will charge a fee for this service.

Legal obligations

The Tenant Fees Act 2019 applies to letting agents and landlords in England and came into force on 1 June 2019. It prohibits certain types of fees being charged to a tenant in order to make renting fairer and more affordable for tenants. Letting fees were already banned in Scotland and similar rules were introduced in Wales on 1 September 2019. More information can be found https://www.legislation.gov.uk/ukpga/2019/4/contents/enacted and https://www.mydeposits.co.uk/content-hub/what-you-need-to-know-about-the-tenant-fees-act-2019/

Client Money Protection Schemes

A letting agent in the private rented sector in England that holds clients’ funds must join one of six client money protection schemes. These schemes make sure landlords and tenants are compensated if the letting agent cannot repay their money, for example if they go into administration. This has been a legal requirement for all letting agents since 1 April 2019.

In Scotland the same protection is provided through Professional Indemnity Insurance.

In Wales, lettings agents need to join a money protection scheme before they can apply for an agent licence through Rent Smart Wales.

Letting agents in Northern Ireland do not have to join a Client Money Protection scheme.

More information can be found here: https://www.gov.uk/client-money-protection-scheme-property-agents and https://www.mygov.scot/letting-agent-registration/professional-indemnity-insurance-and-protecting-client-money and https://rentsmart.gov.wales/en/home/

Redress Schemes

A letting agent in England or Wales must be a member of one of the two approved redress scheme for dealing with complaints, which are:
- The Property Redress Scheme https://www.tpos.co.uk/
- The Property Ombudsman https://www.theprs.co.uk/
It is important to note that the Redress Scheme only applies to residential lettings and not commercial lettings.