In the last five years the obligations on letting agents in both the residential and commercial sector have increased hugely. Regulations have been tightened to clamp down on illicit funds and dirty money running through the rental sector.
Below we set out the key pieces of legislation that letting agents are subject to.
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (2017 Regulations)
Under the 2017 Regulations, a letting agency business is a company or sole practitioner instructed by either a prospective landlord seeking a tenant or a tenant seeking land to rent. Since 10 January 2020, these Regulations have applied to letting agents where the monthly rent is £10,000 or more and the tenancy lasts at least one month.
Where letting agents meet this threshold they will need to:
- Register with HMRC before carrying on any letting agency business and pay the necessary annual fees.
- Apply customer due diligence measures for any landlord and tenants. This includes (but is not limited to) verifying the identities of beneficial owners, taking reasonable measures to understand the ownership and control structure of the beneficial owner (e.g. if it is a trust, company, foundation etc.), and identifying politically exposed persons and verifying their identity and source of wealth.
- Report any suspicious activity to the National Crime Agency by making a Suspicious Activity Report.
Failure to comply can result in fines, prison and money laundering charges.
Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024 (2024 Regulations)
In May 2025 letting agents were added to the definition of ‘relevant firms’ under the 2024 Regulations. This brought letting agents under the same requirements as law firms and financial institutions and, regardless of value, letting agents must comply with the financial sanctions regulations.
How this applies to lettings on landed estates depends on how ‘letting agent’ is interpreted. Under the 2024 Regulations, a letting agent is any firm or sole practitioner who, or whose staff, carries out letting agency work. A ‘firm’ includes any non-individual entity, such as a company, partnership or unincorporated association. Although not defined, ‘sole practitioner’ is broad and likely covers many types of businesses.
‘Letting agency work’ means work:
a) consisting of things done in response to instructions received from:
- a person seeking to find another person to whom to let land (prospective landlord), or
- a person seeking to find land to rent for a term of a month or more (prospective tenant), and
b) done
- in relation to a prospective landlord, from the point that the prospective landlord instructs the letting agent, or
- otherwise in the course of concluding an agreement for the letting of land of a term of a month or more.
Clearly, this would catch many landlords and agents dealing with property on landed estates. Relevant firms must:
- Screen landlords and tenants against the UK financial sanctions list.
- Report any matches to the Office of Financial Sanctions Implementation (OFSI).
- Freeze any transactions where there is a match and seek guidance from OFSI.
- Keep records of checks and the results of sanction screening for at least five years.
The consequences of non- compliance are significant, heavy fines and even imprisonment in the most serious cases.
Conclusion
Letting agents must stay alert to their money laundering and financial sanctions obligations, ensuring their policies, employee training and awareness of suspicious activity are up to date. These regulations clearly apply to landlords or agents on landed estates who meet the definition of a ‘letting agent’ and, under the 2017 Regulations, those letting high-value properties.
