Property sourcing can be a very exciting, lucrative and profitable business to get into – but here’s where a lot of people fail at the first hurdle “Their Property Sourcing Business Is Not Compliant”
The common misconception of a Property Sourcer is that you’ll go on a course and learn about the industry, go home turn on your laptop and start finding properties for investors to invest in and watch the money roll in – while in essence this is true there is a fundamental issue that Property Soucers fail to do to ensure the longevity and success of their business “Compliance”.
We cannot stress how important it is to become a Compliant Property Sourcer
In a nutshell, property sourcing compliance requires four things:
If you haven’t got the above sorted out then in essence your trading illegally which could open you up to a whole host of financial and legal issues.
In this article we’ll run through exactly what you need to ensure that your business is fully compliant, but before we do – lets run through some real case scenarios:-
A non-compliant property sourcer is a property sourcing business that doesn't adhere to the required legal regulations, such as Anti-Money Laundering (AML) regulations and GDPR. Non-compliance can have serious consequences, including:
Fines: HMRC regularly issues large fines to non-compliant businesses. For example as a sourcing agent you can be fined thousands of pounds for trading without proving compliance.
Legal consequences: Failure to comply with the regulations is a criminal offence that could lead to criminal prosecution and unlimited fines.
Business closure: Non-compliance could result in the closure of your business.
Make Sure Your Covered With Professional Indemnity (PI) insurance
To fully protect yourself from potential financial or reputational loss, you must be in possession of an active Professional Indemnity (PI) insurance policy.
This is also a requirement by The Property Ombudsman if you want to be part of their scheme.
This type of insurance provides coverage in the event that you as a property sourcer makes a mistake leading to your investor client suffering from financial harm or loss. Without this cover, both parties could find themselves in trouble or in the red if something goes wrong.
Agents with professional indemnity insurance protect investors from financial liabilities, offering security and peace of mind. It showcases accountability and addresses potential liabilities.
It also offers reassurance and peace of mind, showcasing the agent's commitment to accountability and addressing any potential liabilities.
Investors can navigate real estate investments confidently by choosing an property sourcer with professional indemnity insurance. This safety net mitigates financial risks and safeguards their interests, providing a greater sense of security.
As a bonus - you might or should also have public liability insurance. This is particularly important if you’re arranging and leading viewings for investors. It can protect you in the event of a physical accident occurring during property viewings.
You can get specialist Property Sourcer Insurance by clicking here
Become A Member Of A Government Approved Redress Scheme
The Property Ombudsman (TPO), scheme offers a free, impartial service for resolving disputes among consumers and property agents. They protect individuals who are buying and selling property and make sure issues are resolved quickly.
This service prevents any issues or complaints making their way to court. Therefore, if you sell a deal to a property investor that doesn’t go the right way, TPO will act as an impartial middleman to solve the issue and make sure the right parties are compensated.
TPO is an extra layer of security you need to have if there is any issue with the deals you’re sourcing.
You can join the Property Ombudsman by clicking here
The Property Redress Scheme (PRS) is a consumer redress scheme that provides an impartial service for resolving complaints about property-related issues. The PRS is authorized by the government and is designed to help ensure that property agents and other professionals comply with their legal obligations to join a redress scheme.
You can join the Property Redress Scheme by clicking here
What is the difference between Property Redress Scheme and Property Ombudsman?
The Property Ombudsman is a private, not-for-profit company limited by guarantee. A Council which is independent of the member firms appoints the Ombudsman and sets the Ombudsman's Terms of Reference. The Property Redress Scheme (PRS) is a consumer redress scheme for the property industry.
Data Protection - Register With The Information Commissioner's Office (ICO)
In an era where data protection and privacy have become a serious and often hot topic, property investors must ensure they check that their preferred property sourcing company is registered with the Information Commissioner's Office (ICO).
Data protection regulations, such as the General Data Protection Regulation (GDPR) in the UK, have stringent requirements for businesses that handle personal data. Registering with the ICO demonstrates a property sourcing company's commitment to meeting these regulatory obligations.
It signifies that the company has implemented appropriate policies, procedures, and safeguards to ensure compliance with data protection laws.
Working with an ICO-registered property sourcer provides investors with peace of mind, as it ensures that their personal information is being handled in accordance with legal requirements. This enhances trust and transparency in the property investment process.
It also ensures investors have recourse to the ICO for data protection concerns, upholding their rights as data subjects.
You can register with the Information Commissioner's Office (ICO) by clicking here
Registered For HMRC Anti-Money Laundering (AML) Supervision
Another essential compliance requirement is the need for property sourcing agents to have an active registration with HMRC for Anti-Money Laundering (AML) supervision.
In UK property investing, large sums of money are most often moved around, especially upon completion of any property sale.
The need for robust measures against money laundering and illicit activities cannot be overstated. Property investors will prioritize working with a sourcing agent who can actively demonstrate their registration for HMRC Anti-Money Laundering (AML) supervision.
Property sourcers need to be aware of the rules and regulations that govern their actions, particularly if they handle clients' money. Failure to register or renew your HMRC AML registration can result in penalties.
You can create a Government Gateway Account by clicking here
You should have clear policies and procedures in place that meet the requirements of AML practices, and these should be maintained with regular reviews.
The UK government has taken a stringent stance on anti-money laundering (AML) regulations to curb money laundering and terrorist financing in the real estate sector. Deal sourcers should be familiar with performing due diligence on their clients, scrutinising and verifying their identities, tracking transactions, and flagging any suspicious or unusual activities.
You are also legally required to undertake AML Training which can be done by clicking here
Limited Company Or Not?
Although it’s not a legal compliance requirement, it is recommended you have a Limited Company for your sourcing business. This means you’re not personally liable if things go south, and your personal assets will be protected.
Setting up a limited company is very easy and takes less than 10 minutes to do – you can do that by clicking here
Summing It Up
Getting compliant to become a property sourcer isn’t a difficult thing to do. However, if you are found to be operating a sourcing business outside of regulation, you could be subject to a large fine.
Follow the compliance steps mentions above you should be fine when it comes to sourcing high-quality deals for investors.
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