A new government crackdown kicks in tomorrow (14th May) to ensure criminal tenants and landlords can’t enter into rental agreements.

Letting agents have previously only needed to conduct sanctions checks where monthly rents exceeded €10,000 per month (about £8,300) but the threshold will be removed, and checks will be mandatory for all prospective landlords - at the point of instruction – and for tenants - before completing a letting agreement.

Agents will need to check if either tenant or landlord appears on the UK sanctions list.

If they have evidence, or a reasonable suspicion, that a client has broken financial sanctions regulations, they need to report them immediately to the Office of Financial Sanctions Implementation (OFSI).

If a guarantor is going to pay rent directly or engage with the agent or landlord during the tenancy, they must also be checked.

Goodlord explains that while this adds an extra compliance step for agents, it will help to protect their business from unknowingly becoming involved in financial crime.

Referencing

It suggests the referencing stage is the ideal time to run a check on tenants, while landlord sanctions checks should happen as early as possible in the onboarding process - ideally at the same time as verifying proof of ownership and identity.

Legally, the rules only apply to prospective tenants and landlords. However, OFSI has suggested that sanctions checks should always have taken place.

It won’t consider ignorance or negligence a defence, adds Goodlord, and warns that failure to comply can result in fines which will be the greater of £1 million or 50% of the value of breach.

Nishma Parekh, (pictured) Goodlord’s director of referencing, says it would be very easy for letting agents to unwittingly fall foul of the new rules.

“With four in five landlords feeling unprepared for the changes, it’s vital that they get their ducks in a row immediately if they want to stay on the right side of the law,” she says.