Hi All, I am hoping someone can help me as I have well and truly confused myself.
I have a client who is a Ltd company lettings agent. He raises invoices to the tenant for say £500 rent, the tenant pays this into a holding account, where my client takes out his fee and the remaining money is paid onto the landlord. This holding account, also holds the tenant deposits, as they have to be protected in the event of my client going into liquidation etc. The deposits are just held in this account until such time as the tenant moves out and is refunded the deposit, minus any expenses. How do I account for this holding account? The holding account also receives bank interest, so I do need to account for it somewhere I'm guessing?
Don't know if this makes any difference but I use Quickbooks Online.
Set it up as a bank account and treat it like a bank account with money in and out.
Also he shouldn't be holding money in the deposit account for the tenants it should go to something like the DPS or something similar, that way the money is protected if like you say he goes bust.
Hi
Should it not be styled 'clients account'? There are very strict rules about how these are controlled. Even to the point where there is a separate Bank account having a designated 'clients account' status with restrictions on withdrawals so that the lettings agency cant just spend it on toilet roll or advertising or whatever.
Also - for protected deposits status they should be actually paid over to the Deposit Protection Scheme (or TPS) people and each client is given confirmation of such and their own reference number. Are they telling clients that their deposits are protected and then not actually paying them over? Refunds of deposits are then made by the DPS direct and not the lettings agent.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Like Joanne says, the Letting agent should be paying the 'deposits' into the DPS or something similar and the tenant should be told that, then when the tenant leaves at the end of the tenancy providing everything is okay then after the last inspection the DPS once requested will send the money direct to the tenant. (I think that is how it works). Sometimes if the tenant has damaged something then the landlord can request that some money be held back for repairs etc, but this has to be agreed before any money can be leased.
The Letting agency should have a normal current account for office expenses and tradesman expenses, also things like photocopier rent etc, then have a separate client account where all money from the tenant goes into. Then you pay the landlord money from the client account and the agent keeps the commission that has been agreed.
The Letting agent should not be building up a large amount of deposits in the client account, this use to be the case a long time ago, but tighter rules are now in place, this is to protect the tenant, so the agent doesn't go bust and go to Barbados on a holiday with the tenants money and never be seen again!
There are stick guildlines in place for this but it does depend if the agent belongs to any governing body or not. There is Narls, Property Ombudsman and probably a couple of others.
Interest should ideally be paid over to the landlord if it is more than £15.00 per landlord a year in total. (Law society guidelines I think). Less than this amount (i.e. less than £1.25pm) , the letting agency should just transfer the interest to the normal current account, and treat it as interest the letting agency received. Ideally the client account should only hold money that is due to be paid out to the landlords. This is just good practice.
I am not sure how estate agents are governed but Solicitors have similar client accounts which are heavily regulated. I used to have to do a lot of audit work on these!
There is often a clients bank account and then a subsequent creditor account which shows the amounts payable to clients and held on their behalf. Any monies in and out should be very carefully accounted for. I would probably look for a tailored accounts package rather than Quickbooks.
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