Andrew Cole Estates v Dudley Metropolitan Borough Council

Grounds of Appeal

Compliance with the requirement to belong to a recognised client money protection scheme (CMPS) has been mis-managed.

The FN cover letter stated that the Appellant was not a members of a CMPS, however, this is untrue as he has been a member of Propertymark since 2021 and prior to that the Appellant was regulated by RICS because he was a member. The Appellant has complied with client money protection legislation for some decades before the legislation came into force in 2019.

It is accepted that the Appellant was not in compliance with the requirement to publish a copy of the CMPS certificate on the website, although this has now been rectified.

The failure to publish fees was rectified following receipt of the Notice of Intent (NI). This was further amended after receipt of the FN to include VAT.

In late 2019 Mr Cole’s parents were involved in a road traffic collision and his father died shortly after. His mother’s injuries and underlying health conditions resulted in Mr Cole taking time away from the business to care for his mother in France, until her passing in early 2023. Mr Cole returned to the business in May 2023.

The emotional toll following Mr Cole’s father’s death and his mother’s injuries in the accident, resulted in him becoming a recluse in France, suffering from lack of sleep, depression and developing a problem with alcoholism and overeating. As a result, there was a lack of oversight over the business, along with other factors, which contributed to the deterioration of the business including the lapse of his RICS membership and an increase in business debt.

Following the death of his father, a legal entity change was required as the business was unable to continue to operate as a partnership. There were significant delays in this process due to advice from the bank. The bank then advised that they were no long offering undesignated client accounts and that the Appellant would have to open designated client accounts for each individual client; at the time upwards of 70 landlords.

In late 2021 Mr Cole became a Principal Partner or Director (PPD) of a Propertymark regulated practice (Andrew Cole Estates Limited) and Member PPD status has since been awarded. Both requiring any associated firm to have client money protection amongst other things. As far as Mr Cole is aware all of these criteria were met.

After returning to the business in spring 2023 Mr Cole realised the extent of the issues and advised Propertymark of the situation, including the fact that the Appellant was still operating undesignated client accounts with the bank as a partnership. On Propertymark’s advice Mr Cole approached The Lettings Partnership to deal with client money via a ring-fenced client bank account. As part of this new software was installed and all the clients were manually uploaded at an additional cost.

Mr Cole had been in negotiations with a friend who runs another lettings company, who agreed to take on the lettings clients as he had decided to try to leave the business and mitigate losses by raising funds from the sale. This was a slow process as clients were handed over individually, to ease transition and assist with client retention for the new owner.

Despite the sale of the business being in progress the Appellant still has a current CMPS certificate displayed on its website as a result of the link with The Lettings Partnership.

The business is in a precarious financial position and is likely to be wound up and closed. As such the Appellant cannot afford the fines levied. The Appellant has Bounce Back Loan of £34,000, rent arrears of £4,000, utility arrears of £10,000, PAYE and VAT owed of £9,000 and penalties levied by HMRC in excess of £5,000.

With reference to the guidance document “Improving the Private Rented Sector and Tackling Bad Practice” the Appellant’s understanding is that the principal of working with Estate and Letting Agents is promoted to improve their understanding and implementation of the legislation and that there are guidelines for Governing Bodies and Local Authorities who are encouraged to engage.

Having been made aware of the shortcoming with the website (namely failure to include VAT in the landlord fees) the website was corrected and therefore it unreasonable to impose penalties.

There should be recognition of the genuine circumstances which led to the oversight, and that past practices have not disadvantaged clients because the Appellant has always levied negligible charges to landlord clients and no charges to tenants.

Grounds of Opposition

Mr Cole does not deny being in breach of Section 83(3) CRA at the material time and accordingly the Respondent was entitled to impose a FP.

Mr Cole states that the Appellant has been a member of Propertymark since 2021 and he was a member of RICS prior to this. However, Propertymark stated in March 2023 that Andrew Cole joined Propertymark as an individual member on 10th November 2021. As a Principal Partner or Director of a Company Mr Cole would have been required to make an application for his company to become regulated and to obtain CMP, however, the Propertymark system held no indication of an application being made, or of Mr Cole being approached to undertake an application. The Propertymark database did show that an application had been recently started and documentation had been requested on 21st February 2023. RICS confirmed in July 2023 that Andrew Cole Estate agents were Registered with RICS for CMP until May 2018 at which point, they were de-registered. As such both Propertymark and RICS have confirmed that the Appellant did not hold membership with their schemes for a CMPS at the material time and in fact have not held CMPS membership since 2018. Accordingly, the Respondent was entitled to impose a FP for breach of Regulation 3 CMPSR.

Mr Cole stated that he became a PPD of a Propertymark regulated practice in late 2021 and references the legal entity Andrew Cole Estates Limited. However, Propertymark confirmed in March 2023 that their records indicate Andrew Cole was a sole trader, trading as Andrew Cole Estates. Companies House records for Andrew Cole Estates Limited show that Dormant Company accounts have been submitted up to the year-end 30th April 2023. The Appellant has stated that the Limited Company name was initially registered simply to secure the use of the name. There is no indication that the Appellant is or has been trading under the Limited company legal entity. In fact, the CMP certificate now displayed on the Appellant’s website is in the name of Andrew Cole trading as Andrew Cole Estate Agents.

The Appellant as a professional entity is expected to be aware of and to comply with all requirements imposed on it by law. The Company was incorporated in 1999; therefore, the Appellant should be fully aware of the Regulations that apply to the business.

It is not for the Respondent to issue advice or warnings prior to issuing a penalty.

The requirements are not new. The CRA requirements date back to May 2015 and CMPSR since April 2019.

There is no evidence to suggest the amount of the FPs would cause the Appellant to vacate the premises or to cease trading. No financial information such as bank statements or accounts were submitted as part of the representations.

In relation to the CRA penalty, The Department for Levelling Up Housing and Communities (DLUHC) Guidance provide that a £5,000 fine (per breach) is the normal starting point and that a lower penalty should only be imposed if the enforcement authority is satisfied that there are extenuating circumstances. In this matter the FP had already been reduced for the reasons set out in the cover letter.

Mr Cole stated that he had sold the lettings side of the business and was in the process of selling the business as a whole. However, no evidence of the sale of the business was provided as part of the Representations, and so far, none has been submitted to the Tribunal. Mr Cole stated in representations on 19th July 2023 that he was in the process of selling the business, then further stated on 19th September 2023 that he no longer owned the business previously known as Andrew Cole Estates. However, when evidence of the sale was requested, the Respondent was informed that the sale was concluded on a “gentleman’s handshake”. Mr Cole also stated at the same time that he was in the process of transferring the landlord/tenant information over to the new owner’s system. However, when the Respondent’s officer visited the Appellant’s premises on 21st November 2023, a member of staff stated that she had no knowledge of any sale of the business and confirmed that the owner was Andrew Cole. A further check by the Respondent on the Appellant’s website (www.andrewcoleestates.com) on 21st February 2024 gave no indication that the business had changed hands and Andrew Cole was still listed as the Partner in the business.

At the time of the Respondent’s visit to the Appellant’s premises, the Respondent’s officer noted that there were no landlord or tenant fee information displayed on site, nor was there a CMP certificate displayed. The Respondent’s Officer advised the member of staff on site and was assured the fees would be displayed in the shop within a few days. The Respondent did not issue a further FP.

Simply rectifying a breach following on from a NI being served does not negate the penalty and this is made clear in the letters to the Appellant.

The FPs issued are substantially lower than the maximums.

The FPs issued are in line with other FPs imposed by the First-tier Tribunal for similar breaches.

In light of the clear breaches of the above stated requirements, the Respondent was fully entitled to impose FPs in accordance with the CRA and CMPSR.

Findings of Fact