New Requirement for Letting Agents to Conduct Sanction Checks on Landlords and Tenants
From 14 May 2025, new requirements will require letting agents to conduct sanctions checks on landlords and prospective tenants.
The Landlord and Tenant Lawyers at OTS Solicitors represent letting agents, landlords and tenants. We can help if your letting agency firm needs advice on being classified as “relevant firms” under UK financial sanctions regulations, or if agents or landlords require advice on the legal and practical implications of the sanction check requirements.
Appointments are available at our offices in central London, by phone, or online consultation.
Requirement on letting agents to carry out sanction checks
From 14 May 2025, a new requirement will be placed on letting agents. The requirement applies to all UK letting agents, regardless of size or turnover.
Letting agents must carry out sanctions checks against the UK sanctions list on the following clients:
- Landlords
- Tenants
- Other clients
The requirement on letting agents to conduct sanctions checks is intended to prevent sanctioned individuals or organisations from being able to enter into contracts and tenancy agreements.
What is a sanction check?
A sanctions check is like a right to rent check that letting agents are already familiar with.
A right-to-rent check ascertains whether prospective tenants have the right to rent in the UK or if their immigration status prevents them from doing so.
A sanctions check is a similar screening process.
The check ascertains if an individual or an organisation is on the UK government sanctions list. The lists an individual or organisation may be flagged on relate to:
- Money laundering
- Organised crime
- National security threats
- Terrorist financing
- Human rights violations
Why do letting agents need to conduct sanction checks?
Under the UK's updated financial sanctions regulations, letting agents are now defined as “relevant firms.”
The classification of lettings agents as relevant firms means they are now subject to the same sanction check obligations as Landlord and Tenant Solicitors, estate agents, law firms, and financial institutions.
Failure to comply with the duties imposed on organisations classed as ‘’relevant firms’’ is the same whether your business is a letting agency or a national law firm, namely:
- Imposition of civil penalties, and
- Criminal prosecution.
Are sanctions checks the same as anti-money laundering checks?
Some letting agents are already familiar with anti-money laundering regulations and have been conducting anti-money laundering checks because thresholds exceeded the AML requirement.
However, the new requirement applies to all firms that act as letting agents, regardless of turnover or rental income per property.
Even if staff are trained in AML checks, it is important that they are aware that the new sanction checks also affect the Know Your Customer procedure.
Carrying out a sanctions check
Letting agents can carry out sanctions checks in these ways:
- Using a commercial sanctions platform.
- Using a combined AML and sanctions platform.
- Checking the UK sanctions list
- Checking the OFSI consolidated list.
The Foreign, Commonwealth, and Development Office publishes and updates the UK sanctions list and search facility. It can be found here.
The Office of Financial Sanctions Implementation (OFSI) consolidated list of financial sanction targets can be found here.
Who needs to be sanctioned checked by letting agents?
All landlords, tenants, and other clients must be subject to a sanctions check. Who to sanction check is not always immediately apparent.
All adult tenants on the tenancy agreement must be subject to a sanctions check. This includes student lets.
If a landlord or client is a company, the check must be made against the company's name and all named company directors.
Sanction check steps
From 14 May 2025, letting agents must carry out these sanction check steps:
- Check landlords and tenants against the UK sanctions list.
- Freeze any assets or property held for a sanctioned person or organisation, or where there is reasonable cause to suspect the person or organisation.
- Report name matches or suspicions to the OFSI on completion of the check.
- Retain records of the check, the reasons for reasonable cause to suspect the person or entity, and any steps taken.
Tips for letting agents on the sanction check procedure
However a letting agent chooses to conduct sanction checks, it is essential to:
- Train staff on how to carry out the checks.
- Write down the firm's policy and procedure on Knowing Your Customer and ensure it forms part of the new staff induction process.
- Ensure staff know that ALL landlords, tenants, and other clients must be sanctions checked.
- Audit files to ensure checks have been carried out.
- Ensure checks are carried out using up-to-date software or government lists.
- If checks are carried out manually, ensure that the correct names of individuals and entities are searched.
- Retain a record of searches.
Staff must understand the implications for them as employees and the firm of failing to carry out a sanctions check, an incorrect check or a failure to record or report.
What happens if an individual or entity is on a sanctions list?
Most landlords instructing a letting agent won't appear on a UK or international sanctions list. However, all property and letting agents must know what to do if a landlord or prospective tenant’s name is on a sanctions list.
The law says that an organisation conducting a sanctions check must act if:
- A person or entity appears on a sanctions list or
- There is reasonable cause to suspect the person or entity appears on a sanctions list.
The obligation on the sanctions checker is twofold:
- The entity conducting the sanctions check should freeze any assets or property of the individual or organisation that appears on the list or where there is reasonable cause to suspect they do so, and
- Report to the Office of Financial Sanctions Implementation.
OTS landlord and letting agent legal services
OTS Solicitors provides landlord-focused legal services and represents letting agents and individual and corporate landlords.
Our team can help your business understand and comply with its obligation to conduct sanctions checks and provide tailored support in navigating these new obligations.
Appointments are available at our offices in central London, by phone, or online consultation.
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