New sanctions rules for lettings: What you need to know for May 2025

There's a new rule coming into effect that will strengthen how business dealings work in the lettings market. If you've chosen a well-prepared agency like Rolstons, these changes will give you greater peace of mind about the tenants in your rental property. Rolstons Lettings Director Breydon Duffy explains the key points you should understand.

The sanctions regime came into sharper focus following Russia's invasion of Ukraine in 2022 but had been around and had applied to estate agents for quite a long time before then.

Part of the UK's contribution to international efforts to tackle money laundering and international crime, sanctions are measures intended to freeze the assets of individuals, companies and other organisations ('designated persons') and restrict their access to investments and financial services. Designated persons are listed on a government list (called a consolidated list), which is overseen by a division of the Treasury called the Office of International Sanctions ('OFSI').

From 14 May 2025, letting agents will become subject to sanctions reporting obligations for the first time. These reporting obligations have applied to estate agents and other 'relevant firms' for some time and are triggered where the (estate) agent reasonably suspects that someone they are acting for in terms of either a sale or purchase is a match with someone (or an organisation) listed on the consolidated list.

The changes in May align letting agents with estate agents. The obligation to file reports will apply where the letting agent 'reasonably suspects' either a landlord or tenancy applicant of being a 'designated person'.

As to the timing of the reporting obligation, this is triggered only when either the landlord or tenancy applicant has entered into what is (in anti-money laundering guidance terms) known as a 'business relationship' with the agent. That is, for landlords, from the point the landlord 'instructs' the letting agent, and the letting agent does work in response to those instructions. Here, the term instructions means formal instructions, and letting agency work means things done in response to those instructions but does not include publishing advertisements, providing a means by which prospective landlords and tenants can make direct contact or communicate with each other. (Thus excludes the newsagent whose shop window might carry adverts for rooms to let, etc.).

When the landlord accepts a prospective tenant's offer, the reporting obligation applies to tenancy applicants.

This means that agents could have designated persons on their database for quite some time before a reporting obligation is triggered. This makes sense because the number of individuals who transact (particularly for large agents) is far less than the number of contacts on an agent's database. So, the thresholds prevent the system from being clogged up by what would otherwise be reported where there is no firm economic activity to speak of. Since the whole purpose of the sanctions is to prevent sanctioned persons or entities from engaging in (and profiting from) economic activity, these thresholds make sense.

Large letting agents, like Rolstons, have the resources to scan their databases and ensure they meet these requirements. This means landlords can be assured that they will not unwittingly assist undesirable persons or entities from carrying out business activity in breach of sanctions legislation and anti-money laundering legislation.

The sanctions regime applies alongside existing anti-money laundering legislation, which remains unaffected by the changes in May. Whereas anti-money laundering legislation applies to lettings transactions over the £10,000 (sterling equivalent) monthly rent threshold, sanctions obligations carry no minimum threshold. Therefore, all letting agents will need to screen all their landlords and applicants to comply with the new rules, and serious penalties lie in waiting for those who fail to comply.

If you'd like to talk to an agent for more personalised advice, our team is always available to help. We'd love to hear from you for a quick chat or a no-obligation property valuation.

Warm wishes,

The team at Rolstons