30 November, 2023
Top 4 Legal Requirements to Open an Estate Agency in the UK
The opportunities and flexibility in the real estate business are unparalleled. However, it wouldn’t be a cakewalk to start an estate agency. The growing competition, unclear legal and client liability, as well as other miscellaneous complexities in setting up an estate agency in the UK require you to plan, research, and structure your venture properly to avoid failing like 20% of startups within the first year, and 90% ultimately over time.
A good starting point is understanding the legal requirements to open an estate agency in the UK to keep you up-to-date with UK laws while you plan and strategise in the business aspect. That’s why we have prepared this guide to help you understand your legal obligations and requirements and show you how to start a successful real estate agency in the UK should you still be unclear about it.
4 Legal Requirements For a Real Estate Agency in the UK
The legal requirements for a real estate agency set-up in the UK require you to fulfil two major conditions:
- The legal considerations or requirements
- The business structure or planning.
Both considerations are intertwined to keep your estate agency running and prevent you from falling into the bad books of the UK government. So, let’s discuss the legal conditions and how exactly the business structure fits into the puzzle.
Certification and Qualifications
No law compels you to have qualifications or be certified before setting up an estate agency in the UK. Also, you do not need to join any society, agency, or body before you can start an estate agency. However, due to the competitive nature of the real estate business in the UK, having a qualification or licence or joining a real estate organisation helps you to stand out in the industry.
Some benefits of joining an estate agency membership organisation include:
- Getting a business licence or active emblem.
- Networking and reaching a broader community or prospects.
- Staying up to date with the legal requirements for an estate agency in the UK.
- An estate agency membership offers you consumer protection. It can also assist you in resolving disputes that may arise while doing business, provided you comply with their regulations of running an estate agency in the UK.
That said, any of these membership organisations can offer you the above-mentioned benefits:
- National Association of Estate Agents (NAEA) Propertymark.
- The Guild of Professional Estate Agents.
- The Property Ombudsman (TPO).
Real Estate Licence Procurement
If you become a member of any of these organisations mentioned in the previous point, knowing how to procure your real estate licence in the UK will be easier. Joining any of these organisations is as simple as creating an account through their website and completing KYC. After proper review, you can collect your licence physically from any of their offices worldwide or in the UK, or opt to receive it via post.
Getting an estate agency licence has its perks:
- A licence boosts your business profile and legitimacy.
- It helps you to build trust with existing or potential clients.
The Real Estate Acts in the UK
One of the most important real estate laws in the UK is the Estate Agents Act of 1979, which ensures estate agents function in the best interest of their clients and property owners and do not go beyond their job description. An estate agent has no right to:
- Draft contracts for the purchase of properties.
- Receive money on behalf of a client from a buyer (unless authorised by the parties involved).
- Sign contracts on behalf of a client (unless properly authorised by the parties involved).
- Draft statements that a client or buyer must abide by when purchasing or selling properties.
All these are the duties of a conveyancer or solicitor. Apart from this Act, you need to understand the Land Registration Act of 2002 and its requirements. All these are relevant for anyone working towards becoming an estate agent in the UK.
Contract Laws and Fiduciary Duties
Fiduciary duties include situations that involve trust between you and your client. A typical example is a situation that requires you to hold client money. In this case, the client must authorise you to do so, which you must do outside your personal accounts. To avoid complications, it’s best to register your business as a Limited Liability Company (LLC).
Also, as part of the legal requirements for real estate agency set-up, you should not profit from the trust and relationship with your client on grounds beyond the mutual business scope. In fiduciary situations, you should be professional and have financial insurance to safeguard you from losses from unforeseen events or risky schemes involving you and your client.
7 Tips on How to Start Your Own Estate Agency in the UK
After getting acquainted with the legal requirements on how to start a real estate business in the UK, you can now plan your estate agency properly. Here are seven tips you could follow to set up an estate agency in the UK:
1. Do Market Research
A CB Insights report revealed that 42% of startups fail because they couldn’t find a market need for their products or services. This could have been avoided if they had dedicated more time and resources to adequate market research. There’s no better way to say it; if you want to know how to be an estate agent, you must understand the real estate market and learn about your competitors and potential limitations.
This will give you a fresh perspective on your region's real estate market and help you brace for the hindrances that may arise when you want to start an estate agency; you also learn about the cracks and trends your competitors might be overlooking.
2. Create a Business Plan
Anyone looking for how to become an estate agent in the UK requires a business plan to ensure success. Your real estate business plan should cover your goals, potential strategies and business structure, budgeting, branding, etc. It’s the blueprint of everything you set to achieve in your real estate business, how to achieve it, and when you expect results to start trickling in.
3. Set a Budget
The fact that 61% of small businesses don’t have a formal running budget sheds so much light on why half of them fail within their first five years. You may not have enough funds to start a real estate agency in the UK, but you can determine how well you spend the limited funds.
That is why you should set a budget to help you avoid unnecessary expenses. Try highlighting the essential or most pressing areas that need funding. For example, a large chunk of your budget will cover getting office space, insurance, marketing and promotion, among other things. But you can cut this cost by getting a virtual office space in London from The Hoxton Mix.
4. Register Your Estate Agency Business
Registering your business adds more credibility to your brand and enables you to create a corporate bank account. Every legitimate business in the UK must be registered at Companies House. Once done, you can go ahead and list your business for tax accounting with HMRC.
5. Get an Office
Everyone looking for how to get into real estate in the UK needs an office space, as it can be an avenue to advertise your business traditionally. Although with the paradigm shift in internet usage and dependency, you could also promote your business through display ads, social media marketing, or digital marketing.
That said, getting an office involves negotiating a commercial lease because you’ll be using the space for commercial purposes. Ensure you fulfil and document the rental or lease terms properly before paying for the space. Alternatively, you could opt for virtual office space and cut down on the rigorous negotiating process.
6. Get Insurance
According to the Estate Agent Act, you must obtain insurance when setting up an estate agency. As such, you will be liable if you lose client money while fulfilling your fiduciary duties.
For a start, recommended insurance for your real estate includes financial insurance and occupiers' liability insurance in case of potential injuries or damage claims within your office premises. You should also get indemnity insurance, specifying the amount you will pay for any damages caused through your service.
7. Marketing and Promotion
One of the most important tips on how to be an estate agent in the UK is to engage in relevant and aggressive marketing campaigns. You can choose between traditional marketing methods or embrace digital marketing strategies. For best results, digital marketing, especially social media, is your best shot at reaching a wide array of people.
Consider The Hoxton Mix as Your Trusted Partner
As mentioned earlier, you can’t start an estate agency in the UK without an office address. With The Hoxton Mix, you can obtain and set up professional virtual office space with a prime London address and avoid the hassles of negotiating a commercial lease. Also, The Hoxton Mix offers mail-handling services, allowing you to receive your office post at any location of your choice. Alternatively, you could request your post scanned to your email or walk into the Hoxton Mix office in London and get your post at your convenience.
What about physical meetings? You can rent a meeting room at The Hoxton Mix for a quick meeting with your clients for as low as £35. Coupled with a London 020 phone number, you’ve got all you need to set up a real estate agency in the UK. To get started, visit our official landing page and have yours set up in less than 10–15 minutes.
One point to pick from this article is that you do not necessarily need any qualifications to start an estate agency in the UK. However, to beat the competition and stand out in your real estate business, you should get a licence, join a membership organisation, get an office, get insurance, register your business, and above all, have a digital presence where you can promote and educate your prospects on the necessary information on becoming an estate agent in the UK. All these and the various legal requirements for an estate agency in the UK should keep you in check, help you network, increase profitability, and shield you from legal negligence.
Can you establish a real estate agency business and make decent money?
Of course. Aside from the money you will earn from an estate agency, you get flexibility and the opportunity to visit different places, network, and meet other people who could connect you to different ventures over time.
What are the main regulatory and licensing requirements for an estate agency?
There are no direct regulatory or licensing requirements to start an estate agency. However, you must register your estate agency as a business, get an office space, and register for taxes to be on the good books with the UK government.
Is obtaining a licence necessary to be an estate agent in the UK?
No, it’s not mandatory to obtain a licence to set up an online estate agency in the UK. Joining a membership organisation or getting a licence is just icing on the cake, and it comes with some perks.