Tribunal reduces penalty for property firm

In a significant ruling, the First-tier Tribunal (General Regulatory Chamber) has reduced the financial penalty imposed on Ellahi Property Lettings Ltd (trading as Rent Me Now) from £19,000 to £7,000 after a breach of client money protection regulations. The tribunal convened on 28th May 2025 and issued its decision on 3rd June 2025, thereby addressing important concerns regarding the enforcement of these regulations.

The case arose after Wolverhampton City Council, acting as the enforcement authority, issued a Final Notice on 19th September 2024 to Ellahi Property Lettings Ltd for not being a member of a registered client money protection scheme by the deadline of 31st July 2023. The Client Money Protection Schemes for Property Agents Regulations 2019 stipulate that property agents must belong to an approved scheme to safeguard client finances, and any non-compliance attracts significant penalties.

Ellahi Property Lettings Ltd chose to appeal the penalty, arguing that the £19,000 fine was excessively severe. They pointed out procedural lapses by the council, claiming that notices were sent to the incorrect legal entity and highlighting their cooperative efforts in attempting to resolve compliance issues. The firm also provided evidence of their previous good standing and referenced other cases where penalties were more lenient.

During the tribunal's hearing, the judges carefully evaluated the details of the case. While acknowledging the importance of complying with regulations designed to protect clients, they found that Ellahi Property Lettings had already taken steps towards compliance by 7th February 2024. The tribunal concluded that there was insufficient evidence indicating that the firm had deliberately disregarded the rules or tried to deceive the enforcement agencies. Moreover, the judges noted that the council's initial legal actions had been taken against the wrong entity, which resulted in additional legal costs of £3,666 for Ellahi.

After reviewing the evidence thoroughly, the tribunal decided that a reduction in the penalty was warranted. They concluded that a fine of £7,000 was a more proportionate response to the breaches identified. The judges underscored the serious nature of failing to have proper client money protection in place but recognised that Ellahi's attempts to rectify their compliance issues were a significant factor in their favour when determining the penalty.

In its judgment, the tribunal encouraged Wolverhampton City Council and similar enforcement authorities to adopt a more cooperative approach in future cases. They emphasised the importance of maintaining open lines of communication and conducting thorough investigations prior to imposing penalties. The Tribunal's comments hinted at the value of dialogue between property agents and regulatory bodies, potentially preventing confrontational situations and allowing for remedial actions to be taken when necessary.

This ruling highlights the need for a balanced approach to regulatory enforcement, particularly for smaller property management firms facing compliance challenges. While Ellahi Property Lettings Ltd received some relief with the reduced penalty, the case reinforces the essential nature of adhering to client protection standards in the real estate sector.

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