We know that it is a very challenging time for our profession globally. For this reason, RICS is prioritising its efforts to provide as much support and advice as possible for its members, especially those running SMEs, in maintaining their business through the unprecedented operating conditions brought by the outbreak of Covid-19. In this context, we recognise that some members of the profession may be taking, or bringing forward, potentially difficult decisions to close their businesses either temporarily or permanently.
For those taking this decision, we have set out the following advice to help members and firms protect the interests of their clients, protect themselves and comply with our Rules of Conduct.
Please note that not all elements of the guidance will be applicable to all firms. This page is not legal advice and cannot be relied on as such and you should carefully consider whether you need to take advice from a solicitor, accountant or insolvency practitioner in respect of your particular circumstances.
It is not uncommon for firms to merge and close, and if clients and others are fully informed, the process is planned and implemented properly, then no unexpected issues typically arise
However, the effects of the novel coronavirus mean that some firms are having to consider closing their firms at speed without a proper plan, whether that is a temporary closure with the intent to reopen, or a permanent closure.
Handling the closure well will reduce your risks of exposure to future legal claims or regulatory problems, will protect clients’ rights, including their confidentiality and property, and will improve your chances of regaining clients when you reopen or move on to other employment.
You will need to make a decision about the date on which the firm is closing, taking into account the steps that you need to take below. This will allow you to communicate clearly with clients, staff and others.
If your firm is insolvent there are likely to be legal requirements to be met. There is also an ethical consideration – the ethical principle of acting with integrity applies in the context of an actual or potential insolvency, including avoiding misleading creditors or others and avoiding wrongful or other forms of improper trading.
The UK government publishes advice for companies and partnerships that may be insolvent:
The charity Business Debtline also provides resources and debt advice for small businesses and the self-employed, including sole traders:
You should also inform RICS if your firm is insolvent by e mailing firstname.lastname@example.org
The emotional and financial wellbeing of any staff you employ will naturally be central to your decision-making and plans, so it is important to understand both their rights and the support the government is currently providing.
For information about making staff redundant see the government’s website https://www.gov.uk/staff-redundant/getting-help
If your closure is temporary the UK government has set up a Coronavirus Job Retention Scheme https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses ACAS has also published information on temporary closure of businesses https://www.acas.org.uk/coronavirus/if-the-employer-needs-to-close-the-workplace
We know that this will be a difficult time for your staff as well as you. Try to communicate with them as early and as clearly as you can, and allow for emotional reactions to the news.
Contact current clients as early as possible to let them know that you are closing so that they can arrange for another firm to take over ongoing work and so you can return their client money or transfer it to another firm. If you know there is an important deadline coming up, warn the client about this. Also consider whether you could give a summary of the services they will need and/or attach important documents to make it easier for your clients to contact another firm about taking over the work.
Lettings agents will also need to advise clients which tenancy deposit scheme they have joined and ensure that any keys held can be returned. If you hold deposits with Tenancy Deposit Scheme (TDS) they have provided the following information:
“Deposits can be switched seamlessly to TDS Custodial without the need to register deposits and we can help make the process as smooth as possible. There is a technical requirement to re-issue the Prescribed Information and we have an online template that can be completed as part of the transfer process that can be sent or emailed to tenants by the agent. We will also notify tenants that their deposit is now held by TDS Custodial. We would encourage agents to switch to our Custodial scheme at the moment; it will also save them money on deposit protection fees.”
Remember that it is for the client to decide which firm they want to take over their matter. If you are able to sell your practice or make arrangements with another firm to take on work, you can inform clients of that and allow them to make the choice. Bear in mind that if you hold clients' money, you do so on trust for the client and you need their (properly informed) consent to transfer it to someone else.
If there is an urgent need to transfer files to another firm before contacting clients, because there is a risk, for example, that an office will be repossessed and files removed by a landlord, you and/or the new firm will need to contact clients urgently and seek consent properly while taking steps, working together, to identify and manage conflicts.
As a matter of good practice, you should also notify any former clients for whom you hold documents, such as leases or deeds. That may be an opportunity for them to collect such documents and reduce your future archiving cost.
Try to deal with all client money before you close by, for instance, sending money to clients or others, paying disbursements, and billing for your outstanding costs. Any withdrawals must be in accordance with the Client Money Handling professional statement and the Client Money Protection Scheme Rules. Following the closure of the practice, you must deal promptly with any monies remaining in the client account, or received after your practice closes, in accordance with the Professional Statement.
If you are holding client money for clients who cannot be traced and more than three years has passed since you received the money you can donate it to a registered charity https://www.rics.org/uk/upholding-professional-standards/standards-of-conduct/client-money/ .
If another firm will be taking over the practice from you, you should seek consent from your clients to transfer client money to the new firm’s client account, or to another firm if the client chooses not to instruct your successor firm.
When you close your firm, whether temporarily or permanently, you must ensure that all previous work is covered by appropriate and adequate professional indemnity cover.
If the closure is permanent contact your broker to discuss obtaining run off cover. Run-off cover is necessary because of the way professional indemnity operates. This is on a 'claims made' basis rather than 'losses occurring' basis. This means the responsibility for paying the claim lies with the insurer on cover when the claim is made (or the insurer is notified of circumstances that may give rise to a claim), which will not necessarily be the insurer on cover when the alleged negligence took place.
To support firms with run-off requirements, RICS amended their minimum policy wording for Professional Indemnity in April 2019 to include mandatory run-off cover for consumer clients for 6 years. Your insurer may charge an additional premium for covering commercial clients.
RICS also recently made changes to the Assigned Risk Pool (ARP) to include a run-off pool. This allows firms that cannot reasonably secure run-off for commercial claims on the open market an additional option to gain cover.
If you are temporarily closing your firm, contact your insurance broker to explain the situation.
Following the closure of your practice, you should take care not to practise or be held out as practising when tying up loose ends. For example, you will not be practising if you submit bills of costs, account to clients for monies held on their behalf, or arrange for the disposal or safekeeping of old files and documents. However, if you were to respond to a query from a client or tenant, you will be practising and this may be doing so without appropriate indemnity insurance or the other client protections in place through being a regulated firm.
If you need to use your firm's notepaper to deal with outstanding administrative tasks, you will need to adapt the notepaper to make it clear that the firm has closed. When taking telephone calls after the firm has closed, you should make sure that it is made clear to the caller that the firm has closed.
Bear in mind that you have obligations to protect your own and client interests to retain certain documents for appropriate periods.
For example, the limitation period on most legal claims is six years and some claims can be brought up to fifteen years later, so you need set a sensible retention policy for records in case you need to defend a claim.
An example of the legal requirements to retain documents includes records for tax purposes and, for property agent firms, the requirements under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
Storing closed files can be one of the highest costs of closure. Files should not be held indefinitely, and you should have a retention plan for how long files need to be kept. Consider whether you can hand files back to the former client, or destroy any files that are outside your retention period to reduce the number of records that need to be stored. You could also consider whether files can be kept in electronic form or whether another firm could take over storage of the files. Files must be stored in an orderly way, so that you can access them if needed later.
Also remember that you will need to continue to have access to any records kept digitally. Consider how these will be stored. You may need to continue to pay for cloud storage and should ensure that passwords are stored securely in case they are needed in future.
You need to bear in mind the following points:
When you leave your office ensure that no confidential information is left behind. If you are selling or otherwise disposing of computer equipment or mobile phones make sure any confidential information is removed before disposal.
You will need to apply to RICS to be deregistered.
This is not necessary if the closure is temporary. However, it would be a good idea to inform RICS that you are temporarily closing so that we have the information if any clients contact us. You can e mail email@example.com. The regulation team will also be able to remove you from Find a Surveyor while you are closed.
Whether you are closing permanently or temporarily, check whether your contact details on the RICS members portal are up to date so that we can contact you if we are contacted by clients who need access to their papers or client money you may be holding.
As soon as you have closed make sure that:
Include an emergency contact number or e mail address in these notices so that former clients can contact you if necessary. Check any answerphone or e mail address regularly for a reasonable time after you close.
Arrange for the redirection of your mail to a home address.
Consider whether there are any bodies to whom you have paid money for which you may be able to negotiate a refund or a renegotiation of a contract. For example the landlord of your business premises, insurers with which you have employer liability, public liability or premises insurance if this is no longer needed, and any organisation with which you have pre-booked marketing or sponsorship arrangements.
You may need to contact some or all of the organisations listed below to inform them of the closure of your practice. This list is meant as a guide only, and is not exhaustive:
Closing down your practice can be very stressful and there is a lot to think about. RICS professionals are reminded of the support available to them through the profession’s benevolent fund, LionHeart.
LionHeart’s support services continue as normal with telephone/ online support and advice, access to legal helpline, and professional counselling. Financial support may also be available for those facing extreme hardship in the current circumstances.
HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).
The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.
The charity Business Debtline also provides resources and debt advice for small businesses and the self employed, including sole traders: https://www.businessdebtline.org/EW/information/business%20insolvency/Pages/Debt-topics-business-insolvency.aspx