Under a piece of legislation called the Bribery Act 2010 there is a liability for a business if it fails to prevent a person from bribing on its behalf in the interests of obtaining a commercial advantage for the business. In short, there shouldn’t be any bribes and unaccounted for incentives happening, not only for the general principle of fairness but to ensure that everybody has value for money service and transparency.
An extreme variation of this is fraud, which has always been illegal, and in the other scenarios there will be general good-practice guidance and sometimes obligations for certain people and organisations under any unique accreditations and authorities.
There are other similar obligations, say, under Money Laundering and the new Immigration Act for residential tenancies. The Bribery Act came into force several years ago and encompasses the general principle of bribery which is applicable to the business world just as much as property in particular.
It also affects everyone within a business, not just those directly involved with it. So the top-dog Director of a business will still have liability for happenings at grass-roots with employees, contractors, subsidiaries, and agents.
As long as the business is linked to the UK, it falls within this legislation, with the penalties of getting this wrong involving personal as well as corporate penalties and imprisonment, not to mention the damage to reputations.
In short, a business needs to demonstrate that there are procedures in place to detect and deal with any forms of potential bribery. When something does happen, they will need to show these procedures, with any defence needing to clearly show that there were adequate systems in place to prevent the activity, otherwise there is a black-and-white liability that exists irrespective of whether or not individuals or the business knew about it or not.
There needs to be a form of risk management and control procedures in place, although this all needs to be proportional and sensible in the context of the business setting and potential issues. So a large corporate entity will need separate procedures and checklists, from financial reporting through to people management, whereas a small business doesn’t necessarily need to have formal policies in place and their procedures can be part of any general Health & Safety systems say and just general good-practice and oral communication. The government’s Quick Start guide helps shed a little more light on this.
Once you are set up, you’ll need to make sure that your systems are updated over time, with any necessary training and reviews. So those set up a few years ago when the legislation came in, now need to ensure they’re still on track.
When it comes to property, and in particular property management, you can easily be in the firing line. By the nature of property dealing with big values, and often being very personality-led, it’s a potential breeding ground for bribery.
With property management in particular, you tend to be involved in all areas of property life from the deal and agency side, to the contractors and suppliers side. It can also affect a variety of property interests, whether a landlord and investor are set up as a business, an occupier where property is one aspect of their business activities, or an advisor and professional such as managing agent or solicitor.
So here are a few different angles to think about to make sure you consider all property aspects:
1. Agent’s Fees
Whether a sale or letting, agents can be paid handsomely for their work, particularly for larger-valued properties. These always need to be above board and clearly related to the instruction, with no unknown extras like inflated finders fees or extravagant disbursements.
2. Corporate Hospitality
Within reason, this can still be acceptable, and part of the nature of the property business. It has to be that though, and not a smoke screen for more substantial bribes.
3. Legal Connections
Unearthing all the legal, beneficial, and equitable interests and ownership with a property can be complicated, and often needing a good lawyer to bottom out.
4. Tenant Incentives
In difficult market conditions, landlords can be eager to attract tenants through incentives like rent-free periods and premiums. If these are part of the market then fine, but care needs to be taken that they’re not more in order to induce them to the property.
If they’re not, but they could be interpreted otherwise, then you could look at anti-bribery wording in the lease stating that both parties agree they have not been part of any bribe and both have procedures to deal with any issues.
5. Planning Permission & Payments
From first obtaining permissions, to then making agreed payments towards local community works, it can be potential ground for bribes.
6. Conflicts of Interests
This is where the same business can have several hats on and interests with a property transaction, and therefore extra care is added to disclose these and any connected interests both within the business and to interested parties. These can still be agreed by parties but after agreed procedures and action.
7. Contractors and Subcontractors
As they can cost large sums, they are open to claims of bribery between different contractors and then property interests. Whether it’s a relevant property interest having an undisclosed and profitable interest in the contractor, or the contractors simply not doing everything they’re paid for, transparency is the name of the game here.
8. Property Management Agreements
As property managers, there should be clear agreement of what services are carried out for what remuneration. The property manager tends to be linked to a lot of interests, and these all need carefully scrutinising.
So if you already have procedures and systems in place to deal with the duties under the Bribery Act 2010, still make sure these are reviewed and updated, and that relevant people are informed and trained where necessary.
It may be worth bringing in additional help to not only help get to the bottom of what you need, but demonstrate that yourselves have sought relevant and unique advice and assistance.
For those who are needing to begin from scratch, whether through growth or not knowing about the duty, then begin with seeing what you might already have in place that helps demistify ‘risk control and management’. Any new systems and paperwork you may require will always need to make sense and actually work and show that there are checks in place to detect any activities that may be construed as bribery and then how to effectively deal with them.