Client Money Protection set to become compulsory
Compulsory Client Money Protection (CMP) schemes are set to be introduced for agents under recommendations from a government working group.
Under the new plans announced today agents found to be handling client money without having Client Money Protection will be fined or shut down.
Those who receive fines for non- compliance should not be allowed to continue to handle cash.
Set terms and conditions for CMP will be agreed by government to ensure the schemes are consistent and the new rules will be enforced by local authorities.
CMP schemes protect the money of landlords and tenants if a letting or property agent goes into administration as well as protecting against theft or misappropriation. The cash in question is usually tenants’ deposits or landlords’ rents – or money for repairs.
Around 60-80% of agents are currently in a scheme voluntarily and the government and the House of Lords established a working group to look at how CMP was operating and whether to go further by making use of the powers in the Housing and Planning Act 2016 to make it mandatory.
In addition to fines and bans the working group has recommended British Bankers Association, in liaison with the government, produce guidance for banks on enabling the opening of client bank accounts without the need for evidence of due diligence on individual landlords.
It also recommends the government issue specific guidance to let agents, landlords and tenants know exactly how the scheme will work and what their responsibilities are.
It say the measures must be linked to the work underway on the ban on letting agent fees for tenants, with a consultation on those plans – announced by the chancellor last autumn – set to start imminently.
Industry estimates that letting agents currently hold approximately £2.7 billion and, at present, agents pay a fee of about £300-£500 to join a scheme. That fee forms a central pot of cash for successful landlord and tenant claims.
Alan Ward, RLA chairman said: “This is great news for landlords and tenants alike. Landlords should be concerned about agents having control over money due to them and formal schemes offer protection against any criminal activity that would deprive them of this cash.”
To read the findings of the government consultation and to read the recommendations in full click here.