Client Money Protection:
The government has confirmed that all property agents in England will need to be part of an approved Client Money Protection (CMP) scheme by April 1 next year.
Client Money Protection (CMP) is a compensation scheme which recompenses landlords and tenants should an agent misappropriate their rent, deposit or other client funds. It is a requirement for trade body members to have CMP.
The regulations give Local Authorities the powers to:
- Impose fines of up to £30,000 on agents who do not belong to a scheme beyond this date
- Impose fines of up to £5,000 on agents who fail to display correct scheme membership details on the business premises and on websites
CMP insurance cover is available through several providers. Agents should review their options to ensure they have this cover in place before CMP becomes a legal requirement next year.
Under current legislation, the Consumer Rights Act 2015 made it a legal requirement for every letting agent in England to display whether or not they are a member of a CMP scheme, their lettings fees and which redress scheme they belong to.
Letting Agents in Wales are now required to be a member of a Client Money Protection scheme (and display this to consumers) as part of their Rent Smart Wales registration.
Trading Standards Officers have the enforcement powers to impose fines of up to £5,000 for any firm that fails to comply.
Agents already belonging to an industry trade body may already be covered by the insurance. The following trade bodies offer comprehensive CMP cover to their member firms: ARLA, RICS, UKALA and NALS.
Agents not belonging to a trade body should seek advice from insurance brokers and providers.
ALRA Propertymark’s CEO, David Cox has said:
“After a long fight, ARLA Propertymark’s campaign for mandatory Client Money Protection (CMP) is finally won.
“With the help of Baroness Hayter of Kentish Town, and cross-party consensus in the House of Lords, this is a vital step forward in improving consumer protection in the rental sector; probably more so than the myriad of other laws passed over the last two decades.
“We look forward to working with the Government to guarantee that the level playing field we’ve fought so hard to create becomes a reality on the 1st April next year.”
“My Lords, I thank the noble Baroness and the noble Lord, Lord Palmer of Childs Hill, for their time and commitment to the client money protection review. I am pleased to announce that the Government intend to make Client Money Protection mandatory in line with the recommendation of the review chaired by the noble Baroness and the noble Lord, Lord Palmer of Childs Hill. This will ensure that every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve. The Government will consult on how mandatory Client Money Protection should be implemented and enforced.”
Lord Bourne of Aberystwyth, 28 March 2017
The Parliamentary Under-Secretary of State, DCLG and Wales Office
Full Hansard Transcript