You may have heard already that the Government have now set out regulations to implement mandatory membership of a Client Money Protection (CMP) scheme for all property agents in England, who handle client money, from 1st April 2019.
We believe this new ruling will give all landlords and tenants the protection they deserve and will also increase consumer confidence in the rental sector.
What is 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 currently a compulsory requirement for all RICS, NAEA Propertymark and ARLA Propertymark members to have CMP, but until now it hasn’t been mandatory for letting agents who are not members of these professional bodies.
Why is it Being Made Mandatory?
It is estimated that some £23 billion is paid annually in rent, of which £6 - £10 billion is collected by agents like us on behalf of landlords like you. Figures suggest as much as £2.7 billion is held at any one time by letting agents and £700 million of that is thought to be unprotected. No wonder then that the industry has been complaining about the lack of protection available for landlords and their tenants when disreputable agents go out of business and disappear with their money.
Being undermined by a small minority of bad agents who steal from their clients and tenants should hopefully become a thing of the past as they will be liable for fines of up to £5,000 and potentially face the closure of their business.
How Does it Work?
Safeguards are in place to make sure that any rent paid to us is held in a separate bank account, so that both tenants and landlords are protected if a letting agent should stop trading or go out of business. To be fully compliant with the scheme your agent should do all of the following, in order to better protect your income.
- Open a segregated Client Money Bank Account
- Become a member of an external consumer redress scheme The Property Ombudsman
- Take out Professional Indemnity Insurance
- Agree to abide by the Terms and Conditions of CMP including following Guidance on the Holding of Client Monies
What Are The Benefits of Client Money Protection?
Whilst most agents already belong to a redress scheme, this may not help the tenant or landlord if they are awarded redress but the agent goes insolvent and is unable to pay compensation. CMP reduces risk by ensuring that the money is handled honestly and appropriately and gives both landlord and tenant the right to claim misappropriated money back through the scheme.
No Cost to You
As your trusted letting agent, we absorb all costs of membership of the scheme and delight in doing so. In order to gain cover, we have had to meet certain eligibility criteria and as a result we are entitled to display our CMP certificate in our office, and on our website, providing evidence that your money is safe in our hands.
Extra Protection When You Need It
We like to think that we get you off to the best of starts with your tenants by providing one of the most thorough referencing checks on the market via our partners, who delve further than most - checking out a prospective tenant’s current and previous address history and obtaining a previous landlord reference which will reveal if the rent was always paid on time, if any outstanding overdue rent is due and if the landlord would be happy to rent to them again.
For further information on how to protect your property and rental income, please get in touch and we’ll be happy to provide you with more information.