Letting agents across the country will soon be required to protect rental monies through an approved Client Money Protection (CMP) scheme, following the recommendations made in a new Government report.
The Property Ombudsman (TPO) scheme was one of several industry organisations called to provide evidence for the working party, which was chaired by Baroness Hayter and Lord Palmer of Childs Hill.
The Housing Minister has confirmed that agents will be required to protect the client money they handle. Gavin Barwell MP has said the government will consult on details shortly.
Lord Best, TPO’s Council Chair, expressed his support for the news in the House of Lords, in which he congratulated the noble Baroness, Lady Hayter, on her persistence in pursuing this matter and the Government on yielding to that persistence.
The report estimates that letting agents currently hold approximately £2.7 billion in client funds but found that very few landlords or tenants are aware of CMP and how it safeguards rental money if an agent goes bankrupt or attempts to use client funds fraudulently.
Gerry Fitzjohn, TPO Board Chairman, said:
“The CMP report addresses many of the key issues facing consumers and the industry, and correctly identifies that tenants choose the property they wish to rent, not the agent marketing it. Tenants have little choice in who they rent but every tenant’s rental payments should be protected.
“We would like to thank all the TPO agents that took part in the CMP survey we carried out last year as part of the Government’s CMP review. TPO’s survey ensured the industry had a voice during the review. While the survey results confirmed that a number of TPO agents already have CMP cover in place, we hope this news paves the way for the industry to finally have a level playing field so every consumer can be assured that their agent has CMP cover in place.”
Gerry added: “From an agent viewpoint, if you do not have CMP cover in place, now is the time to review your options. Agents can contact their trade bodies to find out what cover they can provide and Lonsdale was one of the first insurance brokers to offer CMP cover to agents that do not belong to a trade body, which has developed an exclusive product for TPO agents.”
What does the report recommend?
Current legislation requires agents to disclose whether or not they have CMP cover but the Government launched a CMP working group last autumn to look at how CMP is currently operating and whether to go further by making use of the powers taken through the Housing and Planning Act 2016 to make it mandatory. The report recommends that CMP becomes mandatory for letting agents in England that handle client money.
If you are an agent and you do not have CMP cover in place, now is the time to review your options (see below).
Current legislation requires letting agents to display whether they have CMP or not. Trading Standards officers have enforcement powers and can fine agents a civil penalty of up to £5,000 (payable to the council) for each office where the information is not published. There will also be a fine of up to £5,000 if the information is not published on an agent’s website.
How can agents find out more about CMP cover?
CMP cover is available through a number of providers - agents can access cover through their trade association or Lonsdale, which was one of the first insurance brokers to offer CMP cover to agents that do not belong to a trade body.
TPO has an exclusive agreement with Lonsdale, which offers TPO members comprehensive Professional Indemnity Insurance and Client Money Protection. Further information on the PI + CMP scheme can be found by clicking here.
• Check your office and website: are you displaying your CMP cover and complying with current legislation?
• Disclose your CMP cover: the more you talk about CMP, the more informed landlords and tenants will become so they can scrutinise rival agents that have yet to sign up and are failing to protect client funds.
• Brief colleagues and clients: If a consumer asks, does everyone in your team know if your business has CMP cover? Please make sure your staff are aware that CMP is not deposit protection – it concerns rental money. CMP offers additional safeguards and gives landlords peace of mind that the rent collected by their agent is protected from fraud and unlawful use.
• Research the CMP providers identified above and please look out for future updates concerning mandatory CMP cover.
To view the Government’s CMP report, please click here.