Client Money Protection – upcoming changes and why they matter

Client Money Protection (CMP) is an insurance policy taken out by letting agents to protect the monies they handle on behalf of their landlords and tenants. If your agent has CMP, it means that if they go out of business or someone runs off with your rent or the funds are held for maintenance, you don’t lose out financially.

Although it’s not yet law, the Government has announced that it intends to make membership of CMP schemes mandatory for all letting and managing agents in England. A consultation was published at the end of last year, inviting views and comments from both the industry and the public on how a new law should be designed, implemented and enforced. The feedback is currently being analysed. 

The consultation proposes that letting agents wouldn’t be permitted to operate until they had obtained cover. Those found not to have CMP could face the following penalties:

  • · A civil penalty of up to £5,000, in line with the one currently in place for agents that aren’t members of an approved redress scheme
  • · A maximum fine of £30,000, if the civil penalty were increased in line with the new fine for housing offences (introduced in April 2017)
  • · Repeated financial penalties for persistently non-compliant agents.

If your agent is a member of ARLA Propertymark, UKALA or RICS, they will already have CMP, as these organisations insist on it as a matter of best practice. Every agent should be acting in their clients’ best interests, so if your agent doesn’t currently have CMP, you should ask why not – worryingly, it may be that they can’t fulfil the criteria demanded by insurance providers.

The other thing to be aware of is that CMP obviously has a cost implication for agents, which they may try to pass on to you if they are indeed able to secure the insurance.

In any case, you should consider switching to an agent that is a member of one of the self-regulating bodies above, for two key reasons:

  1.  They are qualified, trained and operate to the highest industry standards, so will almost certainly be able to provide a better service than the one you’re currently getting.
  2.  In October last year, the Government also announced that it will change the law in the near future, so that all letting agents must be regulated. Again, there is a cost attached to this and if your current agent isn’t already trained and doesn’t meet certain code of conduct requirements, they may well be forced out of business.

In Scotland…

By 30th September 2018, all agents in Scotland must have applied to sign up to the Letting Agent Code of Practice, which requires them to belong to a CMP scheme. In addition, they must prove they are properly qualified and trained and hold Professional Indemnity insurance.

In short, legislation is tightening up for everyone who lets and manages property. So, the advice for you as a landlord is to work with an agent that already protects your interests as far as possible and isn’t simply doing the bare minimum to stay on the right side of the law.

This information has been provided by our partner Mortgage Advice Bureau. For more information relating to Mortgages or for Mortgage Advice please visit Mortgage Advice Bureau.

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