A consultation on making membership of client money protection schemes mandatory for letting and managing agents that handle client money in England has been announced. The six week consultation by the Department of Communities and Local Government (DCLG) aims to ensure greater financial protection for landlords and tenants and is seeking views from the industry and the public.
The DCLG document says that such a move will give tenants and landlords complete confidence that their money is safe when it is with their agent and they can be compensated if all or part of their money is not repaid. The consultation document highlights that membership of a client money protection scheme generally costs an agent between £300 and £500 a year depending on the size of the firm and the amount of money held in client accounts.
Landlords and tenants frequently pay money to agents to handle on their behalf. These monies are normally rental payments but can also include monies held for repairs and maintenance to the property. The industry estimates that property agents currently hold approximately £2.7 billion in client funds and around 60% of agents are already members of protection schemes.
‘If an agent is not a member of a client money protection scheme, clients, either the landlord, tenant or both, risk losing their money in the event of the agent defaulting on its obligations,’ the document says.
‘Membership of a client money protection scheme is not currently mandatory. The Government encourages firms to join schemes and encourages landlords and tenants to choose agents who are members of a client money protection scheme. Professional bodies require agents to join a client money scheme as part of their eligibility criteria,’ it points out.
‘If an agent is found to be handling client money without having client money protection, they should be fined or shut down. Agents who receive fines for non-compliance should not be permitted to continue to handle client money,’ it adds.
The move has been welcomed by landlord organisations. David Cox, chief executive of the Association of Residential Letting Agents (ARLA) already requires its members to be part of a client money protection scheme, making it mandatory will ensure that all letting agents are operating on a level playing field, meaning consumers will be protected regardless of the agent they choose.
‘We are equally pleased that agents will have to display their CMP membership prominently, which will provide tenants peace of mind that their money is protected. We urge agents to respond to the consultation as it is an essential measure, that will go a long way to improving the regulatory environment in the lettings sector, and increase the protection for consumers who count on agents to handle their money safely,’ Cox added.
