The Government has unveiled proposals for how the introduction of mandatory Client Money Protection (CMP) could work in the lettings sector.
The long awaited consultation paper proposed that membership of a CMP scheme becomes mandatory, with fines of up to £30,000 for non-compliance.
It would only apply to those agents who handle client money, so if rent were paid direct to the landlord there would be no need for it.
The Government has rejected calls by the working group led by Baroness Hayter and Lord Palmer of Childs Hill for banning orders against those who don’t join as it says this could be due to a lack of awareness.
The consultation also adds that once letting agents regulation and minimum standards are introduced, it would be impossible to trade without the CMP anyway.
The paper also seeks views on whether CMP providers are approved by Government, similar to deposit protection and redress schemes, or whether there is a State-backed offering.
Agents will also need to list the name of their CMP provider, while the schemes would also need to disclose who their members are.
An impact assessment in the document claims a CMP 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.
Commenting on the consultation, David Cox, chief executive of ARLA Propertymark, said: “After years of lobbying and a successful campaign alongside Baroness Hayter of Kentish Town, we have finally convinced the Government of the need for this measure.
“While Propertymark members are already required to have CMP, this new measure 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 with 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.”
John Midgley, chair of CMP campaigners SAFEagent, said: “This consultation is a first vital step in achieving that goal. The SAFEagent campaign will continue with its work in the meantime in raising consumer awareness, building on everything we have achieved over the last six years.
“We urge all agents who are part of CMP schemes to sign up to the campaign and use the SAFEagent logo to highlight the protection they offer to tenants and landlords.”
The consultation, which you can read via the link below, closes on December 13.
I see no problem with client money protection. Indeed this should be in place for any business that holds money that belongs to someone else.
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“It would only apply to those agents who handle client money, so if rent were paid direct to the landlord there would be no need for it.”
Obviously we will need to see the detail, however the statement above may not be entirely accurate. Even where a tenant pays rent directly to a landlord, as is the case with ‘let only / tenant find’, where the agent collects the security deposit and / or first months rent, (often to ensure that they collect their commission) then I believe they would require CMP Insurance. It’s key to remember that client’s money isn’t exclusively the rental element. Just my opinion.
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Still wondering why it’s taken so long to get to this point. That in itself is criminal. Well done to the lobbying group and keep up the good work.
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