Block management firms will be able to offer Client Money Protection if they belong to trade body the Association of Residential Managing Agents.

ARMA estimates that around £1.3bn is being held in unprotected client funds  by UK managing agents, and ARMA says there is a clear need for greater protection of leaseholders’ money.

Now ARMA has launched a first of its kind CMP insurance policy, exclusively available to members.

CMP schemes are expected to become compulsory for managing agents. But compared with letting agents, for whom CMP will be mandatory from probably next April, similar regulation for managing agents has lagged behind.

However, given that the sums held by property managers are significantly larger than those held by lettings agents, ARMA says the need for client protection is all the more pressing.

The body says that on average, property managers hold £6.2m in leaseholder money and larger firms could be holding in excess of £100m, whereas the average letting agency holds around £500,000 at any one time.

Money held by block managers is made up of clients’ service charges and reserve and sinking funds, all held in trust in individual client accounts.

It is estimated that 40% of all managing agents have no CMP in place, meaning that money would not be insured should the managing agent walk off into the sunset or use the funds to prop up the business.

Now ARMA is offering its members the first CMP policy designed specifically for the block management sector offered through NFU Mutual, underwritten by multinational insurance group RSA.

Previously the only CMP schemes available were levy schemes, where payments from all members are held in a central pot, from which money for any claim is paid out, meaning cover for all members is suspended when the pot runs out.

Dr Nigel Glen, CEO of ARMA, said: “Given the large sums of money that property managers are dealing with having adequate cover is vital, which is why it was important that we found a CMP solution that was fit for purpose. The current CMP schemes are not designed to offer the level of protection required within our sector.

“We are pleased to introduce a straightforward and cost-effective CMP policy so that our members can get ahead of the curve and ensure they have protection in place before legislation comes in.”

Over the past year ARMA has been proactively lobbying the Government on CMP and the benefits that making it mandatory will bring to everyone in the residential block management sector.