Agents have been given an extra year to comply with the mandatory client money protection rules.
Mandatory CMP was introduced for letting agents in April 2019 and firms were given a grace period of 12 months to comply.
But the Government this week quietly amended the rules surrounding CMP, effectively giving firms another year.
The amendment substitutes the date of April 1, 2021, for the date of April 1, 2020, in the Regulations.
A note on the amendment said: “It therefore has the effect of extending, by a year, the application of the provision for deemed compliance with the requirement to hold client money in a client money account at an authorised bank or building society.”
It comes as agents have faced difficulties opening client accounts with banks and building societies. Some have been told they need to open a separate account for each landlord rather than offering a pooled one and others have been told that the lettings sector is deemed too high risk.
Isobel Thomson, chief executive of safeagent blamed banks for the delay.
She said: “Unfortunately, we know some banks are refusing to permit agents to open client accounts or changing the terms on which existing accounts are held with little notice. Client accounts are vital for compliance with Client Money Protection Regulations.
“Not only does this stance make life difficult for these agents who are trying to comply with the legislation, but these banks are actively blocking, rather than supporting an important consumer protection measure. This is unacceptable.”
David Smith, policy director for the Residential Landlords Association, said: “The CMP regulations required that all agents had a pooled client account by April 1, 2020. Otherwise the various CMP schemes would have been obliged to throw them out.
“The new regulations deal with the current problems by putting off their implementation until April 2021.
“In the meantime, the Government is apparently working with banks and producing updated anti-money laundering guidance to make clearer that the lettings sector is a low risk and should not be seen by banks as a problem.
“For some agents this will be a relief. Others will have already solved this issue by moving banks or will have been lucky enough to be with a bank that will accept pooled client accounts.
“However, it also illustrates the problems that arise when Government departments make substantial changes in a complex sector without properly considering the consequences.
“CMP is important and a clear benefit to the sector, but implementing it badly so that tweaks need to be made later represents a waste of effort.”
David Cox, chief executive of ARLA Propertymark, said: “Although the Government is giving agents an extra year to comply with The Client Money Protection Schemes for Property Agents Regulations, it’s vital tenants and landlords still have a route to reimbursement during this time should the agent they’re dealing with go out of business or misappropriate client funds.”
Comments (3)
What a joke from start to finish!
It seems that not enough people in the process understand what is required, it is a confused situation of conflicting understanding.
4.2 million tenancies need to be reconciled each month, there needs to be ledger and cash accounts for each property tenancy, tenant, landlord etc. they do not have to be physically separate accounts. One designated client cash account will do.
The single physical designated client cash account should reconcile with a system that identifies ledger and cash entries, that provides an audit trail to movements in, out and between not physical accounts.
The banks don’t want client cash accounts- there are too many transactions for not a lot of return- there might be about £43.36b passing through client cash accounts but the shear volume of transactions required at a bank base rate that is effectively 0% means client cash accounts are an expense the banks could do without.
Why delay this? We’ve all had at least a year to prepare for it!