How will agents comply with Client Money Protection law after government moves goalposts?

Letting agents might not be able to comply with statutory requirements to offer Client Money Protection – because the insurance won’t be available.

No insurer will be in the market after the Government said there would be no limit on liability.

The issue potentially causes huge problems for larger letting agents in particular, with ARLA warning that such firms will be put out of business because of the enormous risks they carry, and  which no insurer will cover.

ARLA warned that it may have to shut down its own CMP offering.

As things stand, all letting agents must offer CMP from next year.

David Cox, head of ARLA, last night told us: “What has been really simple for years became very complicated when the regulations were laid and I have been working for the last six months to try and fix it.

“The CMP regulations require that an agent’s CMP scheme must cover, at minimum, the maximum amount in their client account and that in the event of a claim, the CMP scheme must pay out ‘without any deduction’ (up to and including the collapse of the scheme and bankruptcy of the company).

“Until October 16, Propertymark had been operating under the impression that the cover could be made up from a combination of the Tenancy Deposit Protection schemes covering all protected deposits and the CMP scheme covering everything else.

“This basis was agreed with officials at MHCLG on August 14, and we subsequently submitted our application for approval to MHCLG on this basis on  September 12.

“On  October 16, I was informed by MHCLG that they now expect us to also cover protected deposits.

“This represents double insurance of the deposits (coverage by both TDP and CMP schemes) which is a probable breach of FCA rules.

“In addition to the 3,000 member firms with less that £1m in their client accounts, Propertymark has a little over 200 member firms with more than that amount. Those 200 member firms have a combined total of £889m in client funds with £500m of that coming from the top 16 businesses.

“To be able to pay out without any deduction, Propertymark would be required to increase its insurance cover from the £5m it has in 2018 to over £200m, a 4000% increase.

“There is simply not enough capacity in the insurance market to achieve the cover.”

Cox said: “The impact will be that the large business will not be able to obtain CMP cover and will be forced to either cease trading or operate unlawfully.”

Mandatory CMP is likely to come in ahead of the fees ban – which some market commentators believe will not now be implemented until October next year, to allow six months for CMP to bed in.

The Government has already said that should letting agents go out of business because of loss of revenue caused by the ban, mandatory CMP needs to be implemented first in order to provide recompense to landlords and tenants.

On Monday, Baroness Hayter said in a debate in the Lords that the Government had upped the coverage needed for CMP providers to £200m with no cap on liabilities.

She also said in the debate that this excluded RICS and Propertymark “as their limit is £5m”.

Last night she clarified to EYE that this is the current requirement.

She told us: “The Government is proposing that all CMP schemes would have to increase their cover to £200m and with no upper limit at all on liability.

“This would affect all CMP schemes who would have to insure for all money held by all their agents. It’s just that RICS and ARLA happen to cover the very big agencies, and thus would have to increase their cover in line to the rents held by the big boys.”

Cox confirmed: “I thank Baroness Hayter for raising this matter in the House of Lords.

“The Government has recently moved the goalposts on mandatory Client Money Protection and some of the requirements they are now placing on the CMP schemes are simply impossible to achieve.

“However, we are working with MHCLG officials, the Minister and Baroness Hayter to find a route forward and hope that there will be a solution very shortly.”


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  1. Property Poke In The Eye

    It’s all a mess.

  2. ArthurHouse02

    For whatever reason the government it would seem would rather estate agents and letting agents dont exist. The Tory government (the pro business party!), have decided that we are just a stain on society and the public are better off without us. They would rather the industry was a completely unregulated s*** show of landlords letting directly to tenants.

    1. Eyereaderturnedposter12

      For whatever reason the government it would seem would rather estate agents and letting agents dont exist”… IMHO, this is spot on. Corporate interests/institutional investors (who are also Govt. /party political funders) have seen the money that can be made by corralling the nation’s renters (of which we all know, there are many), under their hastily built and mass produced (often poorly constructed) ”roofs”.  
      This is simply one facet of multi-faceted agenda to kill-off the PRS (and, IMHO to reallocated wealth from those who have successfully built both small and medium sized portfolios, into the hands of a small commercial elite).
      The Govt. and ”friends” (Shelter/TPO/CAB etc.) attacking the sector on all fronts (Landlords [sec.24/energy efficiency requirements/required testing/licensing scheme testing etc.- all come at a cost, rendering investment in property unviable] and Agents [proposed fee ban/ widespread anti-agent propaganda/CMP/ requirements to be members of regulatory bodies to the detriment of members etc.]. Combine the two, and you will swiftly see the demise of the traditional ‘cottage industry’ of agency as well as an exodus of Landlords from the sector.
      The Landlords you refer to won’t be of the ilk that Lettings Agents currently do business with, on the whole. They’ll be self managing, corporate/ financier backed entities whose scale and control over renters (renters whom, ironically, have been duped into believing that agents and their current Landlords [Mr. Jones with his three flats, allowing him a comfortable retirement ] are the ‘enemy’) , should raise a ‘red flag’ to any one operating on any level of common-sense/socio-political awareness. …Its an absolute disgrace. Have a successful day!      

  3. Robert May

    One knot in my knickers is duly untied!   Legislation should always fix broken things , it should not break things that on the whole are not broken. Going back long before Eye existed there was a lot of debate about the need for client money protection.  
    I’m still firmly of the belief  no principal should be able to buy a policy that provides cover for their own crimes or negligence. PI covers staff thieving or negligence, CMP the principal.
    “Don’t you be minding be burgling your house missus, here’s me insurance details, that’ll cover you  for wot I nicked. I might be a thief but I’m a decent thief”
    Making every agent buy a policy that  is unlikely to ever pay out is mad enough, but having that  policy providing un-capped cover is simply industry naive.
    If the underwriters won’t even apply to provide the cover the whole industry will cease to trade legally in under 6 months time, not because the industry is a bunch of crooks but the legislation has defeated itself.
    CMP should be provided by a 3rd party, a  3rd party who are keeping a month by month eye on those they’re insuring.
    Monthly reconciliation of client cash accounts has been possible for a whole generation now,  automatic reporting of  out of balance accounts 17 years.
    It is perfectly possible to have client money accounts properly protected from both crime and negligence, far more  effectively than some well intentioned scheme that will take a purely  futile premium out of the industry.      

    1. Robert May

      To put the £200m cover into perspective
      A typical managing agent looks after  200 properties- thats about £270,000 of deposits and a monthly rent roll of £180,000. 
       Direct debit (in own right, not factored)  require agents to have the equivalent 12 months rent  to cover potential loss. For most agents £5m cover is more than ample. £5m is about 10x the largest CCA agent fraud I’m aware of. Most landlords are on the phone as soon as the very first statement is late.

  4. Oliver Wharmby

    The solution is to remove insured deposit schemes and have Custodial only. CMP for letting agents only ever came about because insured deposit schemes were introduced. It’s made trade associations a fortune and is now creating a real mess.

    Scotland and Wales seem to have successfully rolled out mandatory CMP. Why is it so complicated for us!

  5. DASH94

    I’ll be honest – I don’t really understand how it works.

    I’ve just renewed my CMP – my premium has gone through the roof,(a 300% increase in premium) although nothing has changed in my business.  I don’t seem to be getting any no-claims benefits or brownie points for having behaved for the past 12 months – or the preceding 12 years.
    Last year I picked up a large number of properties as a result of a local agent having ‘lost’ all the deposits and that month’s rents.   They were a member of CMP and when I rang them to see if the landlords had any redress, I was told that unfortunately not, because they’d cancelled this agents membership as soon as they found out they’d absconded.

    1. Robert May

      Small secret, the people writing this legislation don’t know how it works either!

      A series of paragraphs that make grammatical sense and possibly legal sense but someone forgot once again, common sense!


      1. IWONDER36

        In a nutshell, people in government who are there without training to do a job they don’t know how to do because of lack of training, or constant shifting of job roles are making decisions which effect an entire industry, forcing redundancy, bankruptcy and inevitably a housing shortage, higher rents and homelessness!


        Because it’s good for party politics!

        I was in Costco the other day stocking up on office supplies where all the pricing is labelled plus VAT, the same VAT that agents are no longer allowed to show as part of their tenant application fee, yet it’s there, still being charged to the poor tenants that MP’s are tripping over themselves to look like they’re helping. Talk about double standards, fake credibility and outright industry bashing!

        Where is the outcry?

        If we were miners of old or we worked in the automotive industry or the NHS and our jobs and industries where under attack to this level you can bet there’d be hell to pay!

        Estate and lettings agents are laying down and taking this dictatorial shafting royally up the **** while at the same time we pay over the odds for everything, including the AML fees which we must pay to government to register to say we are doing a job we were already doing (criminal).

        Not to mention in our personal lives the forced fees we pay such as the TV licence which props up the BBC, which in turn pays its lovey’s over inflated salaries to go on trips around the globe for the 50th time in their career. Hard work if you can get it (not).

        How about we celebrate the hard work of small businesses, their entrepreneurial owners and staff for persevering for years trying to establish themselves from humble beginnings?

        How about we do actually make work pay by making people work, instead of handing out another brand new £30,000 mobility car to someone who knows someone who they drive to the doctors once a month?

        How about we motivate people to start in business, remain in business, employ people in their business instead of making them look for the highest bridge to throw themselves off?

        Too easy to just keep giving more and more to the inter-generational work shy while the rest of us pay for it, that’s a vote winner!

        It can’t be long now before all the political parties merge into one giant dictatorship of snowflakes which governs a Utopian land where nobody can offend anyone, unless you work for the government of Utopia that is!

        Rant almost over, all I will say as we start the countdown to Christmas is that while your sitting in a position of responsibility Mr & Mrs MP, just spare a thought for those of us who work hard and pay our rent/mortgages before buying little Liam a widescreen ultra HD TV  to go with his XBOX 1, which he can play on when he’s not out on his quad churning up other people’s lawns!

        We tax payers might also then feel like we live in a fair society that works for all!

        1. Robert May

          When tenant deposit legislation was introduced by Yvette Cooper, the obvious flaws and ommisions to her legislation were pointed out and even escallated up to Blair.
          We are governed by processes other than democracy, if we don’t like it there is not much we can do about it.
          This legislation will become an embarrassement to those who drive it through,  they’ll be replaced and we’ll start all over again.

  6. Woodentop

    Laughable. One hand hasn’t a clue what the other is doing. “Lettings” has become a political nonsense, out of control, out of step and a rocky ship that gets bigger and bigger with no captain at the helm.

  7. rsvstu97

    So the Government openly expect some agents to go out of business as a result of the tenant fee ban. ****** brilliant. They mess up everything they touch. Hips. Pensions. What a shame they have no experience or training to do their jobs. And while messing up their day job can get paid to work as executive directors on our time. You couldn’t make it up.  

  8. KByfield04

    Messy indeed but 2 obvious workarounds will be to either place all deposits in to a Custodial Scheme (if they aren’t already) or mandate that landlords must hold deposits- be that insured or custodial. Don’t think this is accidental but the gov could have just said- we don’t want landlords or agents to hold any cash deposits any more.


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