With the deadline fast approaching where all letting agents in England must have compulsory Client Money Protection, one established supplier has withdrawn from the market, drawing comparisons with Brexit – flawed and running out of time.
It has also emerged that the RICS has yet to have a scheme approved, with the April 1 deadline for compliance now little more than a fortnight away.
A large number of letting agents now find themselves scrabbling to try and get the required insurance in time.
If they do not, they will be trading illegally, and could face fines of up to £30,000.
Lonsdale is the insurance broking business that has withdrawn from the market, despite having offered CMP for five years.
Lonsdale originally came up with its own voluntary scheme at the request of The Property Ombudsman, which wanted agents who did not belong to a trade body to be able to access CMP.
Oliver Wharmby of Lonsdale said that an estimated 4,000 agents still do not have CMP.
He told agents in a letter sent on March 6 that Lonsdale has withdrawn its application for its scheme to be approved by the Ministry of Housing, Communities and Local Government.
He said: “After 12 months of dialogue with MHCLG and with still so much uncertainty, we have lost confidence in the way CMP is being legislated and therefore cannot reasonably continue to provide a CMP scheme to agents in England.”
He has told Lonsdale insured agents that their Professional Indemnity and CMP shall remain in force.
However, with effect from April 1, the CMP section will not be compliant.
Wharmby explained in his letter: “CMP is for the consumers’ benefit and includes a 12-month extended reporting period after the policy expires.
“Consequently, there is no cancellation provision; however, under the circumstances, subject to insurers formally being released of their liability, they have agreed to return premiums pro-rata for the remainder of the period.
“The only way we can achieve this for you is if your new CMP provider confirms, in writing, that your new CMP includes retrospective cover for the period prior to you joining their scheme.
“It is our opinion that retrospective cover does not currently apply prior to new members joining the scheme.”
He said he understands that the approved CMP schemes do not provide retrospective cover.
Meanwhile, he has suggested that Lonsdale agents now get CMP via trade body UKALA, which is offering preferential rates to them, starting at £395.
One agent who received the letter told EYE that their firm had renewed its annual insurance policy via Lonsdale in only December.
Wharmby told EYE that there cannot be any refunds in such cases.
He told us that the whole issue had been like Brexit – “too much uncertainty and no time left”.
He went on: “With only weeks to go and there still being so many unanswered questions, we took the view, as a regulated FCA authorised entity, to pull the plug. Whilst regretful, we felt we had little choice.
“CMP was born due to the insured-backed deposit protection schemes.
“My understanding is that insured-backed deposit protection schemes were never the intention in 2007 and therefore CMP should never have been created. Mandatory CMP does not exist in other professions.
“There is a reason for CMP being legislated and it’s because MHCLG anticipates a high volume of claims post the tenant fees ban.
“I’m certain there shall be claims and we are already seeing the signs.
“What makes me nervous is that there appears to be no infrastructure to police whether the claims are accepted and subsequently paid.
“Trading Standards do not have the resource, and without a central claims notification process nobody knows what claims have been made and if indeed they are being dealt with.
“The approved schemes are largely unregulated and therefore there is no redress for the consumer or agent.”
A spokesperson for the RICS confirmed to EYE that its own scheme is still in limbo.
The spokesperson said: “RICS submitted its application to establish a government-approved Client Money Protection scheme, and we are working closely with the Ministry of Housing, Communities and Local Government to obtain approval of the scheme ahead of April 1.
“We will be communicating with RICS regulated firms over the coming weeks to give updates on RICS’ progress and provide guidance on any next steps that RICS regulated firms may need to take.”