Letting agents have just weeks to ensure that they have compulsory Client Money Protection insurance in place – but some 4,000 could be struggling to meet the deadline.
The figure appears to be the Government’s own estimate of the number who do not have the insurance in place.
CMP is currently voluntary, but from April 1 it will be a legal requirement.
In a leaked letter seen by EYE, the Government has expressed its concern that agents are struggling to open client accounts.
The letter says that “changes to the CMP legislation will allow schemes some flexibility” until next year to accept agents without a separate client account.
This was also publicly stated by Lord Bourne during the report stage of the Tenant Fees Bill in the Lords last year.
But one provider we spoke to said yesterday that agents without separate client accounts cannot get insurance: “CMP schemes cannot accommodate agents who do not have a client account,” they said.
The April 1 deadline means that agents without CMP from then on will be trading illegally. They could be fined up to £30,000, together with £5,000 fines for failing to display membership details.
The letter we have seen looks to come from a civil servant within the Private Rented Sector department at the Ministry of Housing, Communities and Local Government (MHCLG).
The letter to the CMP providers says: “We have been in contact with you all individually to ask about your approach to dealing with agents finding it difficult to get client accounts.
“As you know, our changes to the CMP legislation will allow schemes some flexibility to accept agents who are making best endeavours to get a client account until April 2020.
“This is only intended to be a temporary measure until banks are more willing to offer client accounts as the ultimate goal is of course that all client money is in an appropriate account.”
The letter goes on to ask how many applicants in the last six months or so have had difficulty opening a client account, and what type of agents these were.
The letter also asks which banks or building societies are not offering client accounts.
The stated aim of the legislation was to close the loopholes by which letting agents could use client money such as rent payments and tenants deposits as cashflow – or to fund lavish lifestyles.
The requirements were for all letting agents to keep client money separately, and to have mandatory CMP.
Mandatory CMP was always going to be implemented before the tenancy fee ban, so that if any agents went out of business as a result of the ban, tenants and landlords would be protected by insurance.
However, although the introduction of compulsory CMP is now some eight weeks away, there has been silence from the Government on its detail.
The letter that EYE has seen suggests that the April 1 deadline may be a difficult one to meet, if CMP providers refuse to relax their requirement that firms must have separate client accounts in place.
One CMP provider said: “We have the perfect storm: mandatory CMP without the time for thousands of agents to join a scheme, followed by the fee ban on June 1.”
David Cox, chief executive of ARLA, told EYE yesterday: “The schemes are still going through the approval process and as far as I’m aware MHCLG haven’t published any guidance for agents yet.”