From today onwards, all letting agents in England must belong to an approved Client Money Protection scheme, or they will be operating illegally and risk facing large fines.

Today’s implementation of compulsory CMP insurance comes before the tenancy fee ban on June 1, with the Government wanting to protect agents’ customers and expecting an unspecified number of letting agents to go bust as a result of the ban.

There are various approved insurance options, including for members of Propertymark and the RICS. The RICS scheme only obtained approval with days to spare, having had to make fundamental changes.

The annual aggregate claims limit for all registered firms holding client money goes up from £5.3m to £10.3m, regardless of the activity.

The annual aggregate claims limit for activities falling under the Regulations will have an additional aggregate limit of £20m (bringing the total to £30.3m in the regulated area).

Propertymark also runs Money Shield, a solution for those who do not belong to a membership body.

The UK Association of Letting Agents (UKALA) also runs an authorised scheme, facilitated by LetAlliance and which offers favourable terms to agents who were previously insured through Lonsdale, which has withdrawn from the market citing unknown risks.

EYE has been told by some ARLA agents – those handling high sums of client money – that they have tried to shop around for cheaper CMP than is on offer at Propertymark.

One agent said that mandatory CMP through their ARLA membership had been hiked by 300% this year, and that UKALA had quoted £595 plus VAT – cheaper than the £1,000 or so that the agent has been invoiced by ARLA.

However, the agent was told by ARLA that members must use the Propertymark scheme.

David Cox, CEO of ARLA, denied that his organisation’s CMP is necessarily more expensive than UKALA’s.

He said:  “I am afraid we don’t recognise this assertion. Our membership fee is £230 and the basic CMP levy is £360 – a total of £595 (VAT exempt). UKALA costs £595+VAT (£714 including VAT).”

He said it was correct that ARLA members must join Propertymark’s CMP scheme.

Agents hit with 300% hike in Client Money Protection costs just weeks ahead of mandatory requirement