CMP will soon be mandatory for letting agents in England
The Government have advised that Client Money Protection will be mandatory requirement for all letting agents in England to increase the protection of private sector rents paid by tenants to agents.
Lord Bourne of Aberystwyth, the Parliamentary Under-Secretary of State at the Department for Communities and local Government said: “This will ensure that every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve. The Government will now consult on how mandatory client money protection should be implemented and enforced”.
He added the protection is needed as currently there is no compensation for tenants and landlords if an agent becomes insolvent or unscrupulous and disappears with the money.
Many agents already have a CMP scheme in place however it is the actions of the agents without, whether through negligence, lack of experience, or going bust, that incur losses for tenants and landlords.
A working party review into these issues said: “The costs of CMP to a letting agent are not great. However, the cost of not having it, to a landlord or tenant, is too great, and too important for the minority of agents without CMP to be allowed to continue to hold client money”.
The report added: “Making CMP compulsory need not deter start-ups, as they can either use a custodial scheme, or act only as an introducer rather than handling client money until they have a track record. Mandatory CMP would deter the rogue, and indeed the amateur who should not handle other people’s rent without security”.
The Association of Residential Letting Agents have welcomed the move saying it is a clear step forward to a more regulated industry. David Cox, ARLA Propertymark chief executive, said: “‘We have long believed that all letting agents should belong to a CMP scheme because the many agents who do not sign up represent a greater risk to landlords and tenants. Furthermore, the reputation of the sector is undermined by the small minority of bad agents who steal from their clients and from tenants”.
Alan Ward, chairman of the Residential Landlords Association (RLA), also believes it is good move for tenants and landlords saying: “landlords should be concerned about agents having control over money due to them and formal schemes offer protection against any criminal activity that would deprive them of this cash”.
Over £2 billion is held by letting agents at any one time in the form of rents and money for property maintenance. Of this, an estimated £700 million is believed to be unprotected.
Agents have had to display whether they are member of a CMP scheme since May 2015 giving landlords the opportunity to choose which agent to use depending on whether or not they belong to a scheme. Tenants however, don’t have the same choice.
Under the new regulations, agents who do not belong to a scheme, could be fined or forced to cease trading if they are found to be handing client money.
Full article available on Property Wire: http://www.propertywire.com/news/uk/client-money-protection-scheme-mandatory-lettings-agents-england/