Letting agent membership of Client Money Protection (CMP) schemes, which offer landlords and renters greater protection from ‘rogue’ lettings agents, has now been made mandatory by the government. From April 2019, letting agents are expected to be compliant and to be members of an approved CMP scheme, or else face fines.
The measures were taken as the government was concerned that a large number of landlords and renters were at risk of being unable to have their money returned to them, in the event of misappropriation of funds or the bankruptcy of their agents.
The government estimated that prior to the regulatory changes, approximately 60 per cent of letting agencies were members of some kind of CMP scheme. It also estimatedthat letting agencies held as much as £2.7 billion in client funds in 2017.
Failure to comply could result in heavy fines
The government intends to place fines of as much as £30,000 for failure of letting agents to sign up to a CMP scheme, according to a press release from the government last month. Failure to provide a scheme certificate or contact clients during the swapping of a scheme could result in fines of up to £5,000.
Heather Wheeler, minister for housing and homelessness, remarked: “It is not acceptable that some tenants and landlords are being put at risk of losing out financially, simply because their agent had not signed up to a scheme to protect their money.”
She added: “Whilst the vast majority of agents act responsibly, this new law will prevent people from losing their hard-earned cash through no fault of their own. This will give tenants and landlords confidence and peace of mind that their money is in safe hands whilst with their agent.”
Protection after a successful campaign
These regulatory changes follow a campaign by the Residential Landlords Association (RLA) to offer better protection against theft or the misappropriation of funds by a rogue letting agent. The RLA campaign for mandatory membership of CMP schemes by letting agents was followed by a government consultation in 2016, which ultimately led to the new law coming to pass this April.
During the CMP campaign in 2016, Alan Ward, chairman at RLA, commented: “It is ironic that estate agents are legally required to be registered yet don’t handle money, yet estate agents handling tenant and landlord money are at present completely free to do what they like. This is why we believe CMP schemes are an essential measure.”
In response to the introduction of the new law, the RLA has provided resources for landlords and letting agents. These resources include a list of approved schemes to sign up to, as well as clear guidelines for letting agencies to follow, as well as the potential consequences, if they fail to comply.