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Client Money Protection to be made compulsory for all letting agents, says review

Months have been spent looking at how to stop landlords and tenants losing cash when agents go bust or defraud.

Nigel lewis

Membership of a Client Money Protection scheme must be made compulsory for all letting agents in England, a government working group has concluded following more than six months of written and spoken evidence.

client money protectionThis has included evidence from landlords, tenants and letting agents, as well as the various industry bodies including NALS, ARLA, NLA, RLA, RICS and UKALA.

The working group, which has been led by Baroness Hayter and Lord Palmer (pictured, right), has revealed in its report that 85% of respondents were in favour of making Client Money Protection compulsory for letting agents, saying that it would help drive up standards across the sector.

It also says that efforts to introduce transparency into the industry by making agents publish and highlight their fees and Client Money Protection (CMP) scheme membership, have not worked.

Several high profile cases of agents misplacing or spending landlord and tenants funds have come to light during the group’s work, and although it agrees that most agents already have CMP is place, “some mostly small letting agents do not”, the report says.

“We heard some quite heart-rending stories from bot tenants and landlords of the losses they incurred.”

The introduction of a compulsory scheme is designed to ensure that landlords and tenants are reimbursed monies owed when a letting agent is fraudulent or goes bust. Even though there are three deposit protection schemes, the working group says, there are still many cases of funds going missing.

The working group will now present its findings to housing minister Gavin Barwell. These include its desire to see a mandatory CMP redress scheme brought in most likely administered by the existing redress scheme suppliers in coordination with banks (who open client accounts), policed by local authorities and trading standards. The whole scheme is to be coordinated by a lead body, most probably the National Trading Standards Estate Agency Team based in Wales.

Penalties

Penalties are to include a fine of at least £5,000 and a ban on handling client money, or in severe cases the agent shut down – although there are no existing powers to support this.

The working group has also recommended that a national register of CMP-registered letting agents be set up, so that landlords and tenants can check that their chosen agent is compliant.

Confuse tenants?

“There is now clear support across the private-rented sector for mandatory Client Money Protection and we fully endorse the Review’s findings that a coherent implementation is now necessary,” says Isobel Thomson, CEO of NALS (pictured, below).

“The Review concludes that agents will not have to source their CMP from agent professional bodies, but this carries the risk that CMP from a plethora of sources could further confuse tenants. That is why NALS has always supported the SAFEagent campaign which offers a single easily identifiable mark for consumers.

“We are in real danger of a ‘piecemeal’ approach if mandatory CMP regulations are not considered alongside the forthcoming ban on letting agent fees. Both proposals will have a significant impact on the market, so we need Government to be thinking in the interests of all in the sector – landlords, agents and tenants before they act and set it within a framework of regulation for all agents.”

March 27, 2017

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