Details of the Client Money Protection (CMP) schemes that letting agents must join by April 2019 have been released by the Ministry of Housing, Communities and Local Government (DHCLG).
This includes paying interest on monies owed, undergoing rigorous financial checks before they join one of the new schemes and integrating CMP procedures closely into their businesses.
The new rules are designed to stop the large number of disputes that arise between landlords/tenants and letting agents over lost deposits and rental payments.
One of the more shocking cases was unveiled earlier this year when a Luton agent was expelled from The Property Ombudsman after it transpired that the company owed one of its landlord clients £181,000.
The details of the new CMP schemes have emerged as the department advises those hoping to provide the schemes, which are designed to give landlords and tenants confidence that their money is safe when being handled by an agent.
The additional red tape that agents will soon face to join one of the schemes include having written procedures to deal with client money and publishing them on their website, providing free copies of their written procedures to anyone who asks and keeping up-to-date records and accounts of client money dealings.
DHCLG also says agents will have to pay back monies both promptly and with interest “where feasible” to landlords and tenants, and hold client money in FCA-regulated bank or building society accounts.
The CMP schemes must also insist that letting agents have taken out appropriate professional indemnity insurance cover in order to join.
Agents will have to provide written proof to show that they are following the rules, while the schemes will be required to complete financial due diligence on each member before they join.
The MHCLG also says that the schemes cannot charge landlords or tenants any fees for using their service or limit the size of their pay outs or require them to pay an ‘excess’.
Tenants and landlords will also be able to make claims against letting agents for unpaid money for up to 12 months after the circumstances.
Read more about the Client Money Protection legislation.