The collapse of property management firm ARPM has highlighted a “grey area” in which businesses may be operating without adequate client money protection (CMP), according to an industry leader.
Roughly 8,000 properties and their landlords have been affected by the problems at ARPM, which ceased trading last month with debts of almost £1.5m.
Many landlords contacted lettings agents who used the company to report rents payment deadlines being missed.
Jennifer Markham (right), Managing Director of The Letting Partnership, says a loophole in the CMP legislation has played its part in the situation some agents using ARPM now find themselves in.
She says the policy document states that “a property agent who holds client money must be a member of a client money protection scheme”.
However, the wording suggests that the policy only applies to agents, and additionally, only to those agents who actually handle client money.
“This wording has completely undermined the objective of protecting the funds of landlords and tenants, and the reputation of agents, for two reasons: firstly, it means many companies who handle client money appear not to require CMP. Secondly, it means letting agents who employ the services of these companies do not require CMP either. The result is a substantial and completely unregulated grey area.”
Legislation must be clarified
She said to avoid any repeat of the ARPM “disaster”, CMP legislation must either be clarified or amended to apply to all businesses with direct access to and/or control over client money, whether they are classed as property agents, client accounting service providers, accountants, software companies offering rent collection facilities, bookkeepers, or anyone else.
“Unless the businesses operating within this grey area have relevant and adequate insurance cover, and operate transparently giving agent clients open access to accounting records and client accounts held by them on behalf of agents using their services, they will continue to be a risk factor to letting agents until this loophole is closed,” added Markham.
Hamilton Fraser, whose deposit and client money protection schemes count ARPM as a client, has released a statement saying it has launched an investigation into the situation.
“Any landlord, tenant or agent who thinks they may be affected should contact mydeposits or Client Money Protect immediately,” a spokesperson said.