Shropshire Council has issued an £8,400 civil financial penalty after discovering a local solicitor was undertaking property management or letting agency work and holding client funds while not being a member of an approved client money protection (CMP) scheme.

The not-for-profit accreditation scheme for lettings and management agents, Safeagent, is now advising solicitors who carry out lettings and management work to use an agent who complies with all the necessary legislation to do it for them.

Should have used compliant agents

Thomson says: “This is an unusual case, but we felt it needs highlighting as solicitors may be unaware that in certain circumstances they come under the CMP Regulations.

“The [unnamed] solicitor argued in their defence that they only managed two properties, so questioned whether they were required to be a member of an approved CMP scheme.

“They are regulated by the Solicitors Regulation Authority (SRA) and felt the money was in a client account and properly protected.

“But the Judge stated that there is no exemption in the legislation for solicitors carrying out letting agency and property management work.

“While it was agreed that the solicitor did not need to belong to a redress scheme as there is an exemption in that Order, no such exemption exists in the CMP legislation.”

The judgement, says Safeagent, also highlights that where a solicitor carries out probate work and rented properties are part of an estate where tenants pay rent to the solicitor’s firm, this could be classed as ‘letting agency work’ or ‘property management work’, which may require them to be a member of a CMP scheme.

It is fairly common practice for solicitors to manage properties for long-standing clients.”

Trading Standards Officer Alexandra Cosgrove, who investigated the case, says: “This was a unique and interesting case. The authority was told that it is fairly common practice for solicitors to manage properties for long-standing clients, especially where they’ve carried out conveyancing work.

“The judgement is very clear, as Judge Brian Kennedy KC fully considered the definitions and interpretation within the legislation in detail.

“He also compared it to other related legislation for letting agents and property managing agents and found there is no exemption for solicitors in relation to the requirement to hold client money protection.”