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Agents are conduits when it comes to cash and in a market that’s gone from bubbling to boiling point, keeping money safe is of paramount importance, says Lisa Isaacs.

Lisa Isaacs

Link to Client Money feature

Like a well-made soufflé, everything is rising in lettings – new applications, rents, completions and, as a result, the amount of cash flowing through an agent’s books. The latest batches of lettings figures only serve to highlight how important Client Money Protection (CMP) and tenancy deposit schemes are.

Both CMP and deposit protection are both required by law, due in part to Safeagent’s seven-year campaign calling for the Government to make it mandatory for letting and management professionals to have CMP in place. “All letting agents need to protect deposits taken in a Government-approved tenancy deposit scheme and they need CMP through a Government-authorised provider,” says David Cox from ARLA Propertymark. “Agents who don’t protect tenants’ deposits risk the full return of the deposit and a fine of between one and three times the value of the deposit. Agents who don’t have CMP could receive a fine of £30,000 and/or a £5,000 fine per breach.”

The difference between deposit protection and CMP

Deposit protection and CMP serve different purposes but both are essential for any letting agent to operate legally. When a letting agent takes deposit money from a tenant, it must be protected within a tenancy deposit scheme in England and Wales. Mandatory deposit protection was introduced in 2007 and is applicable to Assured Shorthold Tenancies (there are other schemes in operation in Scotland and Northern Ireland).

“Tenancy deposit schemes are a critical area of cover for a letting business to have,” comments Chris Mason from The Letting Partnership. “If a letting agent goes bust, these schemes ensure the tenant can recover their deposit. There are three deposit protection schemes in England and Wales – MyDeposits, TDS and DPS.”

CMP was introduced in April 2019. It exists to give tenants protection for monies taken in a letting agent’s office, such as rent, cash and maintenance funds. Members of ARLA (Propertymark), RICS, UKALA, Safeagent and NALS can access CMP as part of their membership, while Money Shield provides CMP for those who do not belong to one of the above associations.

Available products & providers include:
  • Propertymark offers a comprehensive CMP scheme with total coverage for all but the largest agents. The Propertymark scheme, which is the longest established in the market, can only be accessed once agents are a full member of one of Propertymark’s professional bodies (ARLA, NAEA or NAVA).
  • Money Shield is one of two standalone commercial CMP schemes. It is owned jointly by Propertymark and the Tenancy Deposit Scheme, and it provides the same level of cover as Propertymark’s scheme but without the need to be a member of one of Propertymark’s professional bodies.
  • Tenancy Deposit Scheme (TDS) offers both paid-for insurance-backed and free custodial tenancy deposit protection, as well as CMP through Money Shield. The custodial scheme can be joined immediately and agents can join the insurance-backed schemes as soon as they have completed checks. Use of both schemes includes access to TDS’s Alternative Dispute Resolution service.
  • The Deposit Protection Service (DPS) provides free, custodial deposit protection in England and Wales on behalf of the Government. It protects deposits for the lifetime of a tenancy and there are no annual, renewal or re-protection charges.There’s training, resources and a free dispute resolution service for those who use the DPS, as well as an insurance scheme that starts at £9.50+VAT per deposit.
  • Safeagent is one of the longest running providers of CMP. In order to access its scheme, agents must first gain accreditation with Safeagent. “It is not just about buying an off-the-shelf product but rather raising standards among agents whilst accessing CMP,” says Isobel Thomson, Chief Executive.
  • Client Money HealthChecks from The Letting Partnership is a cost effective, fast, online alternative to traditional accountant reports and client account audits. Agents simply provide information about their active portfolio, their processes for handling client money and details about their tenant deposits. Client Money HealthChecks are certified by the leading insurance providers underwriting client money protection in the private rental sector.
  • The Hamilton Fraser Group offers several products, covering CMP, TDP, mediation and redress. These include the Property Redress Scheme, Mydeposits, Client Money Protect, Ome and Landlord Action. It also offers clients CPD accredited presentations, guides, podcasts, fact sheets and case studies to help improve understanding and drive up industry standards.
Turning the tables

Eddie Hooker - Hamilton Fraser - imageIn the pandemic fall-out, some tenants may be financial trouble but the same may be said for a selection of letting agents. Eddie Hooker at the Hamilton Fraser Group draws attention to the role CMP also plays in reassuring tenants and landlords against rogue operators.

If times are tight, there may be the temptation for agents to dip into financial reserves that they are holding or close down and do a midnight flit with the money. Eddie Hooke,r Hamilton Fraser.

“If times are tight, there may be the temptation for agents to dip into financial reserves that they are holding or close down and do a midnight flit with the money,” says Eddie. While this rarely happens, tenants and landlords should be reassured that CMP provides protection for any money held during such unusual trading conditions.

Is there a deposit alternative?

A number of ‘deposit free’ initiatives now allow agents to sidestep taking any cash at all. So how do they work? Instead of taking a deposit equivalent to five or six weeks’ rent, tenants pay a one-off fee, usually equal to one weeks’ rent.

“Agents using our scheme can sign up tenancies at any point in the agreement, allowing them to return deposits,” says Flatfair’s Simon Scott. “Deposit free allows faster sign up, same-day move ins and fewer void periods.” He also highlights that Flatfair and other deposit-free arrangements can make the end of tenancy process more seamless. “With us, all charges are handled through our online platform with a team of third-party adjudicators on hand to resolve any tricky disputes,” concludes Simon.

Deposit-free schemes can sometimes offer landlords enhanced protection. Flatfair offers double the protection compared to a traditional deposit, giving landlords up to 12 weeks of protection for any damages (with six weeks available for rent arrears).

Link to Client Money featureIn the case of Zero Deposit, its FCA-regulated status gives another type of reassurance, this time for tenants. The company’s Jon Notley says, “FCA regulated products have the added protection of the Finance Services Compensation Scheme, which acts as a safeguard should the company fail. Equally, regulated products must operate to standards set out by the FCA and eligible customers have a right to complain to the Financial Ombudsman Service – providing an additional safety-net for landlords as well as tenants.” Zero Deposit works closely with The Dispute Service (TDS), mirroring the impartial adjudication of a traditional scheme.

FCA regulated products have the added protection of the Finance Services Compensation Scheme, which acts as a safeguard should the company fail. Jon Notley, Zero Deposit.

Will there be a third mandatory requirement?

Agents have become accustomed to CMP and deposit protection but COVID-19 has made a relatively manageable issue in the private rented sector a looming danger. “The biggest threat to our sector is the non-payment of rent,” says Eddie Hooker, CEO of Hamilton Fraser which runs Property Redress Scheme (PRS). “The end of furlough and redundancies mean tenants will struggle to pay – whether they don’t want to or can’t. PRS is behind the creation of formal agreements between landlords and tenants, when it comes to deferring rent and rent payment plans. “There is no requirement for these by law at the moment but we expect this to change,” adds Eddie.


Trading Standards is actively working with local authorities and the National Trading Standards Estate and Letting Agency Team (NTSELAT) to check whether lettings agents are correctly registered with an approved CMP scheme. A small oversight, such as not displaying the protection they provide, can result in an agent being investigated. “Agents must prominently display their CMP certificate in their officers and on their website,” adds David. “Their website must also display their CMP procedures. For agencies with Propertymark or Money Shield protection, they will receive an ATOL style security certificate, which they can give out to their customers to reassure them that they are protected.”

Link to Client Money featureAgents can also fall foul of lettings law if they don’t provide tenants with information after their deposits are protected, as Steve Harriott from the Tenancy Deposit Scheme says: “Agents are required to issue tenants with a set of prescribed information about where the deposit is protected, within 30 days of the deposit being protected. In cases of non-service of the prescribed information, a penalty of the return of the deposit plus a fine of between one and three times the deposit can be levied.”

Don’t forget, tenants or other interested parties can find out if a landlord or a letting agent acting on their behalf is operating within CMP and deposit protection law, and they can report letting agents for non-compliance. “A tenant unsure whether their deposit is protected can contact the main deposit protection schemes or find out via the Shelter website,” comments Matt Trevett at The DPS.

September 10, 2020

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