By April 2019, all property agents who hold client money must be registered under a Client Money Protection (CMP) scheme, safeguarding landlords and tenants from losing their funds.
The government has published new draft regulation after a consultation last November, which will make it compulsory for any company holding customer money to be registered under a CMP scheme by no later than April next year – and that includes property agents.
At present, around 60% of agents are members of a scheme voluntarily, with the likes of ARLA Propertymark and the National Approved Letting Scheme making it mandatory that all their members take part. However, for those that aren’t, any money held by them on behalf of the tenant or landlord has no protection, meaning that if any fraudulent activity takes place, for example, or if the agent goes bust, the money is lost.
Creating a level playing field
An estimated £2.7bn is currently held by letting agents on behalf of landlords and tenants, which could include rental payments, holding deposits or money for repairs. Most agents hold a tenant’s rent for an average of five to seven days before releasing it to the landlord – during which time, if the agent is not a member of a CMP scheme, the cash has no protection.
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David Cox, chief executive of ARLA Propertymark, said: “This is a vital step forward in improving consumer protection in the rental sector; probably more so than the myriad of other laws passed over the last two decades.
“We look forward to working with the Government to guarantee that the level playing field we’ve fought so hard to create becomes a reality on April 1 next year.”
The new legislation will give local authorities the power to fine anyone in breach of the new law, with those who have not signed up to a scheme by the deadline facing penalties of up to £30,000, or up to £5,000 for those who do not display CMP scheme membership details on their websites and in their premises. In extreme cases, some agents could even be shut down.
Despite the 1 April 2019 deadline, the government is urging businesses to sign up to a scheme as soon as possible.
