Government announce client money protection review
Letting agents could be required to join a client money protection scheme following a last minute clause inserted in the Housing and Planning Act 2016.
The government have now established a working group to look at how client money protection schemes are working and whether the current voluntary arrangements should be made compulsory.
According to the government, letting agents could hold an estimated £2.7 billion in client funds, although without client money protection both the landlord and tenant could lose their money.
Scheme membership provides protection in the event of a letting agent going bankrupt or following theft or misappropriation of funds by the agent or their staff. The government estimate that around 60% to 80% of agents already belong to a client money protection scheme.
Under the Consumer Rights Act 2015, the only requirement is for letting agents to display whether or not they are part of a client money protection scheme. The information must be displayed in-store and on their website. In June 2016, the National Approved Letting Scheme (NALS) published a toolkit to help local authorities enforce these rules which can lead to a £5,000 penalty (read here).
While client money protection remains voluntary, landlords and tenants are urged to look out for the SAFEagent kite mark which denotes agents belonging to such a scheme. You can search for a SAFEagent near you by visiting the letting agent category in our Landlord Suppliers Directory (here).
In the meantime, the government has launched a consultation into making client money protection mandatory for lettings agents and all interested parties are being encouraged to take part. The initiative is being supported by Baroness Hayter and Lord Palmer who co-signed the consultation document along with Housing Minister Gavin Barwell.
The consultation runs for six weeks and is set to close on the 3rd October 2016. You can read the consultation document and submit your comments here.
The government consultation and proposals for compulsory CMP have been met with widespread support amongst leading industry figures.
Isobel Thomson, Chief Executive of NALS, said:
“NALS wants to stamp out the illegal and fraudulent practices that put tenants and landlords at risk and tarnish our industry’s reputation. We have long argued that to protect the consumer, all letting agents must be covered by a client money protection scheme.
“We’re delighted to see this review, and that the Government has recognised SAFEagent’s excellent campaigning for full and mandatory CMP.
“NALS will be responding fully to the consultation to inform the argument that all agents should be covered by CMP, and we urge others to do so too. We hope this review will finally lead to mandatory CMP for all letting agents.“
John Midgley, chair of the SAFEagent Steering Group, said:
“We very much welcome the Government’s review. Clearly, the SAFEagent campaign has given impetus to Government reviewing this issue. Quite simply, the industry wants it, and all members of licensing, professional and trade bodies already have it.
“It’s worth adding that cost is not an issue here. The Government should recognise that the cost of CMP is a small price to pay by an agent who genuinely wants to protect their clients and consumers“.