The importance of client money protection for landlords and tenants

Wednesday, June 7th, 2017 - By Eddie Hooker, CEO of Hamilton Fraser

Following recommendations from a government working group to move forward with the mandating of Client Money Protection (CMP) for agents in England, Housing Minister Gavin Barwell announced the following via Twitter on the 27th March: “Today we confirmed we’ll require all agents to protect the client money they handle.”

CMP has been a continuous issue for some time now with many industry experts, including Hamilton Fraser, petitioning for it to be compulsory. Confirmation of the news that government had finally backed mandatory CMP was therefore very much welcomed. It is a huge step forward for the private rented sector and a great outcome for both landlords and tenants, offering them peace of mind that should an agent misappropriate their rent, deposit or other funds, their money will be safely protected.

Whilst mandatory CMP is great news, it is important for landlords and tenants to remember that it is not yet law. The CMP review states that the working group will be putting implementation recommendations to the Ministers in the autumn, although they suggest that it is transitional to give agents time to comply. Currently, the Consumer Rights Act 2015 requires letting agents to predominately display whether or not they are part of a CMP scheme in their office window and on their website, but it is voluntary nonetheless at present. Landlords and tenants are therefore still at risk so it is important they choose an agent that has CMP cover in place for financial protection.

It is estimated that around 60% of agents already have CMP, demonstrating that thousands of agents do have comprehensive cover. If a letting agent is not a member of a CMP scheme, then their clients are not safeguarded. If the agent makes off with their money then there would be no way of getting it back.

The best way for a landlord or tenant to know if an agent has CMP is to ask them upfront. If the answer is yes, if the business goes insolvent or an agent is fraudulent, their money is protected. If the answer is no, they should not use them.

Unfortunately, there have been far too many cases where both landlords and tenants have lost hundreds or even thousands of pounds when they have used a letting agent that didn’t offer this level of protection. The sooner the law is changed and CMP is mandatory the better. It will go a long way in helping to improve standards within the industry and prevent the small minority of ‘rogue agents’ from deceiving consumers, who are perhaps unaware of CMP requirements.

Eddie Hooker is CEO of Hamilton Fraser, the parent company to three leading brands in the property industry: my deposits, Property Redress Scheme and Total Landlord Insurance.

Please note that the views and opinions expressed in these blogs are those of the author and do not necessarily represent the views of London Property Licensing. These blogs are designed to stimulate discussion and debate within the property industry.

For all the latest news and comment, you can sign up for the free London Property Licensing newsletter here.