Last year saw significant changes to the rental landscape with this year set to be no exception for letting agents.
From 1st April 2019 letting agents in England will be required by law to belong to an approved client money protection scheme to protect landlord and tenant money. Agents are required to comply or face heavy penalty fines of up to £30,000.
Despite there being only a number of weeks left, it is estimated that currently around 4,000 agents are struggling to meet the deadline. Now more than ever it is important to understand your legal obligations as a letting agent and ensure that you are compliant.
What is client money protection?
Client money protection is designed to protect client money held by property agents and professionals.
Client money protection offers financial protection for landlords and tenants that their money is secure whilst being held by an agent, and also helps to continually support and raise standards within the property industry.
In the event that monies are misappropriated by an agent, in the course of running their business, client money protection helps to return monies to the affected parties (landlord and/or tenants).
What does a compliant agent look like?
As an agent you should already be aware of the coming legislation and be putting measures in place to ensure that you are compliant on 1st April 2019. Many agents may already have access to client money protection as a result of their membership to an agent body such as ARLA, RICS, NALS or UKALA.
Client Money Protect (CMP) – part of Hamilton Fraser, parent company to mydeposits, has been running a voluntary client money protection scheme since 2014 with over 800 agent members. Client Money Protect has now been announced by the government as one of the first schemes to be authorised to provide mandatory client money protection.
Joining a client money protection scheme
Agents need to comply with a number of standards in order to join a client money protection scheme. In relation to CMP membership letting agents are required to;
- Have a segregated client money bank account
- Have membership of an external consumer redress scheme
- Have professional indemnity insurance
- Agree to abide by the Terms and Conditions of Client Money Protect
- Agree for Client Money Protect to display their membership details on their website
- Display the Client Money Protect logo in every lettings branch
- Provide landlords and comprehensive information about client money protection and their membership of the scheme
Additionally, credit and fraud checks are carried out on potential members to help to identify whether money is being held correctly.
What are the membership benefits?
Joining Client Money Protect also benefits agents in a number of ways including;
- A legal helpline provided by Arc Legal
- Cheaper protection fees with mydeposits
- Discounted professional indemnity insurance with Hamilton Fraser
- Monthly newsletters featuring the latest industry news to help keep you compliant from Hamilton Fraser