Wed 17 May 2017
You may have seen in the press recently that on 28th March 2017 the Government announced its intention to make Client Money Protection (CMP) mandatory for all letting agents in England who handle client money and wonder what this might mean to you.
We believe this new ruling will give all landlords and tenants the protection they deserve and will also increase consumer confidence in the rental sector.
WHAT IS CMP?
CMP is a compensation scheme which recompenses landlords and tenants should an agent misappropriate their rent, deposit or other client funds. It is currently a compulsory requirement for all RICS, NAEA and ARLA members to have CMP, but until now it hasn’t been mandatory for letting agents who are not members of these professional bodies.
WHY IS IT BEING MADE MANDATORY?
It is estimated that some £23 billion is paid annually in rent, of which £6 - £10 billion is collected by agents like us on behalf of landlords like you. Figures suggest as much as £2.7 billion is held at any one time by letting agents and £700 million of that is thought to be unprotected. No wonder then that the industry has been complaining about the lack of protection available for landlords and their tenants when disreputable agents go out of business and disappear with their money.
Being undermined by a small minority of bad agents who steal from their clients and tenants should hopefully become a thing of the past as they will be liable for fines of up to £5,000 and potentially face the closure of their business.
HOW DOES IT WORK?
Safeguards are in place to make sure that any rent paid to us is held in a separate bank account, so that both tenants and landlords are protected if a letting agent should stop trading or go out of business. To be fully compliant with the scheme we do all of the following, in order to better protect your income.
ïƒ¼Open a segregated Client Money Bank Account
ïƒ¼Become a member of an external consumer redress scheme - TPO
ïƒ¼Take out Professional Indemnity Insurance
ïƒ¼Agree to abide by the Terms and Conditions of CMP including following Guidance onthe Holding of Client Monies
WHAT ARE THE BENEFITS OF CMP?
Whilst most agents already belong to a redress scheme, this may not help the tenant or landlord if they are awarded redress but the agent goes insolvent and is unable to pay compensation. CMP reduces risk by ensuring that the money is handled honestly and appropriately and gives both landlord and tenant the right to claim misappropriated money back through the scheme.
NO COST TO YOU
As your trusted letting agent, we absorb all costs of membership of the scheme and delight in doing so. In order to gain cover, we have had to meet certain eligibility criteria and as a result we are entitled to display our CMP certificate in our office, providing evidence that your money is safe in our hands.
"I have always found Lovetts to be very responsive to any concerns I have. The monthly statement and my rent are always produced on time and they send out an annual statement for tax purposes which is invaluable. Of the 4 letting agents I have used over the past 10 years Lovetts are by far the best!"