Legislation in the private-rented sector is changing all the time. One of the most important new laws is compulsory Client Money Protection (CMP).
Introduced on 1 April this year, CMP protects the money agents hold on behalf of a client. But why do landlords and tenants need to understand how the new legislation could help them?
What is Client Money Protection?
Letting agents hold around £3billion of client money. From 1 April 2019, all agents need to belong to a government-approved CMP scheme to safeguard these funds. The insurance scheme pays landlords and tenants back if an agent ‘misappropriates’ the rent, deposit or other client funds.
The new legislation also means letting agents need to prove that they are handling clients’ money in the right way by:
1) Holding this money in a separate bank account to their operating funds
2) Having indemnity insurance so the money can be reclaimed if any employees commit fraud.
What has changed?
Stirling Ackroyd has been covered by CMP insurance long before it was mandatory but, not all agents have given clients the same peace of mind. In March 2017, the Government announced that all agents would need to protect the client money they handle.
The law is slightly different around the UK. Agents in Wales must have CMP as part of the Rent Smart Wales initiative and Scotland introduced compulsory CMP in January 2018.
What does Client Money Protection cover?
Client money includes landlords’ repair funds, rents, service charges and arbitration fees. The new CMP legislation is different from tenancy deposit protection (TDP). CMP does covers tenancy deposit money whilst it’s with the agent i.e. before or after it’s protected by a TDP scheme.
Agents who don’t handle any client money, for example, those who just offer landlords a tenant find service, won’t need to have CMP.
Who are the Client Money Protection providers?
The government has approved a number of CMP schemes. At time of writing, six key industry bodies currently offer the insurance: Propertymark, Client Money Protect, Money Shield, NALS Client Money Protection, RICS and UKALA Client Money Protection.
To find out more about the schemes available to letting agents, read more on the government’s website here.
How do I find out if an agent has Client Money Protection ?
Despite the new legislation, rogue letting agents are still out there. If you’re searching for a letting agent to manage your property, ask to see their CMP certificate. The new law says this should be prominently displayed in their office and on their website. Alternatively, you can check with each of the schemes.
If an agent doesn’t become a member of an approved CMP scheme, they will be liable for a penalty of up to £30,000. Failing to display the certificate alone carries an additional fine of up to £5,000. These penalties will be served by the appropriate local authority.
How do I make a claim?
There’s no need to go to court if you do need to claim your money back. If a landlord or tenant can show a letting agent has misappropriated their funds, then a claim can be made through the agent’s CMP scheme.
The process is fairly simple: after reporting the money missing to the police, you must make claim through the agent’s CMP provider within 12 months. Make sure you can send over the following documentation as evidence:
- The tenancy agreement
- Terms of business with the agent
- Bank statements illustrating a pattern of payments and then non-payment by the agent
- The tenant’s bank statements illustrating rental payments have been made.
Speak to our expert team
If you’re looking for a professional letting agent to help find a new tenant or manage your rental property, contact our expert team at Stirling Ackroyd today. We’re fully covered by CMP and will look after your property as if it were our own.
In addition, our Fully Managed Plus service provides extra cover to ensure that your money is safe through our Rent and Legal Protection Insurance. Find out more here or call 020 3961 7806 for more information.