The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations came into force on 01 April 2019. Under these regulations, all private sector letting agents and property managers in England who hold client money are required to be members of a government approved Client Money Protection Scheme (CMP Scheme) from the 01 April 2019 or face fines of up to £30,000.
Client money does not include tenancy deposits, which are protected under an approved tenancy deposit scheme.
These regulations give landlords and tenants the confidence that their money is safe, and that they will be compensated in the event of the monies being misappropriated or if the agent becomes insolvent. This is one of several legislative changes being introduced to protect customers against rogue letting agents and to regularise this industry.
These regulations only affect agents operating in England. Letting agents and property managers in Wales are already required to be a member of a CMP Scheme before they can obtain a license to operate in Wales.
Agents who belong to a professional body such as ARLA will already be members of a CMP Scheme.
In order to comply with the regulations, agents must:
(1) Be a member of an approved or designated CMP Scheme;
(2) If they’ve been provided with a certificate from the scheme administrator:
(a) Obtain a certificate confirming membership of the CMP Scheme;
(b) Display the certificate at the agent’s premises and on their website; and
(c) Produce a copy of the certificate to any person who may reasonably require it, free of charge;
(3) Notify all clients within 14 days if their CMP membership is revoked, or they change to a different approved CMP scheme; and
(4) Notify all clients of the name and address of the CMP scheme.
Financial Penalties for Non-Compliance and Right to Appeal
Every local authority in England is under a duty to enforce these requirements.
In respect of a breach of point 1 above, an agent can be fined up to £30,000.
In respect of a breach of points 2-4 above, an agent can be fined up to £5,000.
An agent can appeal against a decision to impose a penalty and the amount of the penalty.
Only one financial penalty may be imposed on the same property agent in respect of the same breach unless:
(1) the breach continues after the end of 28 days after the final notice is served and the agent hasn’t appealed the final notice within that period; or
(2) the breach continues 28 days after an appeal is finally determined (excluding the day on which the appeal is decided).
At the time of writing there are five government approved CMP Schemes:
(1) UK Association of Letting Agents (UKALA);
(2) Money Shield;
(3) Client Money Protect;
(4) Propertymark; and
(5) National Approved Lettings Scheme (NALS).
Agents will be required to pay an annual membership fee to join a CMP Scheme. The amount of the membership fee will vary depending on the sum of money that the agent holds from time to time.
Requirements vary from scheme to scheme, but the current approved schemes all require agents to:
(1) show that they have a designated client account in which to place client monies which is separate from their business account;
(2) Professional Indemnity Insurance; and
(3) Bank statements for the designated client account.
Are you already a member of a CMP Scheme? Have you had any problems joining a CMP Scheme? As a letting agent/property manager operating in England, do you welcome these changes? Your comments are, as ever, welcome!