Client Money Policy for Letting Agencies
Residential lettings agents regularly handle money, often large sums of money, for their landlord clients. Agents need to have systems in place to ensure that the money is kept safe. Measures are likely to include having written policies, robust administrative procedures and well-trained staff.
The Housing and Planning Act 2016, which was enacted in May, introduces new legal requirements relating to client money. The Act allows the government to make regulations requiring lettings agents and property management agents to become members of a client money protection scheme.
More information on compulsory membership of client money protection schemes will follow as and when the regulations are made. In the meantime, we have added a Client Money Policy to our portfolio. Below we look at what “client money” is, why agents need a client money policy and what client money protection schemes do.
What is client money?
Client money is money that a letting agent or property management agent receives and holds on behalf of a client. It includes tenancy deposits, rent and service charge.
Do I need a client money policy?
Agents who belong to a professional body such as RICS or ARLA will be subject to a code of conduct that includes rules as to how client money is to be handled. For example, it must be kept in a designated “client” account, separate from the agent’s own money held in the “office” account.
Members of The Property Ombudsman (TPO) redress scheme must follow the TPO’s Code of Practice which includes a section on Clients’ Money.
It is good governance to establish and adhere to a written policy setting out how client money will be handled. This is the case whether or not you are subject to the rules of a professional body or ombudsman scheme.
New client money policy template
The new Simply-Docs template Client Money Policy for Letting Agency sets out, for the benefit of both staff and clients, how the agency will deal with the receipt, banking and payment of client money. There is optional wording for the agency to confirm that it is a member of a client money protection scheme.
Client money protection schemes
A number of agents’ professional bodies already run a client money protection scheme. Members pay an annual levy. Landlords, tenants and other parties whose money has been mishandled by an agent may bring a claim for compensation from the scheme.
Membership of a client money protection scheme is set to become compulsory for residential lettings agents when sections 133-135 of the Housing and Planning Act 2016 come into force. As yet no coming into force date has been announced.
The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.