Client Money Protection Scheme (England)
The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 come into force on the 01 April 2019. Under these regulations, all letting agents and property managers in England who hold client money (received from a landlord or tenant) 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 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.
Requirement to belong to a Client Money Protection Scheme (Regulation 3)
A property agent who holds client money must be a member of an approved or designated CMP Scheme
Transparency Requirements (Regulation 4)
A property agent must:
- (if they’ve been provided with a certificate from the scheme administrator) display the certificate at the agent’s premises and on their website;
- Produce a copy of the certificate to any person who may reasonably require it, free of charge;
- Notify all clients within 14 days if their CMP membership is revoked, or they change to a different approved CMP scheme; and
- Notify all clients of the name and address of the CMP scheme.
Financial Penalties and Right to Appeal
It is the duty of every local authority in England to enforce these requirements.
- Breach of Regulation 3 (requirement to belong to a scheme):
If a local authority in which the agent has its premises or where the property (which the agent manages) is based, is satisfied beyond reasonable doubt that an agent is not a member of a government approved Client Money Protection Scheme they can impose a fine of up to £30,000.
- Breach of Regulation 4 (transparency requirements):
If a local authority in which the agent has its premises or where the property (which the agent manages) is based, is satisfied beyond reasonable doubt that an agent has breached regulation 4, they can impose a fine of up to £5,000.
Only one financial penalty may be imposed on the same property agent in respect of the same breach unless:
- 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
- the breach continues 28 days after an appeal is finally determined (excluding the day on which the appeal is decided).
An agent can appeal against a decision to impose a penalty and the amount of the penalty.
Becoming a member of a CMP Scheme
At the time of writing there are five government approved CMP Schemes:
- UK Association of Letting Agents (UKALA);
- Money Shield;
- Client Money Protect;
- Propertymark; and
- 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:
- show that it has a designated client account in which to place client monies which is separate from its business account;
- Professional Indemnity Insurance; and
- Previous bank statements for the designated client account.