Following our campaigning it is now mandatory for all letting agents in England, Wales and Scotland to have CMP and we continue to push for mandatory requirements in Northern Ireland.
Leading the campaign on CMP
It has been estimated that letting agents hold approximately £2.7 billion in client funds at any one time and yet, if they are not covered by Client Money Protection, both the landlord and tenant stand to lose their money. Before regulation, it was thought £700 million is not protected, leaving tenants and landlords vulnerable to agents who go out of business or abscond.
Since 31 January 2018, CMP is a mandatory requirement for all letting or managing agents in Scotland under the Letting Agent Code of Practice.
In 2017 the Northern Ireland Executive carried out a review into the private rented sector with proposals for change. We continue to push for reform including the introduction of mandatory CMP as part of the Virtual Housing Panel.
When legislation for licensing requirements were being developed Propertymark was part of the Welsh Government’s Working Party and pushed for mandatory CMP alongside the Code of Practice.
Why is CMP important?
Letting agents hold a significant amount of money in the form of deposits and rent on behalf of tenants and landlords. CMP ensures that funds are held in a designated client account and in the event of an agency going bust or misappropriating funds, it offers landlords and tenants a route to compensation.
Martin fronted a string of letting agencies and used numerous aliases between 2009 and 2015 to pocket £221,000 from more than 60 tenants and landlords. He repeatedly offered tenants properties he had no right to let out, took deposits from multiple tenants for the same property, moved in different tenants than those promised and used a variety of methods/excuses to hold on to thousands in deposits and rents.
David stole £123,000 from landlords, pocketing rent and deposits paid by tenants rather than passing the cash to his clients over four years. During this time, he put tenants' rent and deposits into the company's 'working capital' account.
Janine of Stour Provost took money from a branch of Dorset Lettings, which she ran under franchise. Police investigations uncovered that financial records showed Janine paid for Mediterranean cruises and a £7,000 Welsh pony with the proceeds.
The situation caused much stress and worry for staff, landlords, tenants and suppliers. However, the agency was ARLA Propertymark Protected so landlords and tenants were able to recoup their losses through our CMP scheme.
Westminister lobbying, victory in our campaign for mandatory Client Money Protection (CMP) in England
We responded to DCLG’s technical discussion paper, which formulated many policies in the Housing and Planning Act 2016. We provided written and oral evidence to the Public Bill Committee in the House of Commons who were scrutinising the Housing and Planning Bill before it became an Act of Parliament. At the oral session, we were asked by MPs to provide further details about the type of amendment we would like to see for CMP.
Baroness Hayter reintroduced the CMP amendment when the Bill was looked at by the House of Lords after the amendment was initially withdrawn in the House of Commons in December 2015. Our members wrote to the members of the House of Lords urging them to support the amendment.
The Bill went back to the Commons and the Government introduced an enabling power to make regulations to require letting agents in England to have CMP.
We responded to the CMP review and gave evidence to a closed session of Peers in the House of Lords to outline why the introduction of mandatory CMP for the whole sector is vital.
Mandatory CMP moved a step closer with the launch of a consultation inviting views on how the rules should be designed, implemented and enforced. The consultation posed nine key questions including minimum levels of cover, the impact on the size of different businesses and whether Trading Standards should enforce the rules and penalties for non-compliance.
We have issued our response to the Government consultation on mandatory CMP giving our views and comments on how the rules should be designed, implemented and enforced.
The Government published its response to the consultation on the introduction of mandatory CMP for letting agents. They announced that legislation will be brought forward to introduce privately led CMP schemes and civil penalties of up to £30,000 for agents who fail to comply.
CMP was voluntary at the time with approximately 60 per cent of letting agents signed up to a scheme. By making CMP mandatory, it ensures that every agent is offering the same level of protection and gives tenants and landlords the financial protection they deserve.
The Government laid regulations that, if passed by parliament, would require all agents managing lettings in England to belong to an approved CMP scheme by 1 April 2019. The draft regulations gave Local Authorities the powers to:
- Impose fines of up to £30,000 on agents who do not belong to a scheme beyond this date.
- Impose fines of up to £5,000 on agents who fail to display the correct scheme details on their premises and website.
Parliament amended the CMP regulations during the legislative process of the Tenant Fees Act. The amendment clarified that government-approved CMP schemes will not be required to cover money protected in one of the three permitted tenancy deposit schemes. The amendment tabled by Baroness Hayter of Kentish Town allowed for the CMP regulations to come into force from 1 April 2019, ahead of the ban on tenant fees.
We received formal approval from the Housing Minister to operate as a government-authorised CMP Scheme.
Propertymark has received formal approval from the Housing Minister, Heather Wheeler MP, to operate a Government-authorised Client Money Protection (CMP) Scheme.
Pooled Client Accounts, campaigning for improved guidance
We welcomed improved Joint Money Laundering Steering Group (JMLSG) guidance on Pooled Client Accounts (PCAs) following our response to JMLSG’s review and sustained engagement with HM Treasury and UK Finance to make it easier for letting agents to meet their legal obligations.
We responded to the JMLSG proposed draft guidance on Pooled Client Accounts outlining that the banks' expectations of letting agents do not coincide with the legal requirements for Anti-Money Laundering (AML) and Client Money Protection (CMP) regulations.
We welcome improved Joint Money Laundering Steering Group (JMLSG) guidance on Pooled Client Accounts (PCAs) following our response to their review and sustained engagement with HM Treasury and UK Finance to make it easier for letting agents to meet their legal obligations.
In the fast-paced world of property management, letting agents face a myriad of challenges, with client money management sitting high on the list of priorities. Ensuring the safety and transparency of client funds is not only a legal obligation; it’s good business practice.
Following a series of high-profile account closures, Propertymark has written to the Rt Hon Jeremy Hunt MP highlighting the ongoing issues and pushing for action from the UK Government to find solutions that reduce barriers for letting agents to operate.
The introduction of the Renter's (Reform) Bill resulted a lot of media coverage, with agents and landlords voicing valid concerns about the potential impact of future legislation on their businesses. However, it is important to note that the Bill has not yet become law and is still undergoing scrutiny and possible amendments.
Fines totalling £12,000 have been handed out to six letting agents in the London Borough of Haringey after a crackdown by Trading Standards.
Following the launch of Propertymark’s Calm About Compliance service in December 2022, designed to help property agents navigate the myriad of sector laws, regulations and guidance, we are partnering with PayProp to trial an extra service where agencies no longer incur costly annual accountant reports and health checks.
Letting agents can suffer from ‘choice overload’ when it comes to client accounting solutions, and with such a myriad of options available there has never been a better time to outsource. Choosing the right outsourcing provider is crucial to continued business success, so it is paramount that agents understand their options.