Mandatory Client Money Protection Schemes for Property Agents

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.

Propertymark has campaigned for many years for CMP to be mandatory for all letting agents. While all Propertymark members who handle client money are already required to belong to a scheme, landlords and tenants remain vulnerable if they deal with one of the many letting agents who do not belong to a CMP scheme. Sharing the cost of Client Money Protection between all agencies will ultimately drive up standards and reduce the cost for individual agents.

ARLA Propertymark was delighted when the Government announced its intention to make CMP mandatory the move will provide greater protection to consumers, improve the reputation of the sector and bring all agents up to the professional standards that Propertymark members represent.

Summary of our response

We are arguing in favour of a ‘market led’ approach with schemes approved by Government, operating in a competitive market place to keep costs to agents down. Our response stresses the context of the Draft Tenant Fees Bill and the pressure that letting agencies are facing and argues that legislative changes should be brought in at the same time so that agents manage one lot of changes rather than prolonged and staggered change.

While landlords and tenants should not have to pay an excess or meet unnecessary requirements, they should be required to report loss of funds to the police and provide a crime number as this will help to ensure that the police do not see the matter as a civil offence.

In our response, we set out in detail what minimum requirements should be placed on CMP schemes based on Propertymark’s experience in delivering the biggest scheme of its kind. We've outlined the importance of standard claim limits and insurance-backing to an appropriate level.

Agency requirements

CMP should be the option of last resort for a consumer, only needed in exceptional cases and scheme operators should have a responsibility to try and minimise the risk of an agent misappropriating client funds.

We have recommended that the following conditions be placed on all letting agents: 

  • All client funds should be deposited into a specifically designated client account held with a recognised bank or building society which should be kept separate from the firm’s own money.
  • Each transaction must be properly recorded so that it is identifiable to an individual client.
  • All transactions must be monitored and reconciled on a regular basis. 
  • Firms should be required by schemes to provide an annual independent review of their client account with the reviews vetted against set requirements.
  • Firms should have Professional Indemnity Insurance which should include cover for theft by staff members. The limit of the indemnity should be based on the firm’s fee income.

Client Accounting Service Providers, used by some agents to provide accounting services also need to belong to a CMP scheme themselves with their accounts independently audited, otherwise client funds will not be protected.

Enforcement and penalties

While there needs to be a period of lead in time prior to any enforcement activity, appropriately resourced and effective enforcement is essential to prevent rogue agents operating outside of the law. In line with other related measures, agents who do not comply should be subject to a civil penalty of up to £30,000 and a Banning Order. Enforcement of other lettings laws such as those relating to the display of fees also needs to be improved to work in tandem. Unless effective enforcement is planned before the legislation comes into force, mandatory Client Money Protection will fail to meet its objectives.

Fines collected from enforcement activities should be ring-fenced for further enforcement resources to ensure the new requirements are complied with by the whole market and all consumers are protected.

Read our full response