The prospect of mandatory membership of a Client Money Protection (CMP) scheme for letting agents has been on the table for quite some time now, but not until recently has there been a date in the diary.
In early May, the government confirmed that as of April 1 2019 all letting agents will be required to be a member of an approved CMP scheme – with the overall aim of protecting the money of landlords and tenants which is handled by agents.
After years of campaigning by various industry groups, clients of letting agents will no longer need to worry about the misappropriation of their money. The process of making CMP membership mandatory started back in 2015 when it became a legal requirement for agents to state whether or not they offer CMP.
Following this, an amendment was then made to the Housing and Planning Bill, putting forward a requirement for agents to be members of a CMP scheme. After a consultation period and recently receiving cross-party approval in the House of Lords, the measure will become a formal requirement next year – expected just ahead of the introduction of a ban on upfront letting agent fees charged to tenants.
It’s thought that letting agents hold almost £3 billion of landlord and tenant money and that around 80% of agents are already members of CMP schemes through their membership of trade bodies such as ARLA Propertymark, the National Approved Letting Scheme (NALS) and the UK Association of Letting Agents.
There are still, therefore, thousands of consumers at risk of losing money that’s unprotected and that’s why this law change is being seen as such a positive and vital step forward for the private rental sector.
How did the industry react?
Upon hearing the news that a date for mandatory CMP membership had finally been set, a number of property experts and industry commentators expressed their delight. Here’s a roundup of what some of them had to say…
• David Cox, chief executive of ARLA Propertymark, said: “This is a vital step forward in improving consumer protection in the rental sector; probably more so than the myriad of other laws passed over the last two decades.”
“We look forward to working with the government to guarantee that the level playing field we’ve fought so hard to create becomes a reality.”
• John Midgley, chair of SAFEagent, said: “This new law is a huge win for the consumer. It’s been a long hard road to mandatory CMP but we’re delighted our hard work paid off and we’re finally here.”
“It’s important to remind all consumers that although regulations have been laid, they won’t be law until April 2019.”
• Gerry Fitzjohn, chairman of the Property Ombudsman board, said: “It will make the sector a fairer place for consumers, and we look forward to this coming into effect next year.”
• Isobel Thomson, chief executive of NALS, said: “[It] marks an important milestone for our industry. Regulations to make Client Money Protection mandatory for all letting agents will ensure a safer private rented sector for consumers.”
“[There have been] too many cases of rogues and criminals taking money from innocent tenants and landlords. This law will change that.”
Why is mandatory CMP membership so important for our industry?
With the majority of agents already members of an approved CMP scheme, you could argue that making it a legal requirement is just a formality. But it represents a whole lot more than that.
Not only does it demonstrate a commitment – from letting agents and the whole industry – to protecting consumers, it marks another step towards a fully professional lettings sector.
It builds upon important measures already in place such as compulsory fee disclosure and tenancy deposit protection and comes before future measures such as the proposed mandatory code of practice and national qualification for letting agents.
There are still roughly 20% of agents that are not members of a CMP scheme and this means that at any point they could withhold or misappropriate their clients’ money.
Ridding the private rented sector of the minority of ‘rogue’ operators that take advantage of tenants and landlords has been a long-term ambition for the government and the wider property industry.
Introducing mandatory CMP membership can help to make this a reality, reducing the cases of fraud committed by letting agents and improving the public perception of the industry at the same time.
The vast majority of letting agents provide a dedicated, professional and high-class service and it’s measures like these that can make sure the positive side of the lettings industry is recognised a lot more frequently than the negative.