What is Client Money Protection (CMP)?
Legislation governing the private-rented sector is evolving all the time. One of the most important recent changes is the introduction of compulsory Client Money Protection (CMP).
Brought in on 1 April 2019, CMP protects the money letting agents hold on behalf of a client. So, what do landlords and tenants need to know about the new legislation?
What is CMP?
It’s estimated that agents hold around £3billion of client money. From April this year, all agents will need to sign-up to a government-approved CMP scheme to safeguard these funds. If an agent ‘misappropriates’ the rent, deposit or other client funds, the insurance scheme pays landlords and tenants back.
The new legislation also means letting agents need to show that they are handling clients’ money in the right way by:
1) Holding this money in a separate bank account to their operating funds
2) Having indemnity insurance so the money can be reclaimed if any employees commit fraud.
What has changed?
Although Townends has been covered by CMP insurance long before it became mandatory, not all agents have given clients the same peace of mind. In March 2017, the Government announced that all agents would need to protect the client money they handle.
The law is slightly different around the UK. Agents in Wales must have CMP as part of the Rent Smart Wales initiative and Scotland introduced compulsory CMP in January 2018.
What does CMP cover?
Client money includes landlords’ repair funds, rents, service charges and arbitration fees. Crucially, the new CMP legislation is separate from tenancy deposit protection (TDP). However, CMP covers tenancy deposit money whilst it’s with the agent i.e. before or after it’s protected by a TDP scheme.
Agents who don’t handle any client money, for example, those who just source tenants on behalf of a landlord, will still be able to trade without CMP.
Who are the CMP providers?
At time of writing, the government has approved a number of CMP schemes, with six key industry bodies currently offering the insurance: Propertymark, Client Money Protect, Money Shield, NALS Client Money Protection, RICS and UKALA Client Money Protection.
To find out more about the schemes, visit the government’s website here. As proud members of Propertymark, Townends is covered by their Money Shield insurance scheme.
How do I find out if an agent has CMP?
Despite the protection the new law provides, rogue letting agents still exist. If you’re searching for a letting agent to manage your property, ask to see their CMP certificate. The new law says this should be prominently displayed in their office and on their website. Alternatively, you can check with each of the schemes.
If an agent fails to follow the new rules to become a member of an approved CMP scheme, they will be liable for a penalty of up to £30,000. Failing to display the certificate alone carries a fine of up to £5,000. These penalties will be served by the appropriate local authority.
How do I make a claim?
If you do need to claim any money back, the law is fairly straight forward and there’s no need to go to court. If a landlord or tenant can show a letting agent has misappropriated their funds, then a claim can be made through the agent’s CMP scheme.
After reporting the money missing to the police, you need to make a claim through the agent’s CMP provider within 12 months. Make sure you can provide the following supporting documentation as evidence:
Speak to our expert team
If you’re looking for a professional letting agent to find a new tenant or manage your rental property, contact our expert team at Townends today. We’re fully covered by CMP and will look after your property as if it were our own.
In addition, our Fully Managed Plus service provides extra cover to ensure that your money is safe through our Rent and Legal Protection Insurance. Find out more today or call 020 3911 3673 for more information.