Following a strong campaign by ARLA Propertymark, the government has confirmed that all property agents in England will need to be part of an approved Client Money Protection (CMP) scheme by April 1st, 2019.
The issue has been scrutinised for several years and according to ARLA is the most important piece of tenant protection law introduced to date. Crucially the legislation will go live before the Tenant Fees Bill.
This is one of the Ministry of Housing, Communities and Local Government’s new measures introduced to transform the Private Rented Sector. The initiatives are meant to crack down on rogue landlords and agents that have taken advantage of vulnerable tenants and raise standards across the industry.
For a property industry trying to build a better reputation without negligence and dishonesty, this will eliminate the threat of tenant’s funds disappearing. But what are the main impacts of the legislation on landlords?
CMP Benefits and Protection
Essentially CMPs, like the name suggests, aim to protect the rental money that a tenant pays to a letting agent to pass onto their landlord. There has never been legislation in place binding agents to separate deposit money from their own. This means that clients who rent through these companies may never see their money again if the agent’s business went bust.
Since 2015 it’s been a legal requirement for agents to state whether or not they offer CMP. This new regulation means any company holding client money will be required to be registered under a CMP scheme or face a maximum penalty of £30,000 issued by local authorities for non-compliance.
In November 2017 it was estimated that around 56% of agents were not members of a CMP scheme. This means at any point they could withhold or misappropriate landlords’ and other clients’ money.
Clearing the sector of rogue operators has been a long-term ambition for the government and the wider property industry including almost half of the 16,000 letting agents in England who are already members of CMP schemes.
The significance of CMP being mandatory before the introduction of the tenant fees ban means agents looking to counteract the loss of tenant fees won’t be able to do it using client funds.
Moving the Property Industry Forward
The focus on improving England’s housing market has been a key part of the relatively fast introduction of the new legislation, which under previous administrations wasn’t a main priority.
Isobel Thomson, Chief Executive of National Approved Letting Scheme (NALS), says the announcement is a milestone after too many cases involving “rogues and criminals taking money from innocent tenants and landlords”.
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.
Introducing mandatory CMP membership can help improve the public perception of the industry. The majority of letting agents provide a dedicated, professional and high-class service and these measures can assure the positive side of the industry is more recognised. With the fines clear, if an agent isn’t already a member of a CMP then instead of waiting they should be looking where to join.
Make Sure You’re Covered
Another way for landlords to protect themselves is making sure they’re covered when it comes to property damage caused by tenants.
At the end of a tenancy an inventory helps confirm the condition of a rental property and subsequently makes clear any deposit deductions that need to be made.
Those without a comprehensive inventory available at the end of a tenancy could therefore make it extremely difficult for themselves to claim back funds for damages and lost items.
During a period when letting property is becoming more complicated, not providing an inventory could prove damaging to the landlord’s investment.