Client Money Protection Schemes May Be Made Mandatory

Understanding the Proposed Mandatory Requirements

It is estimated that property letting agents currently hold approximately £2.7 billion in client funds such as rent recovered from tenants or monies paid on account in respect of repairs. As agents tend to hold significant amount of client funds the Government introduced Client Money Protection Schemes to protect this money from misappropriation or in the event of a letting agent going into administration or liquidation. The Scheme is voluntary and aimed at protecting the money they hold for both landlords and tenants, for example by providing that client money is held in separate client accounts ensuring that they cannot for instance be used to pay the letting agents’ liabilities in case they went into an administration.

According to the Government up to 80% of agents currently sign up to Client Money Protection Scheme (CMP). However, as there are still millions of pounds of client money not protected the Government has decided to review how CMP is currently operating and whether it should be made mandatory.

The Government’s Consultation was launched at the end of August 2016 with responses due in by Monday 3rd October 2016. The result of this consultation is awaited.

If you are a landlord or a tenant and want to know whether you money is currently being protected you should speak to your agent or simply check their website for the SAFEagent kite mark.

If you are an agent, a landlord or a tenant and would like to know how CMP becoming mandatory could affect you please, contact our Landlord and Tenant Department on 01273 249200.