In March 2017, the Government revealed that it intended to make Client Money Protection a mandatory requirement for every lettings agent in England that handles client money. A consultation is currently underway to determine how the rules should be designed and enforced, and it now seems increasingly likely that soon both tenants and landlords will be able to enjoy additional protection when they let or rent property in London.
What is Client Money Protection?
Put in basic terms, Client Money Protection is a compensation scheme that is designed to recompense tenants and landlords if a lettings agent misappropriates their deposit, rent or client funds. Although it is already compulsory for NAEA, RICS and ARLA members (which include Henry Wiltshire) to have this protection in place, until now there has been no mandatory requirement for a lettings agent who is not a member of any of these bodies to offer the scheme.
Henry Wiltshire has always provided CMP, but still welcomes the introduction of mandatory CMP for all lettings agents because the many benefits that it will provide for the rental sector as a whole. Natalie May, estate agent at Henry Wiltshire Canary Wharf, explains more: “Not only are the government’s proposals for change going to benefit landlords and tenants, but it will also raise consumer confidence across the entire market.” She says. “At the moment, some people are reluctant to enter the rentals sector of the London housing market as they’re concerned about what may happen to their money if their lettings agent goes out of business. Mandatory CMP will help to offer extra reassurance and give the London property market a boost.”
Why is mandatory CMP being recommended?
In the UK, around £23 billion every year is paid in rent, and almost half of that amount is collected by lettings agents on the landlords’ behalf. At any moment in time, it’s estimated that up to £2.7 billion is being held by lettings agents, and around £700 million of that sum is believed to be currently unprotected. At the present time, that means that if a disreputable agent goes out of business, the landlords’ and tenants’ money will disappear with them.
While most lettings agents are reliable and trustworthy, unfortunately a small minority give the whole industry a bad name. However, with the introduction of mandatory CMP, this should no longer be a problem, as bad agents could be fined up to £5,000 and may even have their business shut down.
How will CMP benefit those who let or rent property in London?
Although many lettings agents are already part of a consumer redress scheme, should they go into insolvency procedures and be unable to pay out compensation, landlords and tenants may well find themselves out of pocket. Client Money Protection reduces this risk by guaranteeing that all client funds are handled appropriately and honestly, and that any misappropriated money will be able to be claimed back through this scheme.
Rent or let property in London
Whether you’re a landlord who has a property to let or a tenant looking for a suitable home, Henry Wiltshire team at Canary Wharf have considerable experience in the London rental market and are here to help. Call 020 7001 9160 and learn more about what we can offer.