Members of NFoPP have expressed anger over a steep hike in the levy for the association’s Client Money Protection policy, caused by rises in fraud.
Members say that the rise has only come about because of NFoPP’s own failure to control the criminal activities of some of its members. One described the hike as ‘crippling’.
Letting agents who are members of ARLA and NAEA are both affected and some are threatening to resign over the issue.
But NFoPP chief executive Peter Bolton King said there had been no alternative but to pass on the CMP rise.
Caroline Kavanagh, group lettings director to Townends estate agents, part of the Badger Holdings Group in London and the home counties, said the news came as no surprise.
She said: “Firstly we saw TDS charges rise to degrees beyond comprehension and now we are told of this increase.
“Despite claiming to back agents’ corner, I think by now agents have started to feel this is not the case and become accustomed to the fact that anything involving a professional agent membership, such as ARLA, comes at a price. and it is difficult to truly see the added benefit.”
Trevor Kent, a long-standing NAEA member and a past President, said there had been no warning about the swingeing increase, to £432 – around double last year’s premium.
Kent, who has a single office and does not do either management or rent collection, said the cost was completely disproportionate.
He said: “I am not prepared to cover the costs of insuring the public against the activities of unscrupulous members and their criminal actions, particularly when the NFoPP have failed and continue to fail to police them.
“I am amazed that NFoPP has blindly continued offering the public this protection and, frankly, I think the Board has been negligent on behalf of members in not pulling out of this activity at the first sign of trouble some years ago.
“To suggest CMP is a ‘member benefit’ and that it brings us additional income is ridiculous. The public are totally unaware that the cover even exists when instructing, and are only alerted to its existence by their lawyers when the worst happens.
“Due to the ridiculously punitive costs of CMP and accountants’ reports, I am closing my clients’ account and will rely on the statutory service.”
He also criticised the NAEA for not telling its members about the hike until after the subscription renewal requests went out, and which did not mention the rise in the cost of CMP.
He also said he was angry about the extra costs of the more detailed accountant’s report that NAEA members must now file, in line with ARLA requirements.
Kent said that he had been quoted up to £1,500 by his accountants.
Kent went on: “I am concerned that the NFoPP Board is losing touch with reality, and is failing to manage our Associations prudently and professionally for the benefit of members. Unlike the RICS, the Board has no statutory responsibility to protect the public.”
Bolton King said: “Our CMP policy operates in the same way as any other insurance policy, in that if claims dramatically increase, premiums go up. As a result of two years of increasing claims due to the fraudulent use of clients’ money, negotiations with the insurers were difficult and took much longer than expected.
“During the past year we have made no secret of the fact that unfortunately we have been experiencing unprecedented levels of claims against our policy due to a relatively small number of firms closing down and illegally using clients’ money in an effort to survive.
“Indeed at last year’s AGM, the chairman of the Board stated that the Board were very worried about this and the potential impact the claims would have on our premium for 2011.”
He said that claims had been received regarding about ten firms in 2009 and for the same number again in 2010. In 2009, the sums involved would be over £600,000, but in 2010, the final sums were likely to be ‘considerably higher’.
He also said that the fact that CMP premiums were under pressure was known. “From early last year we were openly warning that claims were on the increase,” he said.
He went on: “CMP is not a product that an individual member can buy. It is only currently available to professional organisations and is therefore a member benefit that I know many firms automatically use as a marketing tool. In addition, by belonging to our CMP scheme, members who also use TDS for their deposit protection have gained to the tune of about £3 per tenancy as a direct result compared to non-members.”
He said negotiations with the insurers had been prolonged. “In past years, we have been able to conclude negotiations before the year end. In respect of the 2011 premium, this was not possible due to some very difficult discussions with the insurers who are naturally a little nervous.
“As part of the negotiations for 2011, we were able to agree that certain trigger premiums should not be paid and we were successful in negotiating down the original suggestions for this year’s premium.
“I can also assure members that we have looked at all options to keep our premium as low as possible. As a result, the insurers accept the fact that we scrutinise accountants’ reports very carefully and do not hesitate to carry out an inspection of a member’s books if we are concerned.
“As soon as we were made aware of the final premium we notified members. I regret this could not have been done earlier, but our hands were tied.”
Bolton King said that more detailed accountants’ reports were necessary, as the same checks were required for NAEA members as for ARLA agents.
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Comments
Why do NFoPP not sack the person responsible for vetting and approing the annual Accountants report of member's client accounts?
The thing is not a one of them have a clue on how to regulate client monies. Not a clue! Too many vested commercial interests, too much collusion. This is just another money making scheme for a looky likey regulator.
I received the letter today advising of an increase to £432. With the amount of other professional fees, 2 x individual membership, increased accounting costs and Ombudsman membership, I have to confess that all these charges are testing my belief that belonging to ARLA is good thing.
I am disappointed to say that the vast majority of both tenants and landlords that we deal with have not heard of ARLA, nor put any value to it.
David 789 mentions rent money as well, and I would expect a number of claims from landlords where rent has not been passed on. It is interesting to note that the maximum period of loss has been reduced to three months; suggesting claims in excess of this period. It begs the question, why does a landlord wait so long before terminating the agent relationship!
Deposit scheme used by an agent to protect deposits should be considered when negotiating renewal fees. We use the DPS so do not even hold the vast majority of deposits, as such, our CMP costs should reflect this lower risk. Did not NFOPP consider this, I suspect not as the letter suggests fees are the same?
Finally – Simply advising us of numbers (£432 premium, 10 firms in 2009 @£600k and 2010 @considerably higher) is somewhat meaningless except to justify the increase. I want to know specifics; claims relating to each branch of NFOPP, new members or established, agents motivation (simple theft or used as business capital), ratio of claims relating to deposits/rent etc. Armed with this sort of info, NFOPP insurers should be able to work out where the higher risk is and assess premiums accordingly. Or am I just naive!
Sorry to read that EstateAgentToday want us to log-on to their new 'sister publication' LettingAgentToday to read a 'letting' story - why do we have to bother to do this? EAT is the mouthpiece for ESTATE AGENTS, most of whom do lettings too. To fail to advise EAT readers of important lettings info is about as short-sighted as NFoPP telling the public only to use ARLA members to carry out lettings when they know thousands of their NAEA members do lettings too and are thus being lobbied against by their own Association. Big T.
David 789 -
1. CMP doesn't just cover deposits - it covers rents paid as well - a fact often neglected
2. A balance sheet is meaningless as it fails to report any deficit on the clients account where the tenant is a member of the TDS
I personally rang Mr.Trevor Kent today,the former President of the NAEA to thank him for his well constructed comments to the Board of the NFOPP.
I am 100% behind him and as a former President, his comments should be taken seriously by the Board.
It is true as far as I am concerned that they have completely lost reality and direction regarding the assoociation. The cost of membership, together with all the associated additional costs, are getting out of hand. The ridiculous hike in the CMP scheme is disproportionate, and out of control.
The genuine membership are being penalised for the members or so called members who have done wrong.
I am a one man band, and feel I do not have a voice. I understand now that the branch restructuring means that I have to close my office to go to a daytime meeting which is not acceptable in today's difficult market, as I cannot afford the time to be away from the office.
I wrote to the North West London Region and received no response, a copy of which was sent to Mr.Peter Bolton King, who also did not respond.
I took up the licensing option which I which I believed was compulsory, which now I understand is not.
I have to do twelve hours CPD (Continued professional development) as punishment for doing so. I write the word punishment because it feels like it, and all the expensive courses and regional meetings are during the daytime again interrupting my daytime work.
I may well cancel my licensing, as I understand that I won't have to do the CPD if I do, and to be honest I am licensed through NALS with no conditions.
I am going to consider my position regarding membership to both ARLA & the NAEA before the next renewal, as both the association and myself are no longer on the same mindset.
I will be sending a copy to Rosalind Renshaw of Sales/Lettings Today, of the letters I have written and and have received no response.
In the past have been accused by the association of being a trouble maker for speaking my mind. I have been a member since 1986, and an agent since 1978, and have always conducted myself in a professional manner, but other agents who do not belong to associations, do not have to abide to any rules except belonging to the Ombudsman, and conduct their business with less interruption than me, with no cost involved.
I joined the membership to belong to a professional body that I was proud to be a member, but at present this is not the case.
Ray you and me have gently crossed swords before on occasions but I agree 100% with every word you write here.
With all the ancilliary costs of ARLA membership - the basic personal membership at £180 or whatever is the least of it - the cost/benefits analysis is becoming much more out of kilter. One of the hardest things to do in a Landlord take-on is to say to the landlord "And look I'm an ARLA member so if I run off with your money you are protected".
The costs of cmp are outrageous and with the accountant's fee ever increasing just for duplicating figures they are already dealing with for annual accounts, oplus as you so rightly say associated costs such as TPO membership also now with an increased fee.
And just why it has to be compulsory for ARLA members to pay to provide a complaints conduit for every frivolous moaner on the books I will never know. Mind NALS are as bad.
1. Can anyone please give me a GOOD reason why the NFoPP contiues to confuse members and the public by having the NAEA still involved/promoting Lettings when ARLA is the dedicated Letttings Division? (That includes you Mr Peter Bolton King)
2. However, at the moment being a Member of the NAEA or ARLA means very little, if anything, to the general public. Since the their amalgamation into the NFoPP they have lost their 'clout' and have just become part of an un-necessary overblown self-serving courses/insurance selling organisation.
I say again, the general public do not know of or recognise it.
3. NFOPP, sort it, get your act together and start promoting/protecting members interests instead of cosying up to every organisation that wants to impose more costly conditions upon them or to sell them something. If you do not do so soon you will become defunct.
I am happy to read this news today. I terminated my membership of this bourochratic organisation (which is set up to rip off its own members) two years ago . Apart from the CPM please check the membership fees how they have gone up!
Best advice - terminate, the level of business you will receive will not make any difference at all. The majority of the public don't know about them they know about YOU!!
As always with both the NAEA and ARLA there is a distinct lack of clarity as to who these bodies are there for.
If they are there for the benefit of agents then their decisions, processes and approach are usually way off mark and this can be seen with the rapid and seemingly constamt decline of memberships and member interaction.
If they are there for the consumers then they still have the same problem they have always had- the vast majority of clients (Landlords/Vendors) and users (Tenants/Buyers) do not know who they are, what they are there for or what value they add.
The rise in CMP is just another nail in their coffin that will drive members away with the constant rising of costs. Rising costs are fine when value can be attached to them but this is not the case.
Having owned and run my own Estate Agency in London since 2004 I can state that, in all that time, I have only ONCE been asked if we are a memeber of any governing bodies and/or associations. At that time, in our first year of trading, we were not but both I and my business partner were in the process of taking the relevant exams in both sales and lettings/management. Despite not being a member, we still landed the instruction over other registered agents (and no, not by offering cut price fees!) and still deal with this client to this day.
Property Live has failed to deliver in any way, shape or form since its launch and I can attribute just 1 lead from the portal since its inception. Again, the naivety by the NFoPP that agents will spend time, money and effort promoting a protal that makes them compete with other agents rather than spend this on their own website is preposterous.
Unfortunately I think the days of the NFoPP and many of their sub-divisions are numbered unless they radically alter how they operate and whose interets they hold in the highest regard.
My NAEA membership is up for renewal imminently and it is highly likely that I will not be taking them up on this potentially saving my company thousands of paounds in associated fees and costs.
Industry Observer - So far as I am aware, the only facility for securing a significant reduction in CMP contributions as a result of the amount of client funds held, is to abandon NFoPP membership, then become accredited by NALS and then use the DPS TDP facility for tenants deposits. The ‘bottom line’ reduction at their currently published CMP premium levels and savings in TDS Ltd membership and per tenancy contribution levels is very compelling?
In my opinion the NFoPP is not a professional association working for the interest of it's members but a wanabie Regulator.
With the TDS & the DPS (for required statutory requirement) why do we CMP at all the level of cost. At better solution would be the requirement to have a solvent Balance Sheet with say £30,000 cash. This could easily be shown by accounts filed at companies house (At no extra cost to the companies concerned).
We joined ARLA in 1987 and for many years no claims were made against their client money protection insurance to the extent that the premiums were actually reduced!
I have asked ARLA to provide me with details of which organisations companies who have triggered claims belong to, NAEA or ARLA, as I believe the majority will be NAEA members because of their less strict membership vetting procedure - I am still waiting.
I believe it is time ARLA seriously considered severing their links with NFoPP before their reputation in the public eye is further damaged. ARLA members are now having to bear the cost of the NAEA's poor record in the past.
As far as the NFoPP's claims management is concerned suffice it to say that I have four clients who were told in September 2010 that their claims were accepted and payment was imminent and are still waiting.
Ian Sanford
Pennington Homes Limited
PBK says: “During the past year we have made no secret of the fact that unfortunately we have been experiencing unprecedented levels of claims against our policy..."
In all the magazines, newsletters, Annual Report, blogs and endless Twittering, can PBK please clarify how this impending problem was communicated to members, other than the statement by the chairman of the Board at the AGM, which no doubt was not the best attended event of 2010.
Sorry further thought prompted by Trevor's comment about basically subsidising failures.
Does everyone pay the same premium? Is it £432 per office or per company or per client account balance covered?
Does a one office firm with say £300K at risk in a mismanaged client account pay the same premium as a one firm office with say £100K at risk?
Does a 10 office member firm pay the same premium as a one member office firm? Given their attitude to TDS I can't see Countrywide for example being prepared top pay massive premiums can you?
If so - why? Or more correctly why aren't those with a bigger balance paying more?
One other thought - never mind anyone not having heard of cmp and bonding in the vast majority of landlord take ons no-one has ever heard of ARLA!!
Perhaps if ARLA paid more attention to the fundamentals instead of peripheral but more attractive headlining issues these defaults would not happen. Or at least not the claims against the policy because the member would have been expelled.
Can someone explain this to me
"As a result, the insurers accept the fact that we scrutinise accountants’ reports very carefully and do not hesitate to carry out an inspection of a member’s books if we are concerned."
What is so difficult about looking at a form when it comes in, seeing if the top and bottom figures of client money allegedly held and client account bank balances actually match up, and that it has been signed off by an appropriately qualified accountant thus satisfying ByLaw 3 etc requirements?
If the top and bottom figures don't match the accountant doesn't sign, the form isn't submitted and the member is expelled. If too many forms come in all at the same time then introduce a rolling membership renewal and thus a rolling ByLaw3 compliance regime.
How many members does NFoPP have contributing towards the costs of what is now I assume and by the sound of it a combined policy for both organisation? ARLA must have about 1500 paying members surely so that alone generates £600,000 in premiums. How much is collected at £432 per paying office of NFoPP that has this cover?
The comment on whose intersts NFoPP protects is interesting too - ever had a complaint handled through NFoPP?