Spencer Knight case highlights differences in CMP schemes
Thursday 12th July 2012
The case of Spencer Knight has highlighted differences in the various CMP schemes, Ian Potter, managing director of ARLA, has said.
Potter also confirmed that ARLA has strict rules about members who acquire lettings portfolios from other agents, and must be able to cover all the liabilities.
He said: “If a member acquires a portfolio, either through portfolio purchase or business purchase, then any shortfall must be made good with immediate effect by the acquiring agent.”
The lettings portfolio of Spencer Knight was acquired by Lime Lettings, with no money changing hands.
Potter was also asked for his views on an early warning system, as proposed by the SAFEagent scheme and reported by LAT on Tuesday.
He said: “There is at present much intelligence sharing within the industry, and much of it is found to be without substance, and this is one of the problems but does not mean it should not happen.”
He also said that using the custodial scheme, the Deposit Protection Service, was not necessarily a fail-safe method.
He said: “There is much confusion that use of DPS, the custodial scheme, provides total protection. It does not. There are examples of CMP claims where the deposits had not been registered or paid over when the business failed.”
Potter said of the different Client Money Protection schemes: “The Spencer Knight case does highlight one of the differences between the CMP schemes, as if the misappropriation can be proven to have taken place during the period of membership, ARLA CMP would consider a claim from either a landlord or tenant.”
He added that there was unlimited run-off with ARLA's CMP, and that claims could be made at any time. In other words, if an agent were to leave, or be expelled from ARLA, and then go bust later, ARLA would consider claims relating to when the agent was a member.
He confirmed: “We do not time restrict it.
“After a longer period it becomes harder to provide proof of misappropriation. If the business was still trading, we would want to know what steps had been taken to recover from the agent. Landlords have a much easier route usually to provide proof on non-payment than a tenant may have.”
On the NALS site, it says that when members of the public make a claim against the CMP scheme, the first thing it will do will be to ‘verify that the firm is currently part of NALS’.
We asked NALS, whether this means that any landlord or tenant of a firm that was no longer a member of NALS could make a successful claim, even if that claim related to a period of membership.
NALS said: "Full details of the NALS Client Money Protection scheme are available on the NALS website. Inclusion under the NALS Client Money Protection scheme ceases when an agent leaves or is terminated from NALS. The policy underpinning the NALS CMP scheme does not offer unlimited liability.”
We also asked RICS for details of its CMP scheme. The organisation has responded, and we will be publishing its response on LAT next week.
The NALS scheme insurers are BRIT/QBE, and the ARLA insurers are thought still to be RSA. Neither NALS nor ARLA appears to provide this information on their sites.
Both Client Money Protection schemes say they will compensate a landlord or tenant up to a limit of £25,000, with landlords capped to a maximum of three months’ rent. Both schemes will pay out a total of £3m in any one year. NALS limit the top individual payout to £300,000 and ARLA to £500,000.
RICS and the Law Society operate CMP schemes, each using a fund into which members pay money.
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