Letting agents and others in the industry have until October 3 to respond to a new review in to Client Money Protection launched by housing minister Gavin Barwell yesterday.
In an open letter announcing the consultation, Barwell says industry estimates suggest letting agents currently hold approximately £2.7 billion in client funds “but if a letting agent is not covered by client money protection, both the landlord and tenant could stand to lose their money.”
It says agents pay a membership fee of £300 to £500 to join a client money protection scheme and this forms part of a central pot of money that can then be used to pay successful claims by landlords and tenants.
The letter says the current voluntary participation has led to a take up of between 60 and 80 per cent of agents offering CMP.
The letter then says: “The government’s concern about making CMP mandatory is that requiring agents to pay to belong to a scheme would force honest agents to buy insurance against themselves being fraudulent. Something the vast majority of agents are not.”
A series of questons are then asked in a bid to give shape to the consultation.
These include asking whether a responding agent is in a CMP scheme, what benefits they believe they receive in return, and - critically - whether the government should make membership of such a scheme mandatory.
The consultation lasts for six weeks and can be found here.