Mandatory Client Money Protection for lettings agents - currently the subject of a formal government consultation - will contribute towards making the sector the most transparent it has ever been, according to a PropTech company.
PayProp - which automates rental payment and reconciliation processes and currently services some 200 letting agents - says any eventual decision to make CMP compulsory for agents will be long overdue.
Although the formal consultation period ends next month, the government first made provisions to introduce compulsory CMP in the Housing and Planning Act of 2016, after years of campaigning by industry groups like SAFEagent.
Then, in March this year, it announced its intention to use these powers, before launching a call for evidence.
"It takes a while for any government legislation to be passed, but for compulsory CMP membership to even reach consultation stage has taken longer than most. We trust this means a lot of thought has gone into enforcing the legislation” says Neil Cobbold, chief operating officer of PayProp in the UK.
Once CMP scheme membership becomes mandatory, non-compliant agents will no longer be able to operate since being a member of a scheme will be a requirement to trade.
PayProp notes the consultation document sets out that compulsory CMP scheme membership will run alongside the proposed plan for minimum training requirements and an industry code of conduct for agents.
“It seems like a perfect fit,” says Cobbold. “It's estimated that around 60% of agents are already members of CMP schemes but this will bring the remaining 40% in line.”
Client Money Protection schemes are relatively inexpensive, costing the average agent between £300 and £500 each year.
Other transparency measures already pledged by the government are likely to feature in tomorrow’s Budget announcements.
“We hope Phillip Hammond gives more details about the ban on upfront letting agent fees now that the draft Bill has been published,” says Cobbold.
“And along with the rest of the industry, we look forward to promised details about regulation measures announced at the recent Conservative Party conference, including mandatory redress scheme membership for landlords and minimum training requirements for letting agents” he concludes.