A PropTech expert is warning that letting agents can expect hefty fines if they fail to comply with complex Client Money Protection rules.
Neil Cobbold, the UK head of automated rental payment platform, says it’s no longer the case that there is poor enforcement by Trading Standards and local authorities.
He comments: “With over £3m in penalty notices issued across London last year, it is clear that any honeymoon period for CMP compliance is well and truly over and local authorities see lettings businesses as either compliant or not – there’s no grey area.”
Cobbold cites the recent example of an agency that had a valid CMP policy, but the director named in the policy resigned and no one updated the insurance. The agency was fined £24,000.
Compulsory CMP rules were brought in for English agencies by the government back in April 2019 and valid Client Money Protection Insurance is a legal requirement in Scotland and Wales as well. They apply to any agent that handles client money.
There are currently six government-approved schemes including one run by Propertymark.
Cover varies but in general each scheme reimburses landlords and tenants if client money is stolen by a third party, or is lost, or if a letting agency misappropriates it or the business goes into administration.
Part of the cost of the scheme is determined by the amount of client money held in the agency’s client accounts – the higher the amount, the greater the risk to the CMP provider.
Cobbold says there’s an opportunity for agents here - they can use this to reassure both landlords and tenants that their money is safe, no matter what happens.
“This is not an MoT situation. Compliance is not health-checked once a year. It is a rolling statutory obligation. When agents are providing details to their CMP provider, they will want to see detailed records of an agency’s client account, including bank statements from the FCA-authorised bank or building society client account provider – so agents must have these to hand” he says.