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Written by rosalind renshaw

An attempt to shine a light on the different Client Money Protection schemes and how they interact with tenancy deposit schemes has been announced as the latest SAFEagent initiative.

All the major players, including ARLA, have been invited to take part in a forum in early November.

Also invited are NALS, RICS and UKALA, as well as all three deposit schemes and relevant insurers. All will be invited to share information and develop lines of communication.
John Midgley, chair of the SAFEagent Steering Group, said: “Since its launch last year, SAFEagent has always had the best interests of consumers as its focus. 

“Its main aim is to highlight the risks to landlords and tenants of using a letting agent not covered by a CMP scheme.

“The campaign has made great strides with some 2,000 offices now signed up, but there is still much more to be done and many more consumers to reach.
“The ethos of SAFEagent has always been to operate in a spirit of inclusivity. 

“We have often said that working together will be the only way to improve standards and indeed the perception of the industry. 

“The SAFEagent Client Money Protection Forum will seek to establish a common approach to sharing information which will be to the benefit of consumers and the sector.”


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    Hi Dave,

    UKALA has independent redress scheme built into its membership at no additional charge.

    For more information on the new UKALA proposition, please visit www.ukala.org.uk

    • 27 September 2012 15:10 PM
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    Thank you for replying.

    The best analogy I can come up with in reply is that I am not recommending that a taxi firm can do without insurance on their vehicles and claims by third parties. I am suggesting that all the drivers know how to drive and the proprietors make sure the cars are roadworthy and safe.

    Once the basics are sorted out then it is fair to assess the risks and charge an appropriate premium.

    Most office bank accounts require pass holders to take money out of the account, either 2 signatures on a cheque or one pass to prepare a payment run and another to authorise the payment.
    Given that the Client account processes roughly 10 times the amount of the offices account, why isn't it procedure to look after a client's money as you do your own?
    Most firms would not let a negotiator near the Office account yet seem happy to allow them access to the System that controls the client’s money.
    I don't live on another planet and I am not as was previously suggested "on something" so I do know that temptation exists at all levels. It is the understanding of the temptation that helps reduce the opportunity for mistake or deliberate wrong doing.

    • 26 September 2012 17:10 PM
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    This is an excellent idea. Until all regulators talk and agree a common stance which is noit construed as self serving, nothing will really work. Well done SAFE

    On another note, I see ARLA has a new badge - 'regulated'

    Didn't they say that they were enough badges? They now have 3!!

    • 26 September 2012 13:37 PM
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    Has UKALA imposed the requirement that its members must be part of an independent redress scheme?

    • 26 September 2012 13:35 PM
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    Rob, maybe the point is that even if we followed and implemented all your instructions there is still, no matter how small, a 'risk' of misappropriation; and whilst that 'risk' can never be 100% eradicated there will be a need for protection by way of CMP.

    • 26 September 2012 13:30 PM
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    Personally I do not think that is enough.
    Separation of Clients' money from the Firm's money is an absolute basic necessity of Client cash accounting but is does little to protect money belonging to an individual client.
    Most 'systems' have a means to transfer cash balances between Landlords, normally as a means of correcting innocent user error. "Whoops I posted to the wrong Mr Brown or the right Mr Brown with two or more accounts"
    Where such error correction tools exist having a single operator simply takes the hinge off the Safe door, there becomes no immediate means to spot, trace or track down user error or deliberate wrong doing and if found no way of distinguishing which is what. In addition to separation of Accounts, separation of duties is a must. It is rare for a Property Management firm to exist with a single operator so separation is not a problem even if the duties are only part split
    I am not against a system of insuring against loss of Clients’ monies but I think there is professional and financial benefit in understanding the problem and resolving what can be resolved before applying a premium to all agents irrespective of the quality of the firm, the integrity of the staff and the robustness of procedure. The time to resolve issues should, in my opinion, come before further discussions of the system of CMP.
    You are probably all bored of me repeating the same stuff but with the external pressures the industry is facing from the likes of Shelter if we don’t fix the problems others see within our industry, we are going to have change thrust upon us. That usually means expensive, un-welcomed and over the top regulation.

    • 25 September 2012 18:00 PM
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    NALS insist that client accounts are held and that this is confirmed annually by the banks. In addition members accounts must be signed off by a qualified accountant and an annual report submitted to NALS.

    • 25 September 2012 16:01 PM
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    Rule 8 says ‘Nominate authorised staff to handle money’ in my opinion this is the weakness in Client cash accounting. It lets everyone off the hook except the person who makes a mistake or gets caught.
    Without further guidance it simply is unfair and unwise to nominate 1 person to Receipt, Bank and Reconcile Clients’ monies. There are no checks and no controls and worse still no requirement for a minimum standard of competency, experience or mathematics qualification.

    Rule 8 continues

    Manage transactions using an accounting system appropriate to the business
    Your system should enable you to keep adequate records of your clients' money holdings
    A suitable software package will enable the firm to manage money effectively’

    RICS, ARLA, NAEA and Nals all put a reliance on the Software firms to provide software that help member firms manage money effectively.
    To my knowledge only one Software firm has submitted its software for any level of professional assessment and again, to my knowledge, none have been looked at by any of the professional bodies with a view to working out if the actually do work as intended.

    Effectively no–one is responsible for Client Accounting across the entire industry and it is down to the nominated individuals to see that all is well. Errors and temptation are bound to give rise to the need for CMP but perhaps the risks would be very much reduced if a clear process for Client Accounting could be agreed and implemented.

    • 25 September 2012 15:02 PM
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    A description of Rule 8, outlining how RICS regulated firms should protect clients' money.
    Rule 8

    A firm shall preserve the security of clients' money entrusted to its care in the course of its practice or business.


    To ensure that clients' money can be clearly linked to the clients to whom it belongs and is protected on their behalf in the following circumstances:

    Misappropriation by any party
    Death of a sole practitioner
    Managing clients' money effectively should deliver an appropriate level of confidence to RICS, firms' clients, potential clients and stakeholders

    What is clients' money?

    Clients' money is any money received and held by a firm that does not solely belong to it. Examples may include:

    Tenants' deposits
    Service charges
    Interest (if in an interest bearing client account)
    Arbitration fees
    Fee money taken in advance
    Clients' money held but due to be paid to contractors
    Money held by members appointed as a Receiver
    Sale proceeds

    Key elements of best practice

    Client accounts

    Keep clients' money in a designated account(s)
    Include the name of the firm and the word "client" - to distinguish the account from your office account
    Obtain bank confirmation of account conditions, including making sure the bank doesn't combine or offset funds in your client account with any other account your firm holds
    Advise client and agree terms of account handling in writing
    Ensure there are sufficient funds in the account to pay amounts owing to clients as they fall due under the firm's terms and conditions of engagement
    Obtain clients' written approval to make payments from their accounts

    Controls in the firm

    Bank at the earliest reasonable opportunity
    Nominate authorised staff to handle money
    If you make use of cash receipts to settle transactions by cash make sure your records show all cash transactions


    Manage transactions using an accounting system appropriate to the business
    Your system should enable you to keep adequate records of your clients' money holdings
    A suitable software package will enable the firm to manage money effectively

    We recommend client accounts together with bank and cash balances are reconciled at regular intervals in order to demonstrate control over the accuracy and completeness of accounting records.

    • 25 September 2012 14:34 PM
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    13. Clients’ Money (*)
    13a. You must at all times comply with UKALA client accounting rules in respect of clients’ money. UKALA gratefully
    acknowledge the Royal Institution of Chartered Surveyors (RICS) whose Rule 8 has been adopted.
    13b. You must provide a client with an appropriate, regular statement of income and expenditure. Other than for minor
    amounts, adequately detailed invoices or receipts should support payments made on behalf of a client and copies
    provided to the client upon request.

    • 25 September 2012 14:28 PM
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    Hello Caroline,
    Please don't think I am putting you on the spot but not being a member of UKALA I don't know what guidance or regulation you have for members in respect of Client cash Accounting.
    It the normal guidance 'the deposit should be protected and don't use one client's money to pay another's bills' or are the UKALA regulations a bit more robust than that?

    Best regards


    • 25 September 2012 14:20 PM
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    Caroline Kenny, UKALA Executive, says:

    “I am pleased to confirm that from July 2012, all agents joining UKALA will be automatically covered by CMP insurance.

    “The main providers of CMPI, those trade associations with a direct interest in how the system works for their members (UKALA, ARLA, NALS and RICS), have been discussing for some time how information could be more effectively shared and communication channels reinforced.

    “We look forward to discussing this further with industry colleagues.”

    • 25 September 2012 12:15 PM
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    If one believes that the foundation of Agency is that an Agent is trusted by their client it becomes difficult to understand the term ‘CMP’
    As a bloke that for 18 years has lived and breathed ‘Client Cash Accounting’; designing processes and systems of working to look after Clients’ money on a minute by minute, day to day basis there are very few people who have a better understanding of what this is all about, what goes wrong and why it goes wrong.
    The whole private rented sector turns over about £30,000,000,000 each year (excludes the rolling Deposit balance), it is an industry that is run for the most part by Professional Agents who are governed by their individual trade bodies who exercise some control and offer some guidance on how to run a Client Account. But if you analyse the money flow from Tenant to Tax man via Agents and Landlords it is possible that not one single accountancy qualified person ever need see the process let alone individual Client’s accounts, in other words an entire £30 Billion Industry is left to honesty, self regulation and self discipline. The only qualified Accountant that gets involved in the process is restricted to those firms who belong to one of the trade bodies, complying with the requirement to have their Client Account Audited.
    There is a problem with Audits; some 86 million ledger entries annually covering about 40 different systems (computerised and manual) means it is impossible for auditors to understand the variety of systems they will encounter and even with an understanding can only hope to scratch the surface of what is going on.
    The reality is that £30 Billion is being receipted by about 6 or 7,000 ‘Agents’ (no-one actually knows how many agents are handling Clients’ money) In those Individual Agents there is no required procedure or regulation for handling the £30 million….. as soon as the tenant hands over their rent the process becomes ungoverned. I would suggest that rather than sitting down and working out how the insurance side of protecting clients against a failure of the system should operate it would be a good first step to establish an industry-wide consensus of best practice and procedure.
    The systems I have been deeply involved with and have influenced (APM, CFPwinMan (adb,sdb,mbo) and Jupix PM) account for about 50% of the industry’s system usage, naturally those systems have been designed to be as robust as possible but I know that simply installing a system does not mean that Client’s money is safe. Without agreed Standard Operating Procedures and without checks on those procedures most systems are essentially an unlocked Safe.
    Separation of duties is an absolute basic rule that will impose good practice. Not only does it reduce the chance of unchecked human error it immediately polices itself by requiring there to be an accomplice in any wrong doing.
    It is fantastic that SAFEagent have announced this initiative and organised this forum but I would respectfully suggest that the net should be widened to include all stakeholders in the industry. Personally I would get NLA, RLA, HMRC, OFT and the software suppliers involved too; all are important stakeholders in our industry.

    • 25 September 2012 09:53 AM
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    UKALA does have CMP and ARLA will attend although this is the first we knew about it.

    • 25 September 2012 09:00 AM
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    Obviously NALS will be there, but crunch time for ARLA no doubt about it. And sharing information and improving communication too?!!

    With all due respect far as I am aware UKALA (which is closely associated with NLA) doesn't have an independent cmp scheme - or does it?

    • 25 September 2012 08:15 AM