What Do Letting Agents Need to Know About the Client Money Protection Scheme?
Hundreds of English letting agents are facing fines of up to £30,000 as the National Trading Standards Estate and Letting Agency Team (NTSELAT) looks to crack down on those who have failed to safeguard money from tenants and landlords. The operation to root out the rogue agencies is particularly concentrated in London, but the NTSELAT is backing up local authorities around the country in enforcing the Client Money Protection (CMP) scheme.
By law, letting agents should register with a CMP if they handle landlord or tenant cash, and they must declare where they keep that money to their clients. However, not everyone does and this could cause a major problem if their business fails.
What is the Client Money Protection Scheme?
Since April 2019, it has been the law that letting agents in England must belong to a client money protection scheme if they work in the private rental sector and handle clients’ money as part of their work. It means that no one is left out of pocket if the property agent goes into administration or cannot return money to clients for some other reason.
Agents need to hold the money they take from landlords and tenants in a bank recognised by the Financial Conduct Authority and join one of six approved redress schemes. They are:
● Client Money Protect
● Money Shield
● Safeagent (previously NALS)
● UKALA Client Money Protection
Each scheme issues a certificate to its members, which agents need to show on-demand from anyone who asks to see it. They should not charge for this and they should also display the certificate in their office and on their business websites.
There are fines for non-compliance. Firstly, a business can face a charge of up to £5,000 for refusing to provide the certificate when asked or for not displaying it. If an agent does not join one of the appropriate schemes, there could be a penalty of up to £30,000.
There are similar schemes in Scotland and Wales, but you do not need to join a scheme in Northern Ireland yet.
What is Happening?
NTSELAT told Letting Agent Today that “hundreds of London letting agents have already been identified where there is evidence of a breach of the law.” As such, the organisation is involved in bringing the offenders to book in an attempt to safeguard, in its terms, billions of pounds of clients’ money.
Using intelligence NTSELAT gathered, local councils have already served 100 notices of intent to take legal action against alleged offenders. This means that they have 28 days to produce evidence that they are a member of a scheme or to provide a reason why they are not. After that period is over, the councils can decide on an appropriate fine if they feel the evidence or mitigation is insufficient.
How Can You Stay Legal?
If you are a letting agent, you should immediately join a client money protection scheme if you have not already done so. If you are already a member, ensure that you have easy access to your certificate and that you display it in any office into which you accept visits from tenants or landlords. Also, make sure that it is on your website.
There are a lot of legalities to remember as a letting agent, including making sure you keep security deposits in an approved tenancy deposit scheme.
With our outsourced property management service, we help you stay on top of these requirements. Whether it is legal notices, gas safety checks, ensuring all legal requirements are met before a tenancy starts or any other similar obligation, we look after it so you don’t have to worry. Check out our outsourced property management packages and contact us today to discuss your needs.