The Government introduced The Housing and Planning Act back in 2016, which meant that the membership of an approved or designated client money protection (CMP) scheme will become mandatory for those property agents operating in the private rented sector. Besides that, agents were informed regarding implementation of the letting fee ban. Both of these should have come in force simultaneously, but it is no longer the case.
It is believed that approximately £2.7 billion of client funds are held by lettings agents. This vast amount has attracted the attention and highlighted the need for protection of these funds. In essence, CMP should provide landlords and tenants with the “confidence that their money is safe”. In recent response (April, 2018), the Ministry of Housing recognises the market-led approach towards client money protection schemes as the most suitable. Arguably, this approach will cultivate consistency in standards across scheme providers.
Whilst CMP scheme seems to be rather straightforward, the letting fee ban has been a hot topic amongst lettings agents. Therefore, the implementation of it has been delayed. In the recent response, the Government has recognised that compulsory CMP will come into force before the lettings fee ban. The main motivation behind it is the worry that the ban on letting agents charging fees to tenants could cause some agencies to close down.
If the above scenario becomes common, this would initiate the domino effect. Hence, the CMP scheme enables a tenant or landlord to recover any money that the agent fails to repay, including when facing misappropriation or insolvency. Whilst we can expect two affirmative CMP scheme related regulations in Parliament as soon as parliamentary time allows, the letting fee ban is still up for discussion.
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