Is your money protected? Client Money Protection explained

Friday, May 19, 2017

On 27 March 2017 Housing Minster Gavin Barwell tweeted that Client Money Protection Insurance would be made mandatory for agents in England.  But what does Client Money Protection mean for you and how do you check if your agent has it?  Find out in our five tips on Client Money Protection:

  • If an agent receives rent on your behalf – even if they pay it straight to you on the same working day – they are handling ‘client money’.  Client money can also include tenant’s deposits (which are held before they are protected in a deposit scheme) and landlords repair funds. 

  • Client money is open to two main risks: fraud by an agent; and where an agent goes bankrupt.  If your agent goes bankrupt client funds will be returned to you rather than used to settle your agent’s debts as long as they are held in a client bank account (a separate bank account with an account name that includes the words ‘client account’).  This is a standard procedure and does not require your agent to hold client money protection insurance although the costs of distribution of client money may be deducted. 

  • Client Money Protection Insurance covers landlords and tenants in the event of a letting or managing agent going into administration, or where the agent misappropriated their money whilst in his/her custody or control. The details of what is covered will vary according to the scheme but it is likely that the government will require minimum terms and conditions of cover and agreed standards. The government estimates that 60% of agents in England already have CMP either directly or through membership of a professional organisation.   

  • Client Money Protection Insurance is currently not mandatory for lettings agents.  However, since 27 May 2015, under the requirements set out in the Consumer Rights Act, it became compulsory for lettings and management agents to display in their offices and on their website whether or not they are part of a Client Money Protection Scheme so it is important that you check whether they can offer you that peace of mind in knowing that your money is protected. 

  • Full details of the Government’s proposals are expected to be published in a Consultation soon.  If your agent is not currently part of a scheme we suggest you ask them to join one.  Lion Yard Lettings is now a member of clientmoneyprotect.  Client Money Protect insures client money held by Property Agents and Professionals in the event that the Member misappropriates the client money held in the course of running their business.

Still want to find out more?  Sign up to Landlordzine to receive updates on landlord regulations that may affect you or your agent.  

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