It’s estimated that letting agents in total hold £2.7 billion of clients’ money. Client Money Protection (CMP) gives you the peace of mind that your money is safe whilst the agent is holding it. This guide will give you a better understanding of how it protects your interests and why we strongly campaigned for mandatory CMP.
Since April 2019, all property agents in England have been required to belong to a Government-approved client money protection scheme in the UK or risk a £30,000 fine. Before the law was introduced, it was estimated that around 60–80 per cent of agents had voluntarily joined a CMP scheme, and it has long been a requirement for all our members to have CMP.
How Does Client Money Protection Work for Landlords and Tenants?
Client Money Protection (CMP) is a reimbursement scheme from which landlords and tenants can claim for lost deposits or rent should an agent misappropriate client money. In simple terms, it means your money is protected should an agent unexpectedly go bust or commit theft.
If you can prove an agent has misappropriated your funds, you’ll be able to make a claim without the need to go through the courts to get your money back. Firstly, report the missing money to the police, then make a claim to the agent’s CMP provider within 12 months. You’ll usually be asked to provide the following supporting documentation as evidence:
- Tenancy agreement
- Terms of Business
- Bank statements illustrating a pattern of payments followed by non-payment
The tenant’s bank statements illustrating rental payments have been made
Client Money Protection (CMP) application for reimbursement
Client Money Protection (CMP) is a scheme that reimburses landlords and tenants should an agent misappropriate rent or other client funds.
What Does Client Money Protection Cover for Landlords?
A landlord’s repair funds, rent, service charges and arbitration fees are all covered by CMP. If a tenant pays a deposit, it must be protected in a Tenancy Deposit Protection (TDP) scheme, so the money is safe during that period.
Due to the existing TDP law, the new CMP legislation only needs to cover a deposit whilst it is with the agent, i.e. before or after it is with the TDP scheme. Agents who don’t handle client money (e.g. when rent is paid directly to the landlord) will still be able to trade without CMP.
Which Government-Approved CMP Schemes Do Letting Agents Use?
Whilst all agents handling client money must have CMP, rogue operators do still exist. Client money protection in property management is particularly important, so before handing over any money or confirming an agreement with a property agent, look for their CMP certificate and clarify with the company that provides the cover. Agencies must display their CMP certificate in branch and on their website. Having a clear understanding of agent responsibilities and the protections they must have in place will help you make a more informed decision when choosing who to trust with your property.
Kerrigans choose to be part of the Propertymark CMP scheme, who inspect their members’ accounts annually. Propertymark will reimburse landlords and tenants up to a total of £15 million per year if the agent is part of our main scheme, or £35 million per year if they are part of our large corporate scheme. There is a maximum award of £50,000 per individual claim.
