It is the intention of the Government that Client Money Protection will be made mandatory by next April 1st 2019. It has done so as it issues guidance and application forms for prospective schemes, which will have obtained approval. Schemes can apply for this from August the 27th.
This new guidance is intended for both client money protection schemes and for agents. The scheme will be required to study each applicant agent’s Professional Indemnity Insurance to confirm whether it is appropriate. This includes the following:
• Obtain proof that client money is being held in an appropriate client money account
• Obtain copies of agent’s written client money handling procedures
• Conduct financial due diligence on agent
The schemes will be required to monitor agent’s compliance with rules on an ongoing basis. These rules could include the requirement that agents are not allowed rental money in a client money account to accumulate over a certain amount of beyond a timeframe before requiring the money to be transferred to the landlord.
Additional guidance will be issued to local authorities on enforcement.
Around 60-80% of agents are currently in a scheme voluntarily and the Government in addition to the House of Lords established a working group to look at how CMP was operating. They contemplated whether to go further by making use of the powers in the Housing and Planning Act 2016 to make it mandatory.
Alan Ward, RLA chairman commented: “This is great news for landlords and tenants alike. Landlords should be concerned about agents having control over money due to them and formal schemes offer protection against any criminal activity that would deprive them of this cash.”