Property and letting agents who are found to be handling client money without a Client Money Protection (CMP) scheme could face hefty fines under new regulations which will make such schemes mandatory for all agents.
The news follows the Government’s response to a recent consultation seeking views on the implementation of CMP schemes for letting and managing agents in England.
Such schemes, which give both tenants and their landlords confidence that their money is ‘safe’ whenever it is handled by a property agent, are currently voluntary – and it is estimated that only 60 to 80 per cent of agents use one.
Under a CMP, both parties are able to recover any money held by the agent on their behalf in instances where an agent fails to properly repay it. This can prove to be a lifeline in instances where a managing agent misappropriates funds, or falls into administration.
In response to a consultation examining whether CMP schemes should be made mandatory for all property agents, the Ministry for Housing, Communities and Local Government (MHCLG) has confirmed that regulations will be made to introduce privately-led CMP schemes, which will be approved by the Government in a similar manner to existing tenancy deposit protection schemes.
Nicola Tubbs, an Associate Executive with Palmers, who specialises in property law, said: “These regulations will impose a requirement on property agents to join an approved scheme.
“They will also set out the general process and conditions as to how CMP scheme providers will go about having their schemes approved.
“In addition to this, MHCLG has warned that property agents who fail to comply with the new rules could potentially face a civil penalty of up to £30,000.”
The MHCLG’s consultation response can be accessed here. Further details are expected to be unveiled in coming weeks.
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