The scheme ensures landlords and tenants are reimbursed 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.
It has been in and out of the headlines for some time, but now the deadline is fast approaching.
The new April 2021 deadline is an extension of the original April 2020 deadline following introduction of the legislation in 2019.
The onus is on agents to understand what they need to do to avoid penalties once the new deadline of April 1st passes.
After initially being introduced in April 2019, with agents having 12 months to comply, in February 2020 the Government quietly amended the rules surrounding Client Money Protection (CMP), effectively giving firms another year. At that time, only 1 in 5 agents were successful in having the necessary protection in place to comply with the regulations.
A note on the amendment said: “It therefore has the effect of extending, by a year, the application of the provision for deemed compliance with the requirement to hold client money in a client money account at an authorised bank or building society.”
Why was the CMP deadline delayed?
The delay to the deadline was as a result of agents facing difficulties opening client accounts with banks and building societies. Whilst some had been told they need to open a separate account for each landlord rather than offering a pooled one, others were told that the lettings sector is deemed too high risk. David Smith, policy director for the Residential Landlords Association, said: “The CMP regulations required that all agents had a pooled client account by April 1, 2020. Otherwise the various CMP schemes would have been obliged to throw them out.”
Thus the extension afforded a further 12 months for the government to work with banks and building societies to address concerns and remove the obstacles to the opening of new accounts for the purposes of adhering to the various CMP scheme rules.
Now that agents have had the opportunity to comply with the requirements of the scheme, after April 1st 2021 any found to be non-compliant face fines of up to £30,000. Further fees may apply to those unable to display a certificate of CMP when required.
Where to find more information
Agents in England are able to source a government approved Client Money Protection scheme via the Government website at https://www.gov.uk/client-money-protection-scheme-property-agents
The rules differ for Scotland, so agents here can find guidance at https://www.mygov.scot/letting-agent-registration/professional-indemnity-insurance-and-protecting-client-money/
Agents in Wales can learn more about their regulations by following this link https://www.rentsmart.gov.wales/en/agent/
Agents in Northern Ireland do not have to join a client money protection scheme as yet.
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