My Lords, I thank the noble Baroness and the noble Lord, Lord Palmer of Childs Hill, for their time and commitment to the client money protection review. I am pleased to announce that the Government intend to make client money protection mandatory in line with the recommendation of the review chaired by the noble Baroness and the noble Lord, Lord Palmer of Childs Hill. This will ensure that every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve. The Government will consult on how mandatory client money protection should be implemented and enforced.
Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Wales Office Full Hansard Transcript
On 28 March 2017 the Government announced that they intend to make Client Money Protection mandatory for all agents in England who handle client money.
A Working Group was set up in Autumn 2016 to review the issue and the Government has decided to take on board the review’s findings and introduce compulsory client money protection.
"The Government has finally accepted ARLA Propertymark’s calls for mandatory CMP. This is an argument we have been making for some time alongside Baroness Hayter and Lord Palmer. Working together we have managed to convince the Government of the merit of compulsory CMP. It’s a campaign that’s taken over two years to come to fruition and is a clear step forward towards a more regulated industry; akin to others such as solicitors or travel agents. CMP safeguards landlords and tenants in the event that agents misappropriate their money. With the ban on letting agent fees on the horizon, this is more important than ever before, so we are very pleased the Government has agreed to take it forward.
Client Money Protection (CMP) is a compensation scheme which recompenses landlords and tenants should an agent misappropriate their rent, deposit or other client funds. It is a requirement for ARLA Propertymark members to have CMP.
We have long believed that all letting agents should belong to a CMP scheme because the many agents who do not sign up represent a greater risk to landlords and tenants.
Furthermore, the reputation of the sector is undermined by the small minority of bad agents who steal from their clients and from tenants.
It’s estimated that £2.7 billion is held by letting agents at any one time including rents and monies to cover maintenance. Of this, it is thought £700 million is not protected, leaving tenants and landlords vulnerable to agents who go bust or abscond.
Tenants are particularly vulnerable. Since 27 May 2015 agents have had to display whether they belong to a CMP scheme. This means that landlords can choose an agent depending on whether they belong to a scheme, but tenants don’t have such choice.
June 2016 - Martin Marcus fronted a string of letting agencies and used numerous aliases between 2009 and 2015 to pocket £221,000 from more than 60 tenants and landlords.
April 2016 - David Whitefield stole £123,000 from of property landlords. Mr Whitefield pocketed rent and deposits paid by tenants rather than passing the cash to his clients over four years. During this time he put tenants' rent and deposits into the company's 'working capital' account.
In August 2015, ARLA Propertymark responded to DCLG’s technical discussion paper, which formulated many policies in the Housing and Planning Act 2016.
Three months later we provided written and oral evidence to the Public Bill Committee in the House of Commons who were scrutinising the Housing and Planning Bill before it became an Act of Parliament. At the oral session our Chief Executive David Cox was asked by MPs to provide further details about the type of amendment we would like to see for CMP. Read more...
We worked with a number politicians to get an amendment was tabled. The amendment was endorsed by other leading sector organisations.
Read the amendment
Before the Housing and Planning Act 2016 was passed an enabling amendment was added by the Government to give the Secretary of State powers to enforce CMP on letting agents.
In December 2015, the amendment was withdrawn in the House of Commons, but in February 2016 Baroness Hayter reintroduced the CMP amendment when the Bill was looked at by the House of Lords. Our members wrote to the members of the House of Lords urging them to support the amendment.
In Spring 2016, the Bill went back to the Commons and the Government introduced an enabling power to make regulations to require letting agents to have CMP.
In September 2016, we responded to the CMP Review and David Cox gave evidence to a closed session of Peers in the House of Lords outlining why the introduction of mandatory Client Money Protection for the whole sector is vital.
The Government will consult on how mandatory client money protection should be implemented and enforced.