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CMP mandatory from 1 April 2019 - here's how it transpired

Thursday 10 May 2018

We announced last week that ARLA Propertymark's campaign for mandatory Client Money Protection (CMP) has finally been won, but how did the victory come about, and what do the regulations mean for agents?

Following evidence to MPs and industry-wide lobbying led by ARLA Propertymark, the Housing and Planning Act 2016 introduced powers allowing the Government to bring in legislation making membership of an approved or designated CMP scheme mandatory. 

Since then, there has been a review by a working group headed up by Baroness Hayter, which reported back to Government in March 2017 recommending that Government adopt the position of mandatory CMP. They said that despite the introduction of the Consumer Rights Act which required agents to publicise whether or not they belonged to a CMP scheme, consumer awareness of CMP is still low. The group also gave recommendations for implementation and enforcement. 

A public consultation also followed, which closed on 13 December 2017, and which ARLA Propertymark responded to, continuing our long-running fight to bring added protection for consumers against rogue agents and a level playing field for the industry. What followed in the Government official response was like music to our ears, with the Government agreeing with our position that CMP should be mandatory and committing to take action.

Then, finally, last week the Government laid regulations that, if passed by parliament, will require all agents managing lettings in England to belong to an approved CMP scheme by 1 April 2019.

Speaking on the day of the announcement, David Cox said:

After a long fight, ARLA Propertymark’s campaign for mandatory CMP is finally won!

"With the help of Baroness Hayter of Kentish Town, and cross-party consensus in the House of Lords, this is a vital step forward in improving consumer protection in the rental sector; probably more so than the myriad of other laws passed over the last two decades.

"We look forward to working with the Government to guarantee that the level playing field we’ve fought so hard to create becomes a reality on the 1st April next year."

While ARLA Propertymark members are already required to have CMP, this new measure will offer greater protection to consumers, improve the reputation of the sector and bring all agents up to the professional standards that we represent.

About the regulations

The regulations take the form of two Statutory instruments which were bourne out of the Government's response to the working group and public consultation. The first - Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2018 - outlines the requirement for agents, whilst the second is aimed at the scheme providers themselves (see below). 

The requirement for agents. Agents must:

  • Belong to a Government approved CMP scheme
  • Display a certificate which confirms the agent's membership to an approved CMP scheme (including in-branch and on the firms website)
  • Produce a copy of the certificate to anyone who reasonably requires it, free of charge
  • Notify all clients within 14 days if their CMP membership is revoked, or they change to a different approved CMP scheme
  • Provide clients with the name and address of the scheme to which they become a member

The regulations also state that the agent must ensure the level of CMP membership provides sufficient cover to compensate clients for the maximum amount of client money that they hold.

Local Authorities will have the powers to:

  • Impose fines of up to £30,000 on agents who do not belong to a scheme beyond this date
  • Impose fines of up to £5,000 on agents who fail to display correct scheme membership details on the business premises and on websites

It's also important to note that if an agency is in breach of the regulations, they will be deemed to have been in breach of the regulation across all local authority areas in which they operate.

Agents' Right of Appeal

Agents may appeal to the First-tier Tribunal against (within 28 days beginning with the day after the final notice was served:

  • A decision to impose a penalty
  • The amount of the penalty

The First-tier Tribunal will then decide whether to quash the final notice, confirm the local authorities original notice, or vary the final notice. 

Local authorities can ring-fence any financial penalties recovered under the Regulations to meet the cost and expenses for further enforcement in relation to the private rented sector. 

The second Statutory Instrument is Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018 aimed at the CMP providers themselves, and a summary is given below:

Government approved CMP schemes must:

  • Have written procedures for handling client money, which they must follow
  • Publish their procedures for handling client money on their website
  • Provide a copy of their procedures for handling client money to any person who may reasonably require a copy, free of charge
  • keep records and accounts that show all dealings with client money;
  • repay any client money, including where feasible any interest earned, without delay if there is no longer any requirement to retain that money or the client requests it
  • hold client money in a client money account with a bank or building society authorised by the Financial Conduct Authority; and
  • hold and maintain professional indemnity insurance cover that is appropriate for the member’s size, income, type of work and the amount of client money held.

The introduction of mandatory CMP is a victory for all our members and means that the rest of the industry will have to catch up and offer the same levels of protection. The Government have proved that they will listen and act to professionalise the sector.