Parliament London

London Parliament

Victory in our Campaign for Mandatory Client Money Protection (CMP)

"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, 28 March 2017
The Parliamentary Under-Secretary of State, DCLG and Wales Office
Full Hansard Transcript

WHAT IS CMP?

Client Money Protection (CMP) is a scheme that reimburses 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. 

LEADING THE CAMPAIGN

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.

Making the case for change - why it's important

Before mandatory CMP it was estimated that £2.7 billion is held by letting agents at any one time including rents and monies to cover maintenance. Of this, it was thought that £700 million was not protected, leaving tenants and landlords vulnerable to agents who go bust or abscond.

Tenants were 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 didn’t have the same choice.

Why change was important

Letting agents hold a significant amount of money in the form of deposits and rent on behalf of tenants and landlords. Client money protection ensures that funds are held in a designated account and in the event of an agency going bust or misappropriating funds it offers landlords and tenants a route to compensation.

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. 

THE JOURNEY TOWARDS MANDATORY CMP

11 DECEMBER 2018

Parliament amends the Client Money Protection Regulations during the legislative process of the Tenant Fees Act. The amendment clarified that Government approved CMP schemes will not be required to cover money protected in one of the three allowed deposit protection schemes. The amendment, tabled by Baroness Hayter of Kentish Town, allowed for the CMP Regulations to come into force from 1 April 2019, ahead of the ban on tenant fees.

3 MAY 2018

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. The draft regulations give Local Authorities 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

David Cox

David Cox

Chief Executive, ARLA Propertymark

“After a long fight, ARLA Propertymark’s campaign for mandatory Client Money Protection (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.”

1 NOVEMBER 2017

Measures to make Client Money Protection (CMP) mandatory for all letting agents in England moved a step closer with the launch of a consultation inviting views and comments on how the rules should be designed, implemented and enforced.

The consultation posed nine key questions including questions on about minimum levels of cover, the impact on the size of different businesses, whether Trading Standards should enforce the rules and penalties for non-compliance. The consultation closed on 13 December 2017 and received 117 responses from a range of stakeholders.

Read our initial response

1 APRIL 2018

The Government published its response to the consultation on the introduction of mandatory CMP for letting agents. They have announced that legislation will be brought forward to introduce privately-led CMP schemes and civil penalties of up to £30,000 for agents who fail to comply with the scheme.

According to industry estimates, £2.7 billion in client funds is held by letting agents at any one time, currently, CMP is voluntary with approximately 60% of letting agents signed up to a scheme. By making CMP mandatory it ensures that every agent is offering the same level of protection and gives tenants and landlords the financial protection that they deserve.

Read the Government's response

WINNING THE CAMPAIGN

Providing Evidence

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 David Cox was asked by MPs to provide further details about the type of amendment we would like to see for CMP. More info...

Drafting an Amendment

We worked with a number politicians to get an amendment tabled, which was endorsed by other leading sector organisations. More info...

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.

Lobbying MPs and Peers

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 CMP for the whole sector is vital. More info...