Letting Agent deposits - are they safe?

New moves by the Government to make mandatory the protection of letting agent client account money in much the same way as holiday makers have their holidays protected by the industry scheme ABTA has been announced.  The measures on client money protection were flagged when Housing Minister Gavin Barwell announced a consultation exercise with the letting industry to ascertain their views.

Many tenant & landlords at risk

In his announcement the Housing Minister indicated that the letting agent industry currently holds approximately £2.7 billion of funds.  If the agent does not have protection then potentially both landlord and tenant stand to lose their funds if the letting agent disappears or goes out of business.
Since the launch of a voluntary Client Money Protection Scheme it is thought that between 60-80% of letting agents and their clients funds are now protected.

You can read all about an agents view on the regulation of the client funds.  For full details of the Client Money Protect visit their website or have a look at the infographic below:

What is Client Money Protection?

Client Money Protection (CMP) protects the money held by a letting agent (i.e. rent and tenancy deposits where the deposit has not been properly protected by an agent through a statutory scheme), meaning tenants and landlords can recover their funds if a letting agent steals that money or uses it fraudulently.

Is it the same thing as tenancy deposit protection?

No. Tenancy deposit protection is a legal requirement for a landlord or letting agent to protect a tenant’s deposit, it does not cover rent money. Where an agent steals a protected deposit or uses it fraudulently there is recourse for recovery through the deposit scheme’s insurance.

Currently, CMP is not a legal requirement for lettings agency firms, although SAFEagent is campaigning to change this.

How does CMP work?

All letting agents registered with SAFEagent are part of a Client Money Protection Scheme that reimburses consumers in the event that a letting agent uses their money fraudulently or steals it.

There are several CMP schemes in the sector operated by NALS, ARLA, NAEA and RICS to which agents voluntarily belong. The scope of these schemes varies and consumers should contact their agent for full details of the scheme they are covered under.

What does SAFEagent do?

SAFEagent campaigns for full and mandatory CMP - which protects landlords and tenants from the worst practices in letting agency.

SAFEagent is a reliable mark denoting firms that protect landlords and tenants’ money through Client Money Protection

Set up by the industry, the initiative ‘by agents for agents’ is administered by The National Approved Letting Scheme (NALS). It is recognised by the Government, and supported by industry organisations and consumer bodies. It is referred to in the Government’s How to Rent guide.

According to research from YouGov, undertaken for SAFEagent, 61 per cent of renters incorrectly believe their rent and deposit money is protected by law.

Although mandatory CMP is now finally on the Government’s agenda with amendments to the Housing and Planning Act, it is not yet mandatory and many consumers are still at risk.

I’m a tenant, when I give my money to my letting agent is it protected by law?

Not unless the agent is signed up to a CMP scheme. According to SAFEagent, at the moment at least 1 in 5 tenants and landlords aren’t protected by CMP. The only way to ensure your money is safe and protected is by using a letting agent who has CMP. Before entering into a contract you should check this with your agent.

How can people ensure their agent has CMP?

Firstly, ask! Before handing over any money, your agent should be able to tell you if they are part of a Client Money Protection scheme. Ask them which scheme and then ring the organisation and check it out. If they are not part of a scheme ask them why not?

Consumers should look for the SAFEagent logo, in the agent’s window or on their website. This is an easily identifiable consumer mark denoting the letting agent is subscribed to a Client Money Protection Scheme.

You can also visit www.safeagents.co.uk to find a SAFEagent in your area

 Landlord insurance - specialist brokers - professional rates