A new year means new predictions for what’s to come in the letting industry. Sometimes things come to fruition as expected. One of these things is likely to be the introduction of compulsory Client Money Protection (CMP) for letting agencies, given it was all but confirmed by the CMP Working Group in March last year.
CMP has its benefits – it means letting agencies can reassure both landlords and tenants that their money is protected. As letting agents hold an estimated £2.7 billion of client funds, this is more of a necessity than a ‘nice to have’.
Around 40 per cent of agents in England and Wales aren’t yet members of a CMP scheme, despite it often being a part of a wider professional association membership.
Is CMP really needed?
Tenants and landlords tend to trust their letting agents and often believe that the protection afforded to tenant deposits is afforded to other client money, such as rent payments.
By ensuring you have CMP, like being a member of an agent redress scheme and being transparent in how you set out fees, then you can stay ahead of the game and your clients can trust that you’re doing what’s best for them.
If the PRS continues to grow – it now makes up 20% of all residential properties – then landlords need to have the confidence that there is no risk of their investment income going astray.
Likewise, with more families and older people renting, it is vital that their security is protected. CMP offers that protection.
So what can letting agents do?
‘Be prepared’ may be the Scouts’ motto, but it’s a good one for those in an industry constantly being regulated by the Government.
Here at UKALA, we’re putting it into practice by partnering with Let Alliance. This means our members are now able to access total loss CMP cover for the first time.
All client money held by UKALA members will have complete protection and loss limits at individual tenant or landlord level have been removed. This policy is underwritten by Hiscox, a leading UK insurer, and we see it as being best practice for all letting agents.
If you’re not a UKALA member, we still recommend getting CMP. However, all other existing policies within the sector only provide cover up to a set limit.
I’ve said this before, and I’ll say it again: agents need to do more to reinforce good business practice and if you don’t belong to a trade body then there is an easy fix – join one. Don’t just take your existing clients for granted, you never know how long they’ll stick around.
*Richard Price is Executive Director of the UK Association of Letting Agents (UKALA)