Mandatory CMP scheme membership requirements have been introduced yesterday, exactly two months ahead of the Tenant Fees Act and are being hailed as a significant milestone for the lettings sector.
According to rental payment automation provider PayProp, the schemes introduction will see all-round benefits for agents, landlords and tenants
Making CMP membership a legal requirement despite the vast majority of agents already being compliant, shows a regulatory strategy designed to promote industry-wide professionalisation.
CMP schemes are in place to protect funds paid to agents by landlords and tenants, such as rent and deposits. If a client’s money is stolen by the agent or the agency goes bankrupt, these schemes provide consumers with the recourse to make a claim for the return of their money.
Agents presented with choice of providers
It is estimated that letting agencies hold up to £3bn of client money, and that currently around 60-80% of agencies are already members of CMP schemes, either directly or through a trade association.
For agents there are a number of compliant CMP schemes available. They can choose to hold their client money with Propertymark, the National Approved Letting Scheme, Money Shield, RICS and Client Money Protect, among others, all of which have been approved by the government to operate a CMP scheme.
Neil Cobbold, chief operating officer of PayProp said, “It’s positive that the estimated 20-40% of agents who have not been offering CMP now have clarity from the government on which CMP schemes are compliant with the law. Having several approved CMP providers helps to keep costs competitive for agents, while ensuring that all the schemes work to the highest possible standard in a competitive marketplace.”
A continued focus on transparency
The fact that at least 60% of agents are already compliant shows that the industry is behind the government’s commitment to increase transparency in the lettings market.
Cobbold added, “Regulation like this reduces the risk for landlords and tenants, allowing them to operate in the knowledge that their money is safe. And that is of course great for the industry’s longevity.
Mandatory CMP can be effectively supported by agents adopting digital payment systems which are secure, keep records of all activity and reduce the margin for error. This new legislation, combined with agents adopting modern and transparent payment systems, can contribute towards greater accountability and even a reduction in cases of letting agent fraud. This will reflect positively across the whole industry. What’s more, introducing mandatory CMP ahead of the Tenant Fees Act on June 1 is vital as a small minority of agencies may struggle financially once fees are banned, potentially putting some client money at risk.”