A recent poll carried out by Client Money Protect, one of the Government approved client money protection schemes, has found that 77% of landlords and tenants do not know what client money protection is.
With a rise in letting agents ceasing trading, landlords and tenants are being urged to check that their letting agent offers this level of protection, which became mandatory in April 2019.
Whilst the vast majority of letting agents already have comprehensive cover, some still do not. This puts landlords and tenants at risk of losing thousands of pounds if the business goes insolvent which, for some, is a greater possibility now than prior to the pandemic.
According to the Property Redress Scheme, in the eight months since the pandemic started (from mid-March to mid-July), there has been a 66% increase in letting agents ending their redress membership because they have ceased trading in comparison to the eight months prior to the pandemic (Jul 2019 – March 2020). This means, on average, more than ten letting agents a week are closing down.
Kate Mutter-Bowen, from Client Money Protect, commented: “It is now eighteen months since it became a legal requirement for all letting agents to have client money protection. Most people know when they book a package holiday to check it is Atol protected, meaning if the holiday firm goes bust, they do not get stranded abroad or end up out of pocket. However, people often part with far greater sums of money when they let or rent a property and yet they don’t check that this money is protected. The lettings industry must work harder at educating consumers on the importance of checking their letting agents will protect their money.”
In the poll, only 35% said they checked that their letting agent had Client Money Protection.
Simone Potter Reed, Investigator at National Trading Standards Estate and Letting Agency Team, said: “It is of the utmost importance that all letting agents are members of a Client Money Protection Scheme to provide security and peace of mind for tenants and landlords.
NTSELAT recognises that the pandemic has caused letting agents to face challenging times, however, the cost of joining any CMP scheme is financially much less than the monetary penalty amount of up to £30,000 for failing to be a member of a CMP scheme, which are issued by enforcement officers. This is a hefty price to pay for failing to become a member of a scheme at the outset.
“NTSELAT advise that tenants and landlords check if their agent is registered with one of the six approved CMP schemes before entering into business with them. Take the time to make those checks to avoid financial detriment.”